) NBC broadcasting has been riding high on the success of
its programming and ended the 2013-14 prime time season at the
top spot in 18-49 demographic. This is for the first time in a
decade that NBC ranked No.1 in its key demographics. The network
benefited from the success of its shows such as
which delivered higher ratings during the season.
We estimate that NBCUniversal contributes close to 25% of
Comcast's value. While the broadcasting business contributes
close to 30% to NBCUniversal's revenues, it merely contributes
7% to the segment's profits. This can be attributed to high
programming and production costs that include distribution costs,
sports rights and direct production costs. Broadcasting
networks such as NBC rely heavily on advertising income.
The broadcasting advertising trends are uneven, as they are
driven by various events such as political campaigns and
sports. Around 70% of NBC's revenues are derived from
advertising while content licensing and retransmission consent make
up for the rest. The split between advertising and
non-advertising income is much higher for NBCUniversal as
compared to Disney's (
) ABC broadcasting, which now derives 45% of its revenue from
non-advertising sources (See
How Is Disney's Broadcasting Business Trending?
). We estimate that advertising will continue to drive growth
for NBCUniversal's broadcasting business in the coming years.
However, if the company manages to grow its non-advertising income
at a faster pace than advertising income, it can look forward
for a stable growth outlook in the long run.
We currently have
$59 price estimate for Comcast
, reflecting more than 10% premium to the current market price.
See our complete analysis for Comcast
Broadcasting Business Has Been Trending Well For
NBCUniversal's broadcasting business includes the NBC Network
and its owned NBC affiliated local television stations, the
Telemundo Network and its owned Telemundo affiliated local
television stations, television production operations and related
digital media properties.
The broadcasting business derives revenues primarily from two
sources: advertising fees and content licensing.
Broadcasting revenues were approximately $6 billion in 2011, around
$8 billion in 2012 and $7 billion in 2013. The surge in 2012
revenues was driven by the Olympics games and high political
spending. Advertising income represented 70% of overall
broadcasting income in 2011 and 2013, while it was a touch higher
at 73% during 2012. Licensing revenues have been around $2 billion
over the past three years. We forecast broadcasting revenues to
grow moderately and be north of $10 billion by 2020, driven by
higher advertising income. Sustained demand for its programming
will help the network achieve higher advertisement rates, evident
from the 2014-15 season upfront sale.
Earlier this week, the company sold the upfront inventory for
its cable and broadcasting networks. Unlike other media companies,
NBCUniversal bundles its advertisement inventory for its cable and
broadcasting networks. The company has got orders worth $6 billion
in advertisements for the 2014-15 season. This represents an 11%
increase over last year's upfront sales. It must be noted that
upfront sales do not include
, which NBC will telecast in 2015 and ad sales for the same will be
sold separately. Earlier in Q1 2014, NBC benefited from its
coverage on Sochi Olympics, which generated $1.1 billion in
revenues for the media company (See - Comcast Adds Pay-TV
Subscribers For The Second Consecutive Quarter; Q1 Results
Impressive With Strong Growth Across The Segments).
How Is Advertising Marketplace Trending?
The U.S. advertising market trended well in 2013, despite the
absence of the Olympics or high political spending. While the
overall U.S. advertising revenues grew by 1.3% in 2013, the
broadcast TV declined by 5.7%. This can be attributed to the
absence of heavy political advertisements versus the prior year.
Television as a medium continues to lead with more than 57% share
of the overall advertising market. We expect a slight uptick in
2014 advertisement spending primarily due to the U.S. midterm
elections. According to research by eMarketer, the 2014 TV ad
market will grow 3.3% to $68.54 billion and to $78.64 billion by
2018. The overall growth in the advertising market will boost
advertising income of ad supported cable and broadcasting
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