Ad Market Starts Hot, But Subs Pose Concern

Going into 2016, TV commercials are selling like hotcakes . The strong market follows a restrained upfront in which buyers were able to limit price increases by keeping budgets tight and at least threatening to move more marketing money to digital.

But as the new season started, money began to flow back into TV. Some analysts say that while some advertising dollars ought to follow the growing number of eyeballs on tablets, smartphones and other digital devices, money moved too fast.

In last-minute additions to upfront buys, and under the cover of scatter, money returned to the TV business—and prices began to rise, cheering broadcast executives .

“The scatter market is remarkably strong. It’s the strongest we’ve seen it in many, many years,” said CBS CEO Les Moonves on the company’s third-quarter earnings call. “Clearly the sky was not falling. In other words, it wasn’t moving to digital.”

The Upfront Will Be Up

Not surprisingly, Moonves sees the good times continuing. “I’m looking forward to the upfront because with scatter this strong you know that in May, it’s going to remain that way,” he said on the earnings call.

Moonves isn’t alone in predicting a strong upfront in May.

As one senior sales exec puts it, clients will look at the 20%-plus premiums they’re paying now in scatter and order their agencies to push their budgets back into the upfront to avoid getting gouged on last-minute buys.

The upfront might be just the centerpiece of a big year for advertising.

CBS chief research officer David Poltrack predicted that broadcast advertising would be up 9.5% in 2016, including the Olympics and election. A strong Olympics could push the gains into double-digit territory, he added.

The Numbers Will Look Different

As it awaits new competition from the combination of comScore and Rentrak, Nielsen will end 2015 by releasing new ratings based on an enlarged panel of sample viewers. That panel will be a part of the Nielsen Total Audience Measurement regimen, which will incorporate viewing on tablets, smartphones and more at some point.

Some networks will benefit from the changes caused by Nielsen’s 100,000-person panel, others won’t. But to some degree the net effect is not yet clear.

“We now have 13 months of side-by-side data and unfortunately the factor has not been consistent month to month, so it’s not like I can say CNN gets 5% more adults 25- 54” because of the new sample, said Turner chief research officer Howard Shimmel.

And before Nielsen can measure mobile viewing, programmers have to pitch in by adding Nielsen software to their websites and apps. That process isn’t going as quickly as Nielsen might have wanted.

Shimmel is also hoping that after the comScore-Rentrak merger is closed, the new company will bring the industry a great product strategy. But even if it did, that wouldn’t affect the ad sales currency until the 2017 upfront.

Every Subscriber Counts

While distribution revenue used to provide media companies with a predictable and steadily growing source of revenue, these days cord-cutting and over-the-top streaming competition has executives and investors gnashing their teeth over signs that subscriber losses are accelerating.

During the third quarter, Walt Disney Co. CEO Bob Iger let investors know that ESPN’s distribution revenue growth would be slower than expected because of subscriber losses, and all media stocks plummeted. When a Disney SEC filing before Thanksgiving included numbers showing ESPN was down 7 million subs, the market convulsed again.

Viacom has a big affiliate deal up for renewal with Dish Network. The deadline is around February, and on Wall Street, analysts have pegged how far down Viacom stock will dive if an agreement isn’t reached and Nickelodeon, MTV and Comedy Central disappear from millions of homes. Viacom is already blacked out in a number of smaller cable systems, and those systems are now complaining about AMC Networks’ tactics. The National Cable Television Cooperative, the cable buying group, charges that AMC wants them to pay for less-watched networks in order to bring subscribers The Walking Dead, whether or not those networks are available.

“NCTC members serving more than a million subscribers are poised not to renew their deal with AMC, and each day more NCTC members are considering discontinuing carriage,” the operators said in a letter to the FCC.

Should make for an interesting start of the year.

Jon Lafayette

Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.