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Poltrack Sees 2% Drop in Broadcast Revenues

NBC's successful London Olympics might leave broadcast
networks with lower advertising revenues in 2013, but one of the industry's key
advocates says a golden age is coming.

CBS' chief research officer David Poltrack, giving his
yearly forecast to the annual UBS Media and Communications conference in New
York on Monday, said that new platforms and devices have begun creating create
additional revenue streams for the broadcasters.

But for 2013, Poltrack said that broadcast network ad
revenues would drop 2%. Excluding the effects of the Olympics, he said revenue
would grow 2% in the first three quarters and 5% in the fourth quarter. He said
growth would be higher in the fourth quarter because a "surging" scatter market
will lead to a strong upfront, that there would be no political preemptions and
that there would be no Olympics drawing fourth quarter money into the third
quarter. For the full year, that translates into an underlying growth rate of

For 2012, Poltrack had forecast growth of 7.3%. "With three-quarters
of the year accounted for, advertising revenue is running 11% ahead of 2011. I
believe my 7.3% gain for the entire year looks solid," he said. "However the
Olympics' contribution was larger than I expected, so the underlying growth
rate should come in at about 4%."

Usually at this conference, Poltrack's role has been to
defend the network and provide reasons to believe they are not media industry
dinosaurs. In recent years, despite ratings erosion, CBS has increased its
earnings thanks to digital distribution of its content, retransmission consent
payments and reverse compensation from affiliates.

On Monday, Poltrack said that a broadening view of broadcast
will continue to make them look like winners.

"This year I'm going to go a little further than [usual],"
he said. "I'm going to argue that the broadcast system may be entering a new
golden era. An era in which its dominant position in the advertising market is
enhanced as new distribution options create greater consumer access to its
programming through several emerging platforms; where new analytical tools
enable advertisers to use the medium more effectively and where its new revenue
streams grow from formative to substantial."

Poltrack argued that the early returns from the new
broadcast season are not giving an accurate picture of the broadcasters'
vitality. Disruptive factors making comparisons from last year difficult
include the fact that several programs launched before the start of the
broadcast season on air, online and on VOD. Another was that the season started
a week later, cutting the pre-baseball segment to just one week. Viewing was
also disrupted by election pre-emptions and by Hurricane Sandy, which cause
programs to be pre-empted and prevented those without power from watching.

"The bottom line is results are not indicative of how this
season will progress," he said.

But those early results have revived myths about the
broadcast business, including the notion that young people aren't watching
broadcast shows.

Poltrack had two responses. One is that the population of 18
to 49 year olds is down, which means that even without a change in viewing
ratings in that demo would be off by 1.4%. The second is that younger viewers
are watching in way that Nielsen doesn't measure, including online streaming,
VOD and DVR viewing beyond seven days after air.

At this point, Poltrack said CBS is earning more revenue
from viewers who watch online than those who watch on air. And VOD viewers, who
often cannot skip commercials, are more valuable than those who use DVRs.
(While Poltrack said there appeared to be evidence of cord-cutting, he noted
that Netflix streaming wasn't a competitor for the networks. Instead he said
Netflix is replacing time that had been spent watching DVDs.)

Poltrack added that while the demographics of 18-49 year old
viewers and 25-35 year-old viewers remain the dominate currency for media
buying, more advertisers are using more sophisticated measurements for media
selection. The net of that is that advertising rates are rising for shows with
more viewers in the 55 to 65 year age range, where not coincidentally, CBS is

In addition to more viewing, social media and second screen
apps are tightening the connection between advertiser messages building
awareness and viewer purchases and creating more potential for transactional