Bad year for TV as ABS-CBN net income drops 25%

2011 ad revenues fell amid a rocky global economy, but ABS-CBN is eyeing aggressive spending for 2012

MANILA, Philippines – Year 2011 was a bad year for Philippine television networks with ABS-CBN executives citing global and local economic woes and a drop in ad spending. 

The country’s largest multimedia conglomerate, ABS-CBN reported a 25% drop in earnings to P2.4 billion from P3.18 billion in 2010, right on the heels of GMA-7 announcing a 39% drop in net income for the same period.

At a press briefing on Friday, April 13, ABS-CBN’s Chief Finance Officer Rolando P. Valdueza described 2011 as “a struggle.” But he said, “It goes to show that given our asset size of P40 billion, we are able to really monetize investments and we will continue to do so in the coming months.” 

ABS-CBN’s net income would have plummeted 58.46% if not for a one-time gain from a sale of Sky Cable Philippine Depositary Receipts (PDRs) to a Singaporean company. The sale was valued at P1.1 billion, or nearly 50% of consolidated net income for 2011, according to Valdueza.

Despite cuts in advertising and rising production costs, Valdueza said ABS-CBN would pursue an “aggressive” spending plan in 2012, even as competitor GMA-7 tightens its belt. 

Drop in subscribers, ads

Consolidated revenues from advertising and consumer sales fell a whopping 13%. Even taking out spending for political ads in 2010, consolidated revenue would have declined 6% year on year.

The company felt the loss since, as Valdueza put it, “roughly 60% of the business is in advertising.”

The financial officer explained, “If you look at the local economy it’s a bit down… even the global economies are down so there are budget cuts coming from our advertisers.”

Even as less money came in, production costs rose 25% year-on-year. 

Meanwhile, ABS-CBN’s number of viewers remained almost flat at about 2.45 million, with continued growth in Canada, Asia Pacific and Australia but declining viewers in its traditional strongholds of North America and the Middle East.

Investing aggressively in broadband

The bright spot for ABS-CBN was the strong 10% revenue growth (P4.3-B) in broadband as unit Sky Cable grew subscribers 18% year on year. 

“It’s a sign we have to invest more,” said Valdueza.

The financial officer expects capital expenditures to reach about P5 billion in 2012; in 2011, it was P4.2 billion.

“The bulk of that will go towards the cable business for Sky to expand our broadband business,” said Valdueza. 

He added, “It’s a temporary setback last year with the economy down locally and globally. We continue to invest because we believe things will continue to improve, our rating continue to improve, we just need to address our signal problem.”

He explained that their analog signal had sometimes put ABS-CBN at a disadvantage in broadcasting to certain Metro Manila locations. 

Valdueza hoped Sky Cable would move them beyond television. He said Sky “will service all possible potential platforms. It will be available to the consumer wherever they may be, cellphone, iPad or laptop.”  

“Our content should be available in all platforms,” he added. – Rappler.com