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Analysts still up on the upfront

Election season expected to spike CPM prices

Television’s advertising upfront is neither down nor out.

Many analysts are predicting this year’s upfront market will indeed be up — from 2% to 5%, to as much as $9.5 billion. One new wrinkle: Anywhere from $300 million to $500 million of that could come from networks’ new digital TV programming outlets.

The upfront selling period — which usually starts in May — is when major marketers buy up to 80% of TV commercial time for the upcoming season that starts in September. Advertisers are guaranteed specific ratings for these deals.

Analysts have speculated the upfront would become an anachronism — doomed to disappear with advertisers making all kinds of deals in different parts of the year.

But stock market analysts say the upfront — which in the past have seen network inventory bought and sold in just three days — is still viable.

“It’s still a solid market,” says David Joyce, equity analyst for institutional securities firm Miller Tabak “There will be growth this year.”

Joyce breaks it down this way: The market will grow 4.7% to just under $9.5 billion, with CBS moving up 5.3% to $2.5 billion, ABC climbing 4.3% to $2.04 billion, NBC rising 3.9% to $1.98 billion and Fox going 5% to $1.98 billion.

Newer broadcast networks will have different scenarios: The CW will see a big hike of 8% in overall dollars to $700 million.

Chiming on the return of the strength of the upfront is Jessica Reif Cohen, longtime research equity analyst of media and entertainment companies for Merrill Lynch.

In a recent report, she pegs the market for the four biggest networks to be up 3% to $8.03 billion, with the price per thousand viewers (CPMs) to average 4% higher than a year ago.

This would seem to be a stronger market than a year ago where CPMs grew less, if at all, at some networks. Overall, the average may have been a 1% increase.

Upfront optimism comes from the likely improvement in the economy, Reif Cohen says, fueled in part by higher advertising dollars spent on the 2008 presidential election.

Most analysts put ABC in the driver’s seat again this year. The Alphabet’s CPMs are still underpriced vs. other networks, ranging anywhere from $27 to $28 for the cost per thousand among 18-49-year-old viewers, according to media executives. Fox and NBC are at the highest levels, believed to be in the $30-plus range.

Merrill Lynch also estimates cable and syndication will see similar gains, with cable networks growing 3% to $7.53 billion and syndication moving up 3% to $3.1 billion.

Increasingly, analysts shy away from upfront predictions. That’s because so much can change. Though some 300 traditional upfront advertisers spend 80% of their money in the upfront, they have many option periods to cut back their buys throughout the year.

New platforms and changing metrics also make it harder to estimate the size of the market.

“Analysts need to make projections,” says Larry Blasius, exec VP and director of negotiations for media buying group Magna Global USA. “In reality, nobody knows.”

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