Is TV Ad Growth Above Investor Expectations? -- RBC Capital Markets

TV advertising is performing inline with company expectations but is it above investor expectationsIn contrast to investor sentiment Media companies did not paint a bearish view on TV ad trends Scatter and Upfront pricing is trending healthily up and inline with their expectations from Q1 results Upfront negotiations continue with media companies expecting historical levels of inventory allocations more CPM expansion and a continued shift towards more comprehensive measurement currencies Investor sentiment around ad revenues is decidedly negative which begs the question that if ad growth for Q2 and H2 comes in at current forecasts is there upside to the stocks With a decent macro backdrop we think ad growth is more likely than sub loss to surprise to the upsideContent is King as the Bundle FragmentsOn the distribution side the companies we spoke to are in favor of skinnier bundles OTT platforms and vMVPDs as they each view the big bundle quotpaywallquot as an accelerant for cord cutting andor a hindrance to getting to premium content We noted a common theme towards gaining and retaining full inseason stacking not just 5 episodes library in new distribution arrangements to make the viewing experience more aligned with customer behavior and SVOD competitors Time will tell whether content companies can resist the allure of exclusive and lucrative SVOD sales for legacy content and whether vMVPDs are effective enough to mitigate cord cutting Subscriber declines are still considered the biggest risk to Media following the acceleration in sub loss seen in Q1Ad Agencies Business as UsualAdvertising Agencies generally suggested that 2017 remains largely on track with the companies guiding to organic growth of 34 on average with no quotnew negativesquot to call this into question Weakness in retail and consumer products remains a hangup for investors while the Agencies tend to discuss the portfolio effect of verticals under pressure offset by verticals with growth We think Ad Agency sentiment has improved over the last 60 days and it39s probably not coincidental with deteriorating sentiment for Media namesAll Eyes on Q2 Previews ampamp ResultsWhile the data points were helpful we don39t think debates were settled in our meetings Overall we think conviction in the sector is pretty low as investors worry about incremental downside from advertising and cord cutting in Media and fee pressure at the Agencies We think relative safehavens like IPG and DIS are most liked with longerterm buyers while most of the rest of the group remains a trading space in the eyes of the market pending better visibility of fundamentals We thus don39t think sentiment will meaningfully change until Q2 results provide more tangible evidence around the key debatesAll values in USD unless otherwise notedPriced as of June 14 2017 market close EST unless otherwise statedLink to Full Research Report including Required Disclosures and DisclaimerThe opinions and points of view expressed in this content are exclusively the views of the author andor subjects and do not necessarily represent the views of MediaVillagecomMyersBizNet Inc management or associated writers amp160amp160amp160

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Is TV Ad Growth Above Investor Expectations? -- RBC Capital Markets

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