Here's the thing about the TV business: It's only as profitable or as valuable as the people who watch it. And if the only people who watch it are senior citizens strapped by debt, it's not worth much -- not to advertisers, anyway.
When Viacom posted second-quarter results yesterday, the company admitted its TV business hit a snag. Global advertising sales grew just 2 percent, and U.S. ad sales only eked out 1 percent growth. Ad volume “dropped off" mid-quarter, according to Viacom president and CEO Philippe Dauman.
“The primary question we have received in recent weeks is, 'What happened in the ad market?'," said Dauman during yesterday's conference call. “Advertisers in a few categories . . . pulled back their on-air spending as they adjusted their own operating plans and product launches. Low ratings at a few of our networks also contributed to the softness."
The culprits, according to the Wall Street Journal , were MTV and VH1. And although the company expects the ratings to return soon, thanks to the season premiere of “The Hills" and the MTV Video Music Awards in September -- we suspect it's not just the economy or a short-term ratings dip that ails Viacom.
The fundamental problem could be that the “youth demo" that Viacom has hotly chased after for the last couple decades is a bust. Teens and twenty-somethings don't watch TV anymore; they don't read newspapers; and they're technologically promiscuous -- how can big media sell advertising against them if you can't corner them in front of any single device?
Dauman hinted at the problem, but he didn't address it head on when he said some viewers are migrating from broadcast networks to cable channels, but “the trend did not benefit some of our networks that cater to younger demographics." The key takeaway: Young people have left, and they're not coming back.
“It's a bit of a challenge to dominate that demo because of their technological proficiency and their willingness and excitement to embrace new [technologies]," says James Goss, an analyst at Barrington Research. “MTV has tried to respond by improving programming to create a little buzz, but nevertheless, it's a greater challenge. [MTV and VH1] remain a central part of the business, and [Viacom] is trying to do something about it."
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