How Will Digital Distribution Deals Impact TV Ratings and Ad Revenue?

By Karla Robinson
March 13, 2012

Tony Wible, an analyst with Janney Montgomery Scott predicts distribution may trump content in the near feature.
“A handful of media companies have become overly dependent on digital licensing deals that increasingly have the potential to disrupt ad revenue for all players, including those that have been reluctant to license content to Netflix,” Wible wrote in his report. “In essence, we believe we are nearing a tipping point where distribution is gaining an edge over content.”
Even though entertainment industry executives deny that Netflix has affected TV ratings, Wible suggests that fixed pricing for digital deals is hurting media companies.
Fixed pricing reduces the companies’ ability to vary the price of ad revenue, which then promotes competition from other networks. These competing networks help to lower ratings and further drop ad revenue. As a result, content producers turn to digital licensing to compensate lost ad revenue.
He estimates networks could be losing nearly $9 of ad revenue per home per month and only earning back 35 to 75 cents of monthly revenue with digital licensing deals.

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