Wall St. Speaks Out on Eve of Upfronts

At Least One Major CPG Player May Move Some Money Back To TV After A Broader Shift To Digital amp8212 We have heard numerous Industry sources indicate that PampampG in particular is strongly considering shifting some budget allocation back from digital to Network TV after a major reallocation didn39t deliver the expected returns last year While the impact of a budget shift from any one marketer isn39t enough to make or break the market financially we think the signal itself could be a positive for the Industry and for investor sentimentLook Out For NonFundamental quotWild Cardsquot Potentially At Play amp8212 With some major media accounts in review such as L39Oramp233al and Unilever we may see a hesitancy to commit money unrelated to real fundamentals pricing or supply dynamics that will create some headwind We are also sensing increased concerns even from some of our more quotbearishquot Industry source that prevalence of single pixel fraud autoplay and below the fold viewership could temper the flow of money from traditional TV to onlineWhile We39d Expect A Less Than Robust Upfront Selling Season Buyers And Sellers Tell Us The Upfronts Have less Importance And Tell Us Less About The Marketplace Than In Prior Years amp8212 For Advertisers the risk of being squeezed out of the market by either higher prices or declining inventory is being mitigated by a scatter market that never really seems to quottightenquot anymore The upfront marketplace probably won39t become vestigial any time soon from a practical level it just makes sense to execute buys ahead of time when you know you will need them if a slight premium is worth the execution and efficiency certaintyAs A Result Upfronts Should Probably Mean Less To Investors amp8212 Midsingle digit volume drops across the Network TV Upfronts last year didn39t portend total TV budgets declining commensurately we still think total TV budgets for 201516 at Cable will be flat to slightly up and Broadcast slightly down The discussions also tend to focus on Network Prime and exclude sports and other dayparts The Upfronts probably give us a good read on the tone of the market but not total spend We expect to see similar volume declines this yearCurrent Environment Remains Steady But Doesn39t Suggest Upside To Overall Budgets amp8212 In the critical quotposturingquot month heading up to the Upfronts the Network TV market in March was quotfinequot Networks were selling but the dollars weren39t easy to come by and a lack of inventory from soft ratings helped create scarcity For investors concerned about a quotstep functionquot down in the ad market we clearly don39t appear headed in that direction any time soonamp8226 But scatter premiums aren39t big and the environment is doing little to dissuade advertisers of the reality that if they don39t buy inventory upfront on the next goround it will be still be there in scatterWe Don39t See A Universal Call For C7 amp8212 It would surprise us of this is the year of C7 full currency adoption With a lack of accompanied Digital Ad Insertion capabilities it will likely take price discounts sellers aren39t willing to offerLink to Required Disclosures and Disclaimer amp174 Registered trademark of Royal Bank of Canada RBC Capital Markets is a trademark of Royal Bank of Canada Used under licenseDavid Bank is Managing Director at RBC Capital Markets He can be reached at davidbankrbccmcom amp174Registered trademark of Royal Bank of Canada RBC Capital Markets is a trademark of Royal Bank of CanadaThe opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaVillagecom management or associated bloggers MediaVillage is an open thought leadership platform

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Wall St. Speaks Out on Eve of Upfronts

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