Better Ratings Are Boosting TNT's Advertising Revenues

Time Warner's ( TWX ) TNT network has been riding high on the success of its original programming and sports coverage. The network is on track to claim four of basic cable's top ten original series for the summer, more than any other network. The network has been benefiting from increased viewership, which has translated into higher advertising revenues. We expect this trend to continue as the network is focused on original programming with a strong lineup for the rest of the season. TNT will also be broadcasting NBA for 2013-14 season beginning October this year. Sports programming will further aid the network's advertising growth.

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TNT Is On The Rise

TNT has been riding high on the success of Rizzoli & Isles, Major Crimes, Falling Skies and Perception . Falling Skies and Rizzoli & Isles are set to rank among basic cable's top 5 summer dramas with adults 18-49 and adults 25-54. In its fourth season-to-date, Rizzoli & Isles has averaged 8.3 million viewers, an increase of 4% over the previous season. The coverage of NBA Playoffs and NASCAR along with the success of original series has helped the network claim basic cable's top network position in total day delivery of adults 25-54 for the summer.

According to our estimates, TNT U.S. contributes around 15% to Time Warner's stock. Recently in Q2 2013, the company's net income surged 87% while overall revenues jumped 10% driven by advertising growth in the cable networks due to higher pricing and strong demand for sports programming, primarily NBA and the NCAA (National Collegiate Athletic Association Men's Basketball Championship tournament) (Read More - Time Warner Reports Solid Growth In Profits As Cable Networks Shine ).

How Is Advertising Trending?

According to Nielsen, advertising spend is continuing to rebound globally. During Q1 2013, global advertising grew 2% to $76.6 billion from the first quarter of 2012. Television remains the most important medium for advertisers to reach the people. According to research by PwC, the TV advertising sector will pass the $200 billion revenue mark with global revenues valued at $209.4 billion in 2017 compared with $162.1 billion in 2012. The spend on TV has been far more than on online ads and all other traditional media. While most of the traditional media markets are growing slowly or declining, television is poised to see healthy growth through 2017. The chart below compares the reported TV ad spending growth rates in the U.S. with overall entertainment and media ad spend for 2009 through 2013 as well as PwC forecasts for TV and overall growth rates reaching out until 2017.

Future Outlook

TNT offers a good mix of drama and sports and thus appeals to a broad segment of viewers. Looking ahead to the rest of the year, TNT's list of new shows includes the eagerly anticipated series event Mob City . Three scripted series will return in early 2014, including the third season of Dallas and the continued current seasons of Rizzoli & Isles and Perception . Growth in TV advertising will benefit the networks, especially the ones with higher viewership such as TNT.

We estimate TNT's advertising revenues to top $1.5 billion towards the end of our forecast period. In the near term, the network will continue to benefit from sports programming. The network's NBA broadcast for 2013-14 season begins October 29, 2013, and will end on April 15, 2014. However, Comcast's ( CMCSA ) NBCUniversal recently signed a 10-year agreement with NASCAR that grants the media giant exclusive rights to broadcast the final 20 NASCAR Sprint Cup Series and the final 19 NASCAR Nationwide Series events of the season beginning in the 2015 season. The deal means that TNT, which has broadcasted six NASCAR Sprint Cup Series events, will no longer be broadcasting NASCAR races after the 2014 season.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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