Upfronts 2009: Complete Coverage From Broadcasting & Cable
Credit Suisse analysts Monday aimed to debunk a variety of upfront myths arguing that the health of the upfront is not the health of the overall ad market, and that broadcast networks are far from dead despite the continued growth of cable.
Two media and advertising analysts, Spencer Wang and Peter Stabler, found only a 35% correlation between upfront spending and growth in the U.S. ad market and cautioned that the upfront is arguably over-publicized. In a report out Monday, the analysts detailed why broadcast remains at the heart of many marketers' media plans even while CPM costs are twice that of cable. “Why does anyone spend on broadcast TV?” pondered Stabler, “The primary reason is because it is really critical to advertisers…The viewing dynamics on broadcast are fundamentally different to cable.”
The analysts found that broadcast delivers light TV viewers while heavy TV watchers tend to watch more cable. “A 100% cable plan, while yielding far more commercial airings and total impressions, concentrates too much exposure among the nation’s heaviest TV viewers, who by virtue of lower education and employment status are less attractive to many of the mediums largest spenders," according to the report.
That isn’t to suggest that money won't continue to shift to cable. Credit Suisse expects a broadcast upfront that will be down 15% to $7.9 billion and cable market that will be flat or slightly down at about $7.6 billion.
“We expect CBS to outperform given their better ratings,” said Wang on the call. He is predicting CBS will see an 8.5% decline in upfront dollars versus 15% for the overall market. ABC and Fox are expected to be in line with the upfront marketplace while NBC and The CW, based on ratings, will come in below average. The calculations assume each network reduces inventory by around 5% and the analysts admit that in the real world different networks have different pricing strategies.
In cable, Credit Suisse expects the Time Warner stable TNT and TBS to outperform the market and Viacom to come in a little worse given its ratings issues.
While there is a heavy focus on upfront time, the analysts found that around 46% of total annual TV advertising is allocated during the May negotiating period. Syndication sees the highest percentage of ad spend allocated during the upfront on 67%, while cablers see the least on 36%. Broadcast networks sit in between on 53%.
Credit Suisse thinks that the concept of upfronts are far from over, however, even though the impact of the presentations is waning. They calculated that the mortality rate for shows that are heralded during the May upfronts and fail to return the following fall is in the 60-70% range. “If the upfront drags out, it’s not a great thing for media stocks and it weighs on second quarter,” added Wang.
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