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 — We have heard numerous Industry sources indicate that P&G, in particular, is strongly considering shifting some budget allocation back from digital to Network TV after a major reallocation didn't deliver the expected returns last year. While the impact of a budget shift from any one marketer isn't enough to make or break the market financially, we think the signal itself could be a positive for the Industry and for investor sentiment.

Look Out For Non-Fundamental "Wild Cards" Potentially At Play — With some major media accounts in review such as L'Oréal 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 "bearish" Industry source), that prevalence of single pixel fraud, auto-play and below the fold viewership could temper the flow of money from traditional TV to online.

While We'd 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 — 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 "tighten" anymore. The upfront marketplace probably won't 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 certainty.

As A Result, Upfronts Should Probably Mean Less To Investors — Mid-single digit volume drops across the Network TV Upfronts last year didn't portend total TV budgets declining commensurately (we still think total TV budgets for 2015-16 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 year.

Current Environment Remains Steady, But Doesn't Suggest Upside To Overall Budgets — In the critical "posturing" month heading up to the Upfronts, the Network TV market in March was "fine." Networks were selling, but, the dollars weren't easy to come by and a lack of inventory from soft ratings helped create scarcity. For investors concerned about a "step function" down in the ad market, we clearly don't appear headed in that direction any time soon.

• But scatter premiums aren't big and the environment is doing little to dissuade advertisers of the reality that if they don't buy inventory upfront on the next go-round, it will be still be there in scatter.

We Don't See A Universal Call For C+7 — It would surprise us of this is the year of C+7 full currency adoption. With a lack of accompanied Digital Ad Insertion capabilities, it will likely take price discounts sellers aren't willing to offer.

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