The CBS chief isn’t prepared to stop once he persuades advertisers to pay for viewers who watch commercials as much as seven days after a show airs — a change he expects to see next year from the current live-plus-three-days. “We’re pushing eventually for live plus 30,” Les Moonves told investors this morning at the RBC Capital Markets Technology, Internet, Media and Telecommunications Conference. Viewers increasingly watch shows on DVRs, VOD, and online. As a result, for a series such as CBS’ Hostages “when you count 30 days more, the number [of viewers] almost doubles,” he says. Moonves adds that buyers should be willing to pay. “If you show the advertisers that a person is really watching them, that’s a good thing….Advertisers are paying for the eyeballs that are watching their spots.” But Disney CEO Bob Iger, for one, says it may take longer than Moonves thinks to persuade buyers to even raise the current threshold to seven days. “I’m not sure it’s going to happen very quickly,” Iger said last week. “I don’t think the advertising community is going to move that fast.”
A combination of low ratings and a sluggish ad market accounted for the 9% drop in the average price of a 30-second primetime spot on broadcast network TV versus last year’s Q1. The typical price early this year fell to $102,983, according to an analysis by media agency TargetCast tcm of data supplied by research firm NetCosts. That’s a change from the last three years, when prices rose or were mostly flat. The researchers provided selected data about individual networks, but they illustrate the differences in pricing power. Fox led the pack with an average unit cost of $172,139, followed by CBS ($116,122), ABC ($106,577) and NBC ($62,890). The Peacock network was down 27% from last year, according to TargetCast. Cable also struggled with the soft scatter market early this year. Prices for the 15 top networks among 25- to-54-year-olds were “up very slightly” to $14,865, following a 2% decline in Q4. ESPN came in at $38,943 early this year, ahead of TNT’s $21,679.
This was one of the points the CBS chief just made to investors to promote his favorite message: that all’s well for CBS and broadcasting. He’s been lobbying to have advertisers pay for the viewers who see commercial spots on DVRs as much as seven days after they first air, up from today’s three days. And that’s “coming right around the corner, and that will be good for us,” he said at a wide-ranging Q&A session at the Deutsche Bank Media, Internet and Telecom conference. Even with the existing C3 arrangement he predicts that in the upfront market “CBS will lead in volume and CPM increases” although he declined to provide a specific target. He adds, though, that “the thing that the press writes that bothers me the most is that 18-to-49 is the only viewer the advertiser cares about…The fact is, we win total viewers by more than we win every other demographic. We welcome everybody and we sell to everybody.” He’s also enthusiastic about digital streaming services including Netflix. “House Of Cards? That’s great. I don’t view them as a competitor. We’ve talked to them as a production company about producing shows for them. So they’re our friend, not our enemy.” Netflix also isn’t the only game in town. “Amazon’s jumping in in a big, big way,” Moonves says. But CBS will stick with selling online services for its older shows, especially serial dramas. “We’re not going to risk our entire schedule.” That’s the main reason why CBS didn’t join Hulu. If the company puts a show on CBS.com that interferes with viewing at the main network “I can pull that in 10 seconds. At Hulu you can’t. Once you give it up, it’s gone. Your child has left you.”
Here’s the dirty little secret behind broadcasters’ campaign to change the way ads are sold — to include people who watch them up to seven days after they air (called C7), up from three (C3): It wouldn’t increase advertiser spending on TV. It would just change the proportion of sales that go to broadcast vs cable. That’s the main reason why Bernstein Research’s Todd Juenger says this morning that a new arrangement “would be largely a wash” for Big Media companies that have broadcast and cable networks. The exception is CBS, which collects relatively little from cable ads. “Broadcast programming, especially primetime, is timeshifted more than cable network programming,” he says. TiVo data show that broadcast network commercial ratings would rise 6% in DVR homes while cable would be +4% if the sales period is expanded to seven days. (That includes ad zapping: Overall program ratings would rise 11% for broadcast and 8% for cable.) Since about half of all households have a DVR, that might translate into an overall increase in counted ad viewing of 3% for broadcasters and 2% for cable. If you assume that advertisers wouldn’t increase their TV budgets, then a change that largely affects DVR homes would move about 0.5% of the $40B in national TV ad spending to broadcast from cable — about $115M. That’s “worth fighting for,” Juenger says. But not so much for companies that sell lots of ads …
Nobody delivers the pro-broadcast network message more effectively than CBS Chief Research Officer David Poltrack. But he was far more bullish than usual today at his yearly industry forecast during the UBS Annual Global Media and Communications Conference. He says the broadcast networks are in for a great 2012 with ad sales up 7.3% — and not just because of the quadrennial effect. Even without the impact of political spending and the Olympics, broadcast sales would be up 5%, he says. That’s partly due to a pickup in the economy. “We remain confident that we’re on the road to recovery,” although he isn’t so sure about the pace, he says. The biggest drag on the economy, he says, is government spending cuts. ”This is also what is keeping the unemployment rate so high,” he says.
But he also expects broadcasters to begin winning back some of the $1.6B in ad dollars that have migrated to cable. He says that the move toward cable was largely driven by the growth in the number of channels, and that “has run its course.” Meanwhile, technologies that encourage time shifting — including DVRs and VOD — disproportionately help broadcasters. DVR time shifting has helped boost the major networks’ audience share to 45% from 43%. For example, Modern Family gains 8M viewers from time shifters — that’s the largest playback audience — while NCIS gains 5M. He’s also encouraged that viewers are starting to accept ads on VOD; CBS saw 70M VOD views of its primetime shows …
Three of the most prominent ad-forecasting firms kicked off the UBS Annual Global Media and Communications Conference this morning — as they typically do at this event — by unveiling their updated forecasts for 2012. And they pretty much agree: 2012 will be better than 2011. MagnaGlobal is on the conservative side, projecting 3.2% growth in North America, and GroupM is more bullish at 4%. MagnaGlobal EVP Vincent Letang says that the U.S. ad market will benefit from the strongest-ever quadrennial effect with $2.4B hitting the market from political campaigns, and $600M related to the Summer Olympics in London. That’s why GroupM Futures Director Adam Smith warns that the ad-growth number in 2013 — without the quadrennial effect – ”might be harder to look at.” The forecasters agree that television and digital will benefit most from the growth in ad spending. But they warn that pay TV providers need to watch out: Subscriptions “will go down by 500,000 a year for next five years” partly due to competition from Web video providers such as Netflix, says ZenithOptimedia CEO Steve King, whose company released its forecast last night. He also says that there’s a reason to take the forecasts with a big grain of salt. “The factor that none of us have incorporated is a default” by European country.
The ad firm’s forecast will set an upbeat tone for the Monday kickoff of the UBS Annual Global Media and Communications Conference, the widely watched series of CEO briefings that runs through Wednesday in New York. Zenith’s projected 3.5% growth, to $160.3B, contrasts with +2.2% in 2011. Much of the improvement is attributable to the predicted excitement around the Summer Olympics in London, as well as the recovery of Japan’s economy following the earthquakes and tsunami in March. That will help to drive large financial companies, retailers, and auto makers back into the ad market. Television will be the main beneficiary, with a 5.1% increase to $61.9B. But the Olympics won’t be enough to stop the ad slide at the major broadcast networks (-1% to $16.9B). The problem is the time difference with London: That “will mean fewer events airing live than there were for the Vancouver Olympics,” Zenith says. It predicts that more viewers will “tune in online to watch their favorite events rather than wait to watch pre-recorded versions.” Syndication will suffer a bigger decline (-12% to $2.2B) as studios struggle to find a daytime host who can match the popularity of Oprah Winfrey. But national cable networks including USA, TBS, and FX will continue to improve (+10% to $20.1B).
In other media: The Internet is still soaring (+16.4% to $30.3B) and will be helped in 2012 by political candidates hoping to reach voters on social media destinations led by Facebook. The Olympics …
The companies bidding to buy Hulu may not want to talk to CBS chief Les Moonves. ”What are they getting and how long are they getting it?” he mused in an interview Thursday with UBS investment banking chief Aryeh Bourkoff at The Paley Center for Media. “Are they buying two years of programs for $2B? I don’t know. I shouldn’t say more — I’ll get in trouble.” CBS is the only major network that isn’t part of the Hulu joint venture. And Moonves says he’s glad he made that decision. “We want to control our content.” Online broadcasts cannibalize TV viewing and syndication and that’s something “we’re not going to do. Even a little bit. … We protect the family jewels.” But his company’s programming on premium channel Showtime is different. CBS is gearing up to launch Showtime Anywhere — a digital service for Showtime’s cable subscribers. ”We are half the way getting there,” he said. Like Time Warner’s HBO Go, Showtime Anywhere would enable customers to watch shows from the premium channel on demand via broadband including on mobile devices like tablets and smartphones. Moonves adds that, also like HBO, he won’t charge extra for Showtime Anywhere.
When it comes to the ad market, the CBS chief showed remarkable self-awareness for a media exec saying, “I know I sound a little Pollyannaish.” But he was consistent with the see-no-evil projection he made yesterday during an investor conference. “The world wants us to tell them that the sky is falling. It’s not.” He added that ”the signs are nothing like they were in 2007 and 2008. The only place we’ve seen real softening is with Japanese auto makers. And that’s coming back. … Toyota’s coming back bigger in November and December.”
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 …
ABC is challenging the decades-old system of how networks and its affiliates share ad revenue with the launch of Inventory Exchange System. Traditionally, the networks sell the majority of their ad inventory nationally on the upfront and scatter markets, while their affiliate stations get a fixed small number of units. With IES, ABC will become the first network to break the pattern by exchanging additional ad inventory with its 200 affiliates throughout the year.