The World Cup's GOOOOOOOOALLLL!
The Super Bowl and Olympics are big, but Univision should score huge advertising dollars with the World Cup.
NEW YORK (CNNMoney.com) – Forget the Super Bowl. Who really cares about the Winter Olympics?
The biggest sporting event of the year doesn't take place in February, but in June and July in Germany. That's right, the FIFA World Cup soccer (or football if you're not an ugly American like me) tournament is expected to draw massive interest from sports fans around the globe.
So instead of trying to figure out just how much of an advertising boost companies like Walt Disney's (Research) ABC and General Electric's (Research) NBC Universal will get from airing the Super Bowl and Olympics respectively, people might want to take a look at Univision (Research), the nation's top Spanish-language TV broadcaster.
Univision has the rights to air the 2006 World Cup in Spanish in the U.S. (ABC will air English-language broadcasts.) And when the company reported its third quarter earnings in November, the company said that it had already secured a record $180 million in advertising commitments for the World Cup.
Revenues get a kick
That could add up to a big....get ready to scream it with me...GOOOOOOOOOOALLLLLLL for investors.
"Most people are unaware of how big an event the World Cup is, or of its ability to generate advertising revenue. What the World Cup does is help anchor a franchise and lock-in longer term advertisers," said David Bank, a media analyst with RBC Capital Markets. (He doesn't own the stock and his firm does no banking with the company.)
Bank said that Univision should see more than a temporary boost from the World Cup this summer. That's because the company had advertisers that wanted to air commercials during the World Cup commit to buying ad time on Univision at other points throughout the year and in 2007 as well.
Another factor that could make the World Cup on Univision a big ratings winner (and hence a solid advertising bet) is the chance for advertisers to reach more than just a Spanish-speaking audience.
I have a confession to make. My Spanish linguistic skills are limited to, "No habla Espanol." But I am much more likely to watch World Cup games on Univision than ABC simply because the Univision broadcasters are so passionate, and that makes the games a lot more fun to watch -- even if I don't understand what's being said.
And I'm not alone.
No language barriers
"The World Cup is a big deal. For advertisers, the World Cup is exciting because it attracts English-language speaking Hispanics and English-language speakers who are not Hispanic. I will tune in to Univision to watch some of the games," said Brian Wieser, director of industry analysis with MAGNA Global USA, a media buying firm.
With that in mind, Univision looks like one of the better bets in media right now. According to a recent report from TNS Media Intelligence, a market research firm, overall ad spending for Hispanic network television is expected to increase by 10.4 percent this year. By way of comparison, ad revenue for the major broadcast networks is expected to increase by just 4.5 percent.
And even if it didn't have the World Cup, Univision, which in addition to its national broadcast network owns cable channel Galavision, several Spanish language radio stations and a record label, is poised to benefit from the strong demand for Spanish-language content.
Univision is expected to report a revenue increase of 15 percent in 2006 and a profit jump of 26.5 percent. Looking ahead, analysts are forecasting a long-term earnings growth rate of nearly 20 percent, on average, for the next few years.
Companies like Time Warner (Research) (which owns CNNMoney.com), Walt Disney, News Corp. (Research), and Viacom (Research) are expected to eke out revenue gains in the single-digits this year and long-term earnings growth in the mid-teens. Not all that exciting.
So even though Univision trades at 30 times 2006 earnings estimates, Bank thinks the stock is worth it.
"When you look at the landscape of traditional media, there is almost nothing growing to the extent that Univision is. You are paying a premium for that growth, but it's one of the strongest stories in traditional broadcasting," Bank said.
For more about trends in Super Bowl advertising, click here.
For a look at more media stocks, click here.
The reporter of this story owns shares of Time Warner through his company's 401(k) plan.