Morgan Stanley is upbeat on the upfront despite a softer scatter market this season, predicting an average pricing increase of 5%-10% with revenue per spot up 2%-4% for broadcast and 4%-6% for cable.Growth won’t match last year’s double-digit increase, said analyst Benjamin Swinburne, which may lead some networks to hold back. “Each upfront is a reaction to the prior year’s — networks may hold back inventory versus last year if pricing falls short of double digits,” said. He thinks that will happen as advertisers bet more on the scatter market. CBS goes into the upfront with the strongest ratings and fewest holes in its schedule, he said, weighing in early on the upfronts in a note to clients. Presentations started this month and run through May. Broadcasters kick off Monday, May 14. In cable, Swinburne sees upside potential for Discovery Communications as the eponymous net has seen strong ratings, and possible downside risk for Viacom as Nickelodeon struggles. Investors and industryites will be looking for clues on scatter pricing and upfront expectations in coming weeks as media companies start rolling out their latest quarterly earnings. One anomaly of this season is that TV viewing is up, even if ratings aren’t, said the firm, due to growth of on-demand and time-shifted viewing that’s isn’t accounted for. “Connected TV will only accelerate this fragmentation and TV/video as an ad platform will continue to thrive because of the power of inertia and a lack of real competition in branded advertising,” Swinburne wrote. That said, digital revenue — which is roughly $2 billion compared with $40 billion spent on national TV and $60 billion on TV overall — will continue to grow. Broadcast and cable nets are bundling TV and online buys and have made it easier for advertisers to gather data on viewers. Auto will lead, up at least 11% on record new model launches. A modest recovery in the housing market in recent months could drive real estate and insurance categories. He sees total upfront dollars growing in the low single digits driven by cable, which will account for 51% of total upfront dollars — the same as last year. Broadcast dollars will be up 0%-2%, led by a 3%-4% boost at CBS — and cable dollars up 3-5%, he predicted. Ratings declines at Nick, TNT and ESPN will be offset by strength at Discovery, Animal Planet, ID, Food Network, ABC Family and AMC.
Data provided by:Nielsen Media Research (Preliminary Results)