Why Viacom Will Never Be Great Again

Spongebob Squarepants ViacomIf you've been noticing a little bit less of SpongeBob on Nickelodeon, Snooki on MTV, or Stephen Colbert on Comedy Central, it's by design.

Viacom (VIA) -- the parent company of Nickelodeon, MTV, Comedy Central, and several other cable mainstays -- is increasing the number of commercials that it's wedging into its shows.

Ratings tracker Nielsen is reporting that Nickelodeon and Comedy Central blasted 9% more ad time during the first half of this year than last year. Oh, and that follows a 4% increase for all of 2010 and a 7% spike in 2011.

That isn't the boost in ad revenue, unfortunately. We're talking strictly about the amount of time that someone watching two of Viacom's flagship channels will be subjected to ads. If we add it all up, we're talking about a roughly 21% increase in ad time over the past three years.

Really? Is this what you're paying your cable company an armchair and an ottoman for?

We'll Be Back After a Few Words From Our Sponsors

No one is going to deny a commercial broadcaster its right to cram as many as ads as it can into its programming. However, it's also the right of a viewer to decide when enough is enough.

We live in impatient times. Folks want programming when they want it, and they'll pay for not being inconvenienced.

There's a reason Netflix (NFLX) has 27.5 million streaming subscribers, shelling out $7.99 a month for the right to watch countless shows and movies -- on their terms -- without commercial interruptions.

Viacom seems to have it all wrong. Even leading ad-based TV streaming service Hulu knows that it has to keep its advertisements in check. Folks aren't going to deal with 12 to 16 minutes of commercials an hour, as one ad buyer tells The Wall Street Journal that Viacom is selling these days.

Viacom's Downward Spiral

Remember back in 2011, when ratings at Nickelodeon fell year-over-year by 11% in September and 17% in October?

Things have only gotten worse. Nickelodeon ratings have fallen by 29% through the first half of this year. Viacom is just stuffing in the ads to try to keep its revenue flowing. And stateside ad revenue slipped 7% in its latest quarter, so Viacom doesn't appear to be winning the war.

Analysts see overall revenue declining 6% at Viacom for its 2012 fiscal year ending next month. Those same pros are targeting a 4% bounce in fiscal 2013, but that still means that total revenue will have declined over a two-year period.

Oh, and things can get worse.

The Uncertain Future of Cable

Pay-television subscribers are ripping their fat cable and satellite television bills to shreds.

All four of the country's largest providers -- Comcast (CMCSA), Time Warner Cable (TWC), DIRECTV (DTV), and DISH Network (DISH) -- had fewer subscribers at the end of June than they did at the end of March.

Some will argue that it's a seasonal dip, yet these net defections didn't materialize until two years ago.

It won't be long before video providers will need to give consumers what they want. Instead of paying $100 for 150 channels that they rarely watch, isn't it just a matter of time before TV fans can pay half that for the dozen channels that they do watch?

The moment that power is put in the hands of the people wielding the remote controls -- and it's inevitable in any consumer-facing business -- Viacom's going to realize how many people really don't feel they need VH1, Spike, or CMT.

The future will be challenging to all of the cable networks, but Viacom faces the grim proposition of settling for shrinking slices in a shrinking pie.

It doesn't add up. It doesn't ad up, either.



Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article, except for Netflix. The Motley Fool owns shares of Netflix. Motley Fool newsletter services have recommended buying shares of Netflix.


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petpetdon

Most hour long TV shows are only 44 minutes. Most half hour shows are 20 minutes. That is actual viewing of the show. More commercials, more money for the station. I love Netfilx, especially in the summer with all of the re-runs. No commercials plus I can watch other shows I don't watch during the regular season as it conflicts with a show I already watch.
As for watching Snooki and the rest of the drunks on Jersey Shore won't do it. They don't represent Jersey. All, drunks and skanks.

August 30 2012 at 12:38 PM Report abuse rate up rate down Reply
Sandi

I can hardly stand watching these stations..I know TVLand is excrutiating to watch. They cut out whole seens of a program (and many are important to the plot) to make way for commercials and promos. It is shear torture to watch that station, It seems that there are more promos and commercials in a half hour than the show itself. I'm just about at my wits ends with them.

August 30 2012 at 12:19 PM Report abuse rate up rate down Reply
mily469

yuck. good thing i am not a tv watcher.

August 30 2012 at 12:18 PM Report abuse rate up rate down Reply
appypony

When cable TV first came out, the big selling point was NO commercials at all. That was 30 years ago, and of course times change, and having to pay for programs has become the norm, but everyone has a breaking point. With the economy problems, high definition being required, or whatever, at some point sellers HAVE to go back to giving actual value for the price. It hasn't happened yet, but it will soon if the economy doesn't improve.

August 30 2012 at 10:34 AM Report abuse rate up rate down Reply
Vinny

I've stopped watching many shows because of the increase of commercials that sometimes exceed the time it takes to run the content of the show. I used to watch Judge Judy but it has become nearly a continuous commercial. Same with the re-runs of 2-1/2 Men. There are many more shows I used to watch but now don't because of the increase of commercials. Commercial after commercial may earn money for the station but I have decided to say 'to hell with it, I'm just wasting my time'. I predict that commercial TV will go the way of the old AM radio that everyone knows was killed by the amount and idiocy of running too many commercials. Too many commercials killed that old dog, and now the only people that listen to AM radio are the addicts of Hate Radio.

August 30 2012 at 10:17 AM Report abuse rate up rate down Reply
mikersales

It used to be that "no commercials" was a plus for cable; YOU were paying for the programming with your monthly fee. Now you pay $70 to $100 per month and have to sit thru commercials too. Screw them, pull the plug!

August 30 2012 at 10:14 AM Report abuse +1 rate up rate down Reply
Hellow Dave

I can; t agree more ! I subscribe to Dishnet work and am very very unhappy with the cost, firstly I do not believe I should fund programming that I never watch but are put into packages, premium channels that suck. HBO has some very good shows but they through in so much garbage/ repeats that you wined up going to netfliix. I think cable and other forms like Dish are going to go the route of regular TV and Internet services will replace them because because of bad management .

August 30 2012 at 10:04 AM Report abuse rate up rate down Reply
ooc5477

I have said it time and time again: Commercials are a two edged sword; They are necessary to pay for programing, but at the same time commercials are destroying TV! What needs to happen is several of the exec at VIA and others need to sit in front of a TV with programs THEY enjoy for a couple hours, then they may see the issue for what it is!!
I have told my wife many times that two thing will probably happen after a program starts and at the beginning of the first commercial:
#1--unlike the old days where a program had "A" sponsor, or maybe 2 at the most, now commercials can run almost 10 back to back (some as long as 30 sec) before the scheduled program resumes! So the first thing that may happen is (depending on the time of evening) I fall asleep before the program is back!!
#2-- during those lengthy back to back commercials, I lose interest in the program I am viewing and simply change the channel to find something else (and often when I do get to another channel, guess what? 9 times out of 10 THEY are in commercial also!
I do not nowadays even watch the Super bowl (almost a commercial after every play--and at times when the commercial is over and you are brought back to the game, play action is ALREADY in progress) live! I simply watch the replay of the game---even then there are still commercials, but not nearly as bad!
Benny Hill did a short sketch on how bad commercial TV has become---in which, after the first commercial, pretty much every word he said led into another commercial!!

August 30 2012 at 9:56 AM Report abuse +1 rate up rate down Reply
1 reply to ooc5477's comment
Vinny

We always criticize Europe for almost everything, but they have some good ideas too. The BBC is funded by a 'TV License' that people buy to watch TV . I think it costs around $50 a year, or it may be less. That allows them to produce the best programming in the world without 'commercial breaks' that destroys the free flow of ANY program. I believe other European countries have some control on the way commercials are shown on TV and the amount of time they can take for the interruption of their advertised program. It's my belief the cable companies should be PAYING US to watch TV that has degenerated into endless commercials that impresses only the easily impressed who are more or less hypnotized by ANY moving picture and the 'mini-dramas' fabricated by the commercial producers. .

August 30 2012 at 10:32 AM Report abuse rate up rate down Reply
patters85

Adding more commercials only make viewers tune out. How many times can you force me to see things that I care nothing about before I just give up and stop watching all together? That question is the one that Viacom should be answering in stead of "How much more ad space can we profit from in each spliced program before our viewers run for the hills?" Should my decision to watch certain channels be based on how much of the actual show I want to trade for E.D. medicine? Answer: Nope!

August 30 2012 at 9:53 AM Report abuse +1 rate up rate down Reply
jmmacom

Viacom has been going downhill since MTV stopped playing music videos (circa 1994).

August 30 2012 at 9:52 AM Report abuse +1 rate up rate down Reply