The Power of Nickelodeon’s Miniature Fans
(Bloomberg Opinion) -- You know who has an awful lot of leverage in the television-entertainment industry? Kids.
These tiny humans spent an average of 23 hours a week staring at a TV screen in the second quarter, according to new Nielsen data on children ages 2 to 11. They averaged almost 15 hours a week viewing live TV or DVR-recorded content, specifically. For perspective, that’s right up there with the 19 hours of TV consumed by adults ages 18 to 49, making children a powerful demographic beyond their own understanding.
That should serve as more than a glimmer of hope for Nickelodeon while the network’s parent company, Viacom Inc., tries to reverse steep ratings declines and maintain the presence of its channels on video bundles. Nickelodeon’s ratings are down 25 percent year to date as more viewers cut the cable cord and their children increasingly watch YouTube and Netflix. But there are still more than 90 million traditional multi-channel TV subscribers in the U.S., according to Nielsen. Among that still-sizable audience, Nickelodeon remains the most-watched kids’ network. EMarketer projects $69 billion in total U.S. TV ad spending next year, and Viacom CEO Bob Bakish has said that Nickelodeon represents 67 percent of all ad-supported viewing in the kids’ TV space. In fact, it’s also Viacom’s biggest network, generating more revenue than even MTV.
There’s been some trepidation about Viacom’s prospects for renewing its carriage agreement with AT&T Inc.’s DirecTV. That’s because AT&T is facing pressure of its own to turn around Ebitda at its struggling pay-TV business, and executives have spoken of “bending the content cost curve.” But it’s difficult to imagine a a big bundle not including Nickelodeon or Nick Jr. And while Nickelodeon could use some new shows, “SpongeBob SquarePants” is still a favorite and “Paw Patrol” is the biggest preschool hit since “Peppa Pig,” “Dora the Explorer” and “Blue’s Clues,” as my Bloomberg News colleague Gerry Smith has written. That also makes switching to a skinnier streaming bundle a tough choice for some parents if it doesn’t include the network.
“Do you really want to have to tell your kids that the three shows they like watching every day they can’t watch any more?” said Rich Greenfield, an analyst for BTIG Research. “Nick may not be what it was a decade ago, but it still dominates” in the 2 to 11 age group.
So far, Bakish hasn’t given investors reason to doubt his strategy, despite the numerous obstacles Viacom has been up against and the constant distraction of the drama around Viacom’s former sister company, CBS Corp., and merger speculation involving the two. His recent decision to put Brian Robbins in charge of Nickelodeon should also be encouraging. Robbins founded AwesomenessTV, a business Viacom bought that had struggled to make money but successfully attracted young viewers who aren’t growing up with the loyalty to traditional TV that older generations have. His experience and fresh perspective is probably what Nickelodeon needs.
In the long run, Viacom is unlikely to remain a stand-alone entity as its peers gain scale through megamergers. It could even be that the long-awaited Viacom-CBS reunion finally happens next year. But until then, Bakish is doing a commendable job turning around Viacom, a company that not too long ago investors and analysts had written off. His strategy seems to be focusing meticulously on one business a time, making changes to MTV’s leadership and content that have since restored ratings, and then bringing life back to Paramount Pictures with two box-office successes, a more robust film slate, and a ramp-up in TV production for content acquirers such as Amazon.com Inc., for which it made “Tom Clancy’s Jack Ryan.”
Nickelodeon looks to be next in line for a makeover, and what’s perhaps underappreciated is that that it’s starting from a better place than Viacom’s other businesses.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tara Lachapelle is a Bloomberg Opinion columnist covering deals, Berkshire Hathaway Inc., media and telecommunications. She previously wrote an M&A column for Bloomberg News.
©2018 Bloomberg L.P.