With the broadcast upfronts just around the corner, one Wall Streeter predicts a decent boost for the Big Four broadcast nets despite an unsettled economic climate and some major anomalies facing the TV biz.
Barclays’ media analyst Anthony DiClemente sees upfront revenue for ABC, CBS, Fox and NBC rising 4.3% to nearly $9.5 billion powered by the auto sector, which reps about 20% of all network and cable TV advertising.
He predicts CPMs will rise by an average of 9% led by CBS with 10%; Fox with 9%; ABC with 8%; and NBC with 7% growth. And he figures nets on average will unload less inventory then last year when sell-out of available inventory for the 2011-12 season was at a high 77%.
Scenario is upbeat although less robust than this time last year when the economic outlook was generally optimistic and broadcast scatter prices pacing 25% to 40% above 2010-11 season upfront levels, DiClemente said in a report Monday. In February, according to media execs on earnings calls, scatter was up mid-teens from the last upfronts. The economic climate for the annual selling frenzy — which follows the parade of programming presentations, culminating the week of May 14 with the Big 4, TNT, USA Network and CW — is less favorable given lingering macro uncertainty and continued risk of contagion from Europe’s economic woes.
The scenario is further complicated by the fact that the first quarter of 2012 has seen an unusual combination of increased demand for spots juxtaposed against “generally weak and often surprising ratings,” said Todd Juenger of Bernstein Research.
That makes plotting sales strategies tough for network ad execs. If they assume viewing levels stay flat they could forfeit potential upside in the event of a rebound. “The pressure on the sales research departments at the networks has never been more intense,” Juenger said in a research note to clients on Monday.
He noted that networks with lower than anticipated ratings are largely blocked from the benefits of strong demand because they don’t have much scatter inventory available due to make-goods for ratings shortfalls.
“This exacerbates the divide between the ‘haves’ and the ‘have-nots,’ ” he said. “We believe this is a major reason why the market has recently bid up the stocks of the ratings winners such as Discovery and CBS while much trepidation exists for companies like Viacom.”
CBS has very few holes in its schedule, said DiClemente, and continues to see strong ratings for sitcoms, including “The Big Bang Theory,” “How I Met Your Mother,” “Mike & Molly,” and “2 Broke Girls.” “Two and a Half Men” has held up post-Charlie Sheen and dramas “The Good Wife,” “NCIS,” and “Criminal Minds” continue to generate solid ratings. He thinks the Eye will maximize sell-out levels at about 80%, same as last year.
At ABC, where the network is juggling such aging franchises as “Grey’s Anatomy” and promising newcomers like “Revenge” and “Once Upon a Time,” he projects 76% of its inventory being sold this year, the same as last year.
DiClemente sees Fox going into the upfront slightly less well-positioned than in prior years given ratings softness of “American Idol.” But other shows like sitcom “New Girl” have been strong. Also, Fox had the 2011 Super Bowl, which somewhat obscures ratings trends. He estimates the net will hold back slightly more inventory in the upfront and sell 77% — below 80% from last year.
NBC, coming off another tough season, will likely try to hold back more of its inventory for the scatter market in the hopes that its ratings trends will improve. He sees NBC selling 75% of its ads in the upfront as opposed to 80% last year.
In terms of dollar figures, Barclay’s sees CBS’ upfront sales rising 10% to $2.92 billion; ABC’s by 5.8% to $2.65 billion; Fox’s by 2.1% to $2.15 billion; and NBC’s by 1.4% to $1.78 billion.
But DiClemente noted CPM pricing is a more relevant indicator of projected advertising performance than sales or dollar volume given discrepancies in sell-out ratios year-on-year and the fact that advertisers can cancel upfront commitments later in the season.
Wall Street projects healthy gains
in upfront ad sales for the Big 4.
Netgains vs. ’11TotalCBS10%$2.92 bilABC5.8%$2.65 bilFox2.1%$2.15 bilNBC1.4%$1.78 bil
– Source: Barclays Capital