New-Media Revenues in Growth Fast Lane

May 14, 2007  •  Post A Comment

New media may only be a small slice of revenues for the leading U.S. media companies, including News Corp., Walt Disney Co. and Viacom Inc., but digital initiatives are growing by more than 30 percent a year, fueled by everything from online advertising to partnerships with iTunes and Yahoo! Inc.

In the quarter that just ended, News Corp.’s Fox Interactive Media’s revenue grew by 65 percent from the same quarter a year ago to $135 million, bolstered by growth in its MySpace.com social networking site, Fox executives said during the company’s earnings conference call.

Disney expects this year to generate $700 million in new media and digital revenue, while News Corp. anticipates $500 million to $700 million in that area. Viacom is forecasting $500 million and CBS expects $200 million in new-media revenue this year.

These numbers represent anywhere from 2 percent to 4 percent of overall sales, but the growth rate for those enterprises far exceeds that of media companies’ other businesses. Five years out, digital media revenues could grow to $2 billion a year at these companies, said Tuna Amobi, an equity analyst at Standard & Poor’s.

“It’s going to be a sweet spot for these companies,” Mr. Amobi said. “They’re hiring people, ramping up, making deals.”

Take Disney, the first company to stream full-length episodes of its TV content online. Its digital initiatives include Disney.com, ABC.com and ESPN.com, where viewers can watch a sports event and track scores simultaneously online. About 21 million episodes of Disney programs have been shown through iTunes, Anne Sweeney, co-chairman of Disney Media Networks and president of Disney-ABC Television Group, said at an April conference.

Disney is seeing “huge growth in advertising revenue” with an increase in ad space on Disney.com, Robert Iger, Disney’s president and CEO, said during an earnings conference call May 8.

“With the new design at Disney.com, not only are we seeing some attractive usage patterns, but we’ve created a significant increase in available space for advertising,” Mr. Iger said during the call. “And so the revenue that we’re seeing from advertising on that site is up very, very substantially from when we launched and from the prior site.”

Viacom projects it will double its digital revenues this year. The company’s MTV, Comedy Central and Nickelodeon networks all have a strong Web presence. In February, more than 90 million people visited Viacom’s online properties, according to the company, which says it is the 11th-most-popular destination on the Web.

“It comes down to leveraging our existing brands across multiple platforms,” said Kelly McAndrew, a company spokesperson.

“The Naked Brothers Band,” which debuted on Nickelodeon in January, is the No. 1 show in its time slot for kids ages 6 to 11. Fans have played a tie-in game called “Ready to Rock” 8.5 million times since its appearance on the Nick Web site in February, Mr. McAndrew said. The company next plans to include a Naked Bros. virtual recording studio on its Nicktropolis virtual world Web site. “South Park” maintains another popular Web site and has spawned multiple videogames, she added.

Last month, Viacom and Yahoo! announced a multiyear partnership under which Yahoo! will serve as the exclusive search provider across Viacom’s 33 broadband sites. In addition, Viacom is providing content from MTV, BET and the Paramount Pictures’ film library for Joost, the first company purporting to provide a broadcast-quality TV site on the Internet.

“There is no doubt that Viacom is starting to hit its stride in the digital world,” said Philippe Dauman, president and CEO, during the company’s first-quarter conference call. Mr. Dauman was brought in to run Viacom after Chairman Sumner Redstone dismissed Tom Freston from the CEO post partly because digital initiatives there hadn’t kept pace.

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