This is one of the early stories from this year’s upfront season: Many advertisers appear ready to give up their fight against counting audiences who watch their commercials up to seven days after they air instead of the conventional three days. That soon could present CBS with a “9-digit [revenue] opportunity, and those are high-margin dollars,” COO Joseph Ianniello said this morning at the Bank of America Merrill Lynch Global Telecom and Media Conference. The seven-day measurement period (also known as C7) “is now going to become the standard. … We have shows that millions and millions of people are watching on the fourth day and after” that don’t count in current ad sales. “It doesn’t make sense to me.” Indeed, the audience of delayed viewers is so big that it would be the equivalent of “a massive hit on cable networks.” While he wouldn’t identify specific categories of advertisers that are most interested in seven-day purchases, he noted that cable companies are developing the ability to change ads in VOD and “the technology is allowing us to be more nimble.” Ianniello’s rosy forecast for C7 sales contrasts with the view of Bernstein Research’s Todd Juenger, who says that CBS likely will see a “minuscule” benefit which he estimates will be in the tens of millions.
Never mind the strong upfront ad sales for broadcast and cable networks. The slowing economy is “finally starting to impact marketers’ budgets,” UBS Investment Research analyst John Janedis said in a report today as he downgraded his investment recommendations for Discovery Communications and Time Warner and lowered his stock-price targets for Scripps Networks and Viacom. He says the cheering from upfront sales will be short-lived: Broadcasters sold $9.3 billion in inventory, up about 6% from last year, while he expects cable networks to record about $9.2 billion in orders, up about 15% from last year. But advertisers will cancel a lot of those orders later this year. The scatter market “has finally started to slow, which could impact results as early as” the third quarter, he says. Janedis also is concerned about the declining ratings at broadcast networks and says that “cable is also at risk of losing a portion of its audience to other platforms” including online services such as Netflix. The fears about slowing ad sales led him to change his view of Discovery and Time Warner to “neutral” from “buy.” Time Warner has an additional problem in film. With the soft start to Green Lantern, “the success of (Time Warner’s) superhero strategy in a post-Harry Potter world is not a foregone conclusion,” Janedis says.
With Fox done with its upfront selling, attention shifted to CBS, which finished No. 1 to Fox in the 18-49 demo and No. 1 in viewers last season. The network had been the most aggressive this upfront season, going into the process with a request for a 18% CPM increase, doubling the increase it got last year. As suspected, there was some gamesmanship involved in the high starting asking price, but it may have helped CBS start writing business at impressive 14%-15% CPM rises. Yesterday, CBS Corp. CEO Leslie Moonves stressed that the network won’t sell at 9% or 10% CPM bumps. (Fox’s CPM increases are in the 10%-11% range.) Industry sources stress that CBS is still early in the selling process with only handful of deals made, but word is they involve a couple of big clients. With ad agencies breaking rank, others may follow. If not, I hear CBS is not going to bring the prices down and plans to wait the buyers out or, if there are not enough takers now, to hold more inventory for the scatter market. Last season, the prices went up from 8%-9% at the upfront to 40% on the scatter market.
CBS chief Les Moonves pretty much accused Fox this morning of spoiling the advertising upfront season for the broadcast networks by failing to hold out for higher prices. CBS is angling for increases of about 18% vs last year in the price advertisers pay to reach 1,000 viewers. But Fox, which cut the first major ad deals this year, is said to have settled for about 10%. ”Fox plays their game. We play our game, and I like our game,” Moonves told analysts at the Nomura Securities U.S. Media Conference. ”We’re not going to sell at 9% or 10%.” Maybe not. But while CBS digs in its heels, the smart money is betting that it will have to settle for a lot less than Moonves wants. Although many of the biggest ad deals have yet to close, the word in advertising circles is that ABC has agreed to low-double-digit percentage price increases for some of its spots. A lot could change over the next few days, though. Networks and advertisers appear to be in the home stretch of their negotiations, leading some to believe that the upfront dealmaking could wrap up within the week.
In other news, Moonves told the investor group that CBS will not make an offer next week to land broadcast rights to the 2014 Olympic Winter Games in Sochi, Russia, and the 2016 Summer Games in Rio De Janeiro.
Just about everyone says that the 2011 upfront ad sales season that kicks off this week will be a record-setter. Barclays Capital analyst Anthony DiClemente expects advertisers to commit about $9.2 billion for prime time spots at ABC, CBS, Fox, and NBC in the season that begins this fall. That’s up 7.5% vs. last year and will beat 2008’s record $8.8 billion. He also says this will be the first year buyers will spend an equal amount on all of cable, up 15.3%. But don’t fool youself into thinking that this has much to do with the quality of the sitcoms, dramas, and reality shows that execs will unveil to ad buyers this week at the networks’ unconscionably extravagant presentations.
Once buyers recover from the networks’ childish efforts to dazzle them with celebrities, shrimp, and booze, they’ll begin their mundane deal-making for clients who need to be sure that they’ll have airtime to help them move product. But companies don’t want to make the same mistake that a lot of them made last year by postponing ad buys in the hope of landing a better deal in the scatter market. Many who waited had to pay as much as 40% more for spots in the first quarter of 2011. Auto makers, TV’s biggest advertisers, can’t afford to sit on the sidelines. They hope to sell about 13 million cars this year. That would be up 13% from last year, but still short of the 16 …
Cable channels are already making upfront presentations to advertisers, and those sales efforts will accelerate on Thursday when Discovery Communications introduces its fall shows. According to new forecasts out this week which do not take into account the deepening NFL labor strife, cable channel sales could hit $9 billion during the coming 2011 upfronts, up 11.5% over last year. As for broadcast, Miller Tabak analyst David Joyce projects a 14.9% increase to nearly $9.9 billion for the Big Four networks’ primetime schedule unveiling next month. Media services firm Zenith Optimedia also said this week that it expects double-digit gains in cable and broadcast sales. Car, cell phone, and banking service companies – eager to take advantage of the thawing economy – could make this upfront ad-sales season one of the strongest since 2003. Auto companies normally account for about a quarter of TV ad sales but were in a deep slump during the economic crisis giving the TV honchos fits. Now they’ll likely drive the market once more. They’re introducing 65 new models this year vs. 60 in 2010, and only 40 in 2009.