Wall Street analysts peppered Viacom management Thursday with questions about the mysterious ratings slump at the company's premier children's television network Nickelodeon.
Nickelodeon's audience levels have fallen nearly 30% this season, prompting much speculation about the reasons behind the troubling drop. The issue is far from child's play. Nickelodeon is one of the most valuable channels in television as well as within the Viacom universe.
Some analysts have theorized that the weak ratings could be attributed to shifts in viewing behavior. More children are watching Nickelodeon shows on demand through Netflix and Amazon.com digital streaming services, rather than watching the channel.
Earlier this week, Time Warner Inc. Chief Executive Jeffrey Bewkes added his support to that theory, noting that his company's Cartoon Network, which competes with Nickelodeon, doesn't have that issue. In fact, Cartoon Network's ratings were up 14%.
"We think part of the reason is that we don't have our programs sitting on an SVOD [subscription video-on-demand service] where parents can park their kids," Bewkes told analysts during Time Warner's earnings call Wednesday. "Obviously, that's taking some viewing away from some of the other animated channels."
Viacom executives pooh-poohed the theory.
"Netflix is present in less than a quarter of television households, and since we get the streaming data on our content, I can tell you that the time spent on Nickelodeon content on Netflix is approximately 2% of the time spent on our Nickelodeon channel," Viacom Chief Executive Philippe Dauman told analysts Thursday during his company's second-quarter earnings call.
"It would have a minimal impact here," Dauman said.
Instead, Viacom traces much of the ratings nosedive to a September change in the composition of the audience panel that Nielsen uses to derive its ratings. New participants in the Nielsen panel apparently watch less Nickelodeon than those they replaced.
Still, analysts are concerned.
"Nickelodeon has fallen to levels that you've never seen before," said one prominent analyst, Michael Nathanson of Nomura Securities, observed during Viacom's call.
Nickelodeon's problems failed to dent investors' enthusiasm for Viacom's stock. The company's widely traded B-shares closed Thursday at $49.02 a share, up $1.59 a share. Viacom reported a profit increase of 56% over the year-earlier period. Revenue was up 2% to $3.33 billion.
"We're going to focus on ways in which we can affect the Nickelodeon brand positively," Dauman told analysts before the opening bell. "Our pipeline is extremely strong. We're developing more new [episodes] of our popular series and more exciting new series. And of course, we're particularly excited about the revival of the [Teenage Ninja] Turtles franchise."