Here’s a fun fact that summarizes RBC Capital Markets’ David Bank’s conclusion from his thorough examination this morning of the video ad marketplace — and the potential threat that digital poses to broadcast and pay TV: An entire week of YouTube is roughly as valuable to major advertisers as a single, first-run episode of The Big Bang Theory. “Is The Big Bang Theory a big show? Yes,” Bank says. “Does its scale threaten the fabric of the rest of the TV advertising ecosystem? We do not think so.” That’s one reason the analyst says the market isn’t a zero-sum game, and is big enough to support growth in digital and traditional video ad sales.
It’s an important issue for investors. Many are becoming wary about conventional TV’s prospects as the ranks of people who watch video on their smartphones, tablets, and PCs grow. Last year was the first in which people spent more time with digital devices including their phones than they did with TV, and the gap between the platforms will continue to grow. No wonder advertisers also are looking seriously at digital, which companies including Google, Yahoo, and AOL encouraged at their NewFront presentations. Sales to national and local Web video providers have grown an average of 20.6% a year since 2009 vs 4.9% a year for national and local TV.
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Now you’ll know why characters will drink Miller High Life on The Americans, Coors Light on The Strain, Leinenkugel’s in Fargo, and Miller Lite on The Bridge. The three-year deal will make MillerCoors brands the “official beers” for FX, FXX, and FXM giving the brewer exclusive rights to program integrations and first look placement rights for shows that FX is developing. The beers also will have “a strong presence” on FX’s digital app, FXNOW. The agreement — which the companies call “groundbreaking” — expands on an existing relationship that gives MillerCoors exclusive product placement rights to Sons Of Anarchy and It’s Always Sunny In Philadelphia. The new terms make this “the most comprehensive advertising deal ever for the FX suite of channels,” says FX Networks Ad Sales SVP Michael Brochstein. MillerCoors’ Marketing Connections VP Jackie Woodward says that “our objective is to make sure our brands are woven throughout the entertainment programming that matters most to beer drinkers” especially men from 21 to 35. “This partnership underscores our commitment to telling our brand stories with the right message, in the right places and at the right time.” Media strategy company Initiative helped to ferment the alliance.
TV networks should be encouraged by the ad forecasts presented this morning at the UBS Global Media and Communications Conference. Global spending on the medium will grow 7.7% in 2014, up from +1.8% this year, Magna Global EVP Vincent Letang says, In the U.S., broadcast TV will benefit most from the mid-term elections and Winter Olympics. Spending will increase 9.3%, in contrast to this year’s 5.7% drop. Cable will be +7.8% vs. +4.4% in 2013. Much of the growth will come from technology and telecom companies as they introduce game consoles and gadgets — but auto and pharmaceutical spending will rise. Entertainment, however, will be down in 2014, due in part to efforts by studios to trim their release slates. Political spending likely will be about a third higher than it was in 2010 at $3B, Letang says. He also expects about $600M in spending around the Winter Olympics. Generally speaking “television and digital media are sharing the eyeballs and dollars that print and radio are losing,” Letang says.
Ad expenditures, at $35.8B, were up for the sixth consecutive quarter with the strongest year-over-year growth rate since late 2010, Kantar Media reports this morning. But there were big differences between the two April-to-June periods. Last year “spending was deflated by major advertisers who conserved budgets in advance of the Summer Olympics and this makes current year growth appear larger,” says Kantar Media Chief Resaearch Officer Jon Swallen. In addition, the NCAA Final Four basketball playoffs moved from March to April, which “generated a sizable windfall of extra TV ad revenue. Without these factors, Q2 ad spend growth would have been lower by about one full percentage point.” With these idiosyncrasies, total TV ad sales rose 6.4% in Q2 with cable +14.9%, network TV +4.9%, spot TV -3.5% (it would have been flat if you took away last year’s political ads), Spanish language TV +6.1% and national syndication -1.2%. Spending across all media by the top 10 advertisers rose 15.7% to $4.1B but that includes extraordinary increases by companies including Procter & Gamble (+35.3%), AT&T (+33.2%) and General Motors (+28.0%) that kept their powder dry for the Olympics. The top spending media companies in Q2 — mostly buying ads for summer movies — were Comcast (-17.4% to $393.2M), News Corp (+8.2% to $322.5M) and Time Warner (+6.9% to $316.0M). Retailers were the top buyers overall at $3.8B, virtually flat vs last year, followed by auto companies ($3.6B, +6.9%), local … Read More »
Facebook had better be careful. A lot of users may find it creepy later this year when, Bloomberg reports, the social network plans to let marketers insert 15-second video ads directly into people’s news feeds. Buyers could target the age and gender of the users who’d find the ads in their feeds the news service says, citing “two people familiar with the matter.” Ads could sell for as much as $2.5M a day depending on how many people watch them. Execs appear to appreciate the possibility of a backlash: CEO Mark Zuckerberg has delayed the plan “at least twice” as he considers ways to minimize user ire over the ads, for example by offering them in high-def and ensuring that people won’t see the same pitch more than three times a day. But the sales opportunity apparently is too lucrative to resist. Advertisers likely will spend nearly $64B in the U.S. this year on TV ads vs $36B on the Internet. That’s why digital powers including Google, Yahoo, and AOL are gunning for TV advertising — including by staging their own NewFront sales pitches to ad buyers as they also gather for television networks’ upfront presentations. Last week Facebook COO Sheryl Sandberg told analysts that her company has “a massive and engaged audience around … Read More »
In a word, yes — which could make them much more formidable when they approach TV networks to negotiate ad rates. Up to now agencies have had mixed thoughts about mergers. The financial advantages, including the ability to cut costs, often are outweighed by the need after a deal to jettison big clients who compete with each other. In Omnicom Group’s new merger agreement with Pubicis Groupe — officially announced this morning following widespread reports about it this weekend — the combined entity might have to pick between Coke and Pepsi, AT&T and Verizon, Nissan and Toyota, and Google and Microsoft. But arguments in favor of mergers become much more compelling if antitrust officials in the U.S. and Europe approve the creation of Publicis Omnicom Group. (The companies call it a merger of equals that should close by the end of Q1 2014.) Last year the two companies together generated $11.4B in revenues from the U.S., more than twice as much as WPP which would become the No. 2 agency. The merger would make Publicis Omnicom a compelling choice for blue chip advertisers, in part because it likely would have the best technologies and resources to track how ads are performing over multiple media. Others will have to respond by making their own merger deals says Pivotal Research Group analyst Brian Wieser. Interpublic “will immediately be considered to be in play,” he says as he raised his stock price target for the ad company to $21 from $16. Currently the No. 4 agency worldwide behind WPP, Omnicom and Publicis, Interpublic offers “the best solution” for WPP, Havas and Dentsu as they look for options. Read More »
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.
Related: PwC Forecast On U.S. Filmed Entertainment Spending
Hollywood will find little encouragement today in the data from the research firm’s latest annual “Global Entertainment and Media Outlook” report. PwC projects that U.S. consumers and advertisers will spend $31B on filmed entertainment in 2013, up just 1% from last year. That contrasts with 4.6% growth, to $376.4B, in the entire domestic media and entertainment economy. PwC’s soothsayers see the annual growth in filmed entertainment spending accelerating over the five-year period through 2017; it will average +3.4% a year to $36.4B. But with the broader business growing at an average of 4.8% a year, by 2017 filmed entertainment will account for just 5.8% of total U.S. media spending, down from 7.1% in 2009. PwC has even drearier news for pay TV, until recently one media’s hottest businesses: Outlays for “TV Subscriptions and License Fees” will average +2.2% a year to $83B in 2017. That’s a slower growth rate than for radio, expected to be +2.5% a year to $21.6B. TV ads will fare better, at +5.1% a year to $81.6B. But Internet ads are catching up fast, averaging +13.7% a year to $69.4B in 2017. Read More »
Credit Suisse’s Michael Senno adds fresh data today to support the increasingly popular view on Wall Street that the TV ad market is losing steam — and may endanger the boom in media company stock prices. His survey of ad buyers indicates that they “expect modest low to mid-single digit CPM inflation and flat to slightly higher total dollar volume growth” in the 2013/2014 upfront market which follows “last year’s trend of slowing growth.” Senno predicts unit prices to rise 4% with CBS +5%, Fox and cable +4%, NBC and ABC +3%, and syndication +2%. The problem goes beyond sluggish ratings. Overall ad spending was lower in relation to the GDP than it’s been at least since 1980. And national broadcast ad sales last year were still 7% below their pre-recession peak in 2006, despite a 12.6% growth in spending by auto makers. It seems that ad buyers who are cutting spending on print newspapers and magazines are shifting more dollars to online media than to TV. All told, Senno says that TV ad sales this year will fall 2.8% — which would represent 1.7% growth if you eliminate spending tied to the elections and the Olympics from the 2012 tally. Read More »
The analysis today from Nomura Equity Research’s Michael Nathanson could dampen the mood at TV networks as we head into the big upfront ad sales season. The most startling discovery: total ad revenues didn’t grow at all in 2012 at the Big Media companies he tracks. Declines at Viacom and News Corp outweighed gains at Discovery and Scripps Networks while sales were “essentially flat” at CBS, Disney, and Time Warner. “Given the surge in media stocks, the aggregate 0% growth was somewhat surprising,” Nathanson says. Factoring out political and Olympics-related ads in 2012, he sees ad sales at the companies growing 3.6% in 2013. But the analyst is “cautious” about his forecast. The pickup in the U.S. economy has been “weak” and the ongoing budget stalemates portend “an uncertain economic future.” Meanwhile Internet-based media are taking market share, and driving ad rates down. “In effect, online advertising — specifically online display advertising — is enabling advertisers to reach their ‘eye-ball targets’ with less (and sometimes even no) ad dollar budget growth.” For example, last year media and entertainment companies cut their ad spending 4.2% — even as box office sales hit a record high. Read More »
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 … Read More »
You wouldn’t think so based on the lousy prime time ratings for everybody except NBC so far in the 2012-2013 season. But CBS’ dauntless Chief Research Officer David Poltrack vigorously argued today in his annual industry forecast at the UBS Global Media and Communications Conference that broadcasters are in great shape. Poltrack projects that advertiser spending for time on the major broadcast networks will fall 2% next year vs 2012. That’s good: It would represent 3% growth if you factor out this year’s boost from the Olympics and the elections. “The economy is finally gaining momentum in the right direction,” Poltrack says. (Zenith Optimedia also predicts a 2% drop for network TV to $16.9B in 2013.) As for the recent ratings, Poltrack says not to worry: The slide is due to what he calls “a chaotic start” with some shows premiering a week early, the presidential debates, and Hurricane Sandy. That’s “not indicative of how the season will progress,” says Poltrack. Read More »
This is one of several findings out today from a survey of 50 ad buyers that Cowen & Co says helped it to update and expand its coverage of Internet and New Media stocks. The advertisers are upbeat about 2013, seeing overall U.S. spending grow 4.6% vs 2012. That’s pretty good considering how much the election and Olympics boosted this year’s sales. But the additional dollars will mostly go to digital media — and especially those that appeal to smartphone and tablet owners. Digital will account for 33.5% of next year’s spending, up from 28.7% this year, Cowen analyst John Blackledge says. Meanwhile, TV’s market share will fall to 39.3% from 41.4%. The company notes that “TV consumption has remained static at 12-13 hrs/week” from 2004 to 2010. “Only Internet consumption has increased, from under 6 hrs/week in 2004 to 13 hrs/week in 2010.” The big surprise, though, is how eager advertisers are to spend on mobile. Cowen projects that smartphones, tablets and other portable devices will account for 26% of digital ad sales in 2018, up from 9% this year. But the firm says its survey suggests that the forecast may be too conservative — and that mobile could account for more than half of all digital ad sales in six years. That should concern moguls because Cowen says that “mobile ad dollars come at the expense of traditional ad mediums (TV, print, radio, etc).” Google is … Read More »
Analysts are starting to wrap their minds around an idea raised by CBS’ Les Moonves (here) and Disney’s Bob Iger (here) in recent earnings calls in response to questions about broadcasters’ disturbingly soft ratings in the new primetime season: With DVRs and time-shifting becoming more popular, they said, it’s time to sell ads based on the number of people who watch them up to seven days after they first air (C7, in industry jargon), up from today’s Live+3 days (C3). But the early verdict seems to be that a change would only help broadcasters a little, if at all — and won’t happen quickly. With DVRs’ ability to speed through commercials, “The problem is not ‘when’ people choose to watch particular content, it is that they are not watching advertising at all when they watch that programming,” BTIG’s Rich Greenfield says this morning. “You can try boosting viewership via C7 or even C14, but the ads are simply not being watched.” His suggestion: Networks should offer more shows on VOD, and fill them with fewer ads that are targeted to viewers’ needs and interests. The shift to that kind of model, including through TV Everywhere initiatives, “has simply been far too slow and we are being kind,” he says. Read More »
This has emerged as a hot question for the TV business in the Q3 earnings season: As DVRs become more popular, and time-shifting more common, should ads be sold on the basis of the number of people who view them up to seven days after they first air instead of the current three? CBS’ Les Moonves made the case on Wednesday, and Disney’s Bob Iger added his support yesterday. Lionsgate CEO Jon Feltheimer has indicated that he likes the idea — but his support is qualified: “If it’s a movie coming out in three days…we’re not going to get the benefit of those [additional] viewers,” he told analysts in a call to discuss earnings. In that case, “we’ll have to look at those numbers and get some kind of adjustment.” Lionsgate has options if that doesn’t happen — or even if it does. “There’s no question that we are seeing significant amounts of awareness from social media and the Internet, and that’s going to give us a tremendous opportunity to reduce our overall marketing spend,” he says. But while a shift to what’s called C7 ratings might create problems for the movie side, Lionsgate’s TV unit could benefit. Its new show Nashville, which airs on ABC, is “one of the most time-shifted shows on television,” he says.
Related: Lionsgate Shares Rise After Fiscal Q2 Results Soar … Read More »
Disney CEO Bob Iger echoed CBS’ Les Moonves in advocating a change in TV ad sales to include all ad views in the seven days after a show airs — up from the current three. The “story of the year,” he told analysts this evening, is the “greater penetration of DVRs and the greater usage of DVRs.” That has contributed to the startlingly big decline in prime time ratings at the major broadcast networks. That would seem to justify “an expanded look from a Nielsen and an advertising perspective at seven days versus three.” Unlike most other execs, Iger says that the networks may bear some responsibility for their ratings. “There seems to be an absence of new, big, buzzworthy hits,” though he says it’s too early to write off the season. He also says he believes ABC’s schedule is pretty solid. He identified Nashville as one of the series that he thinks could catch on. But he adds: “Would I like ABC to put on the schedule a big hit at the beginning of the year? Of course.”
Related: Disney Matches Fiscal Q4 Earnings Estimates But Falls Shy On Revenues
Here’s where we see how much American Idol‘s ratings drop last year stings Fox — and how much football helps NBC. Last year 30-second ads on NBC‘s Sunday Night Football were just slightly more expensive than the talent show — $512,367 vs Idol’s $502,900 — according to Advertising Age’s widely watched annual tally of average ad prices for the major networks’ regularly scheduled prime time shows. But there’s no contest in Ad Age’s latest figures, out tonight. Football’s up 6.2% to $545,142 while Idol dived to $340,825. That’s the show’s lowest price in years and puts it neck-and-neck with ABC’s Modern Family, up 32,7% to $330,908. (Idol’s numbers are hard to average because they rise significantly as the show approaches the finale.) The latest price estimates also show that seven of the most expensive shows are comedies.
The youth-oriented network was able to raise its cost-per-thousand (CPM) price by about 7% and sold about 75% of its inventory, I’m told. Retailers and mobile phone companies were especially eager to buy time. No dollar figures yet, but it should be pretty easy to calculate soon: CW racked up about $410M in commitments last year and typically accounts for about 5% of the upfront marketplace for the major English-language broadcasters. The results aren’t as robust as last year. CW’s unit prices were up about 11% and sold close to 80% of its inventory at a time when advertisers were eager to buy as the economy pulled out of the recession. But CW’s latest results aren’t bad considering that its ratings were down about 20% in the 2011-2012 season, and this year included upfront pitches from Internet video providers as well as traditional TV. While the results are still sketchy, they suggest that CW successfully managed its effort to fold online and mobile ad inventory in with traditional television. The network increased its commercial load this year with the introduction of its apps for Apple and Android mobile devices.
Related: Broadcast TV Unit Ad Prices Slipped Slightly In Q1: Report
As for the other networks, I hear negotiations should wrap up by the end of next week. Fox could close by the end of this week with CPMs up in the 8%-9% range, with help from auto companies and movie studios. ABC’s … Read More »
Programming execs described pricing for scatter ads in Q1 as being stable, but now we have a clearer idea of what that means: The average unit cost for a 30-second prime time spot on the major broadcast networks dipped 2% vs the period last year to $111,754, according to an analysis out today from media agency TargetCast. The firm, using data from NetCosts and research firm SQAD, says that Fox was on top with $198,088. It was followed by CBS ($115,772), ABC ($95,992) and NBC ($86,914). Although prices dipped slightly, TargetCast says that Q1 was the eighth straight quarter in which ad prices “were virtually flat or increased.” That’s a contrast to the previous period when broadcasters’ unit costs fell as they grappled with declining ratings and the recession. The scatter market was softer this year, TargetCast says, because many advertisers — scared by soaring scatter prices in 2010 and 2011 as the economy recovered — committed more of their budgets to upfront sales. As for cable, prices to reach 24-to-54 year olds at the top 15 ad-supported networks rose 3% to $12,998. ESPN led the pack at $37,329, with TNT a distant second at $18,071.