Analyst Looks at Aereo’s Affect On The Upfronts

As the Aereo case makes its way to the Supreme Court, analyst Brian Wieser (pictured) of Pivotal Research brings up an interesting point. Having threatened to move their programming to cable if Aereo’s service is ruled to be legal, will CBS and Fox have to guarantee that they’ll be broadcasting next season in order to sell advertising time in the upfront?

In a research report, Wieser notes that broadcast TV is usually negotiated first—and carries higher prices on a cost-per-thousand viewers basis—because it reaches the most consumers. He asks: “If you were a planner, would you still pencil in the same amount of money to the two potentially cable-only "broadcast" networks knowing there was a good chance that a given media owner might fall short on the reach goals you have grown accustomed to and which generally receive premium pricing given the scarcity of the widest-reaching packages of television inventory? Or would you overweight your budgets towards those networks that are more likely to meet your reach goals?”

The answer, according to Wieser is that a larger share of ad dollars would be allocated to networks promising to stay on broadcast, namely ABC and NBC. Based on last year’s spending, moving to cable would cost Fox and CBS about $400 million in ad revenue, he estimates.

“Given these considerations, our guess is that Fox and CBS will have to make their positions clear regarding their broadcast or cable-only status for their premium programming well before the court ruling,” Wieser says. He figures that Fox and CBS will back down and commit to over the air, at least for the 2014-15 season.

It is early to predict the upfront, but based on his historical assessment of the data, Wieser says that “if our starting point is to presume 0% to -2% volume growth for network TV, our upfront pricing model calculates a 7% CPM improvement for the leading broadcast network, or the one with the most inventory to sell. That network would probably be CBS if they remain a broadcast network,” he says.