Wible's Weekly - "Marvel"ous Originals, New TV Ad Rates, and Big Data Oppty - Janney/MediaEntertainment

Original Arms Race – IPTV providers are becoming an increasingly important market for content producers. According to Deadline Hollywood, DIS' Marvel is leveraging their success in films by developing 60 episodes across four drama series and a mini-series that may target VOD players - including NFLX and AMZN. Separately, NFLX entered in a deal with Sony Picture Television to produce a psychological thriller. We believe the escalating arms race for original content has the potential to harm the traditional TV ecosystem as it forces networks to invest in more costly programming (including sports) and as it has the potential to erode ratings. We believe this dynamic is also behind the push for retrans and substantial increases in affiliate fees.

Broadcast Ad Rates – The cost of advertising on the new season of broadcast programing varies significantly, according to an Adweek survey of media buyers. New hit shows such as The Blacklist generate a healthy $199k per 30-second spot (ABC's S.H.I.E.L.D. and CBS' The Crazy Ones attract $170k and $175k per spot, respectively), while less popular shows such as Ironsideand Welcome to the Family attract only a third of that amount. This compares to established hit shows such as Big Bang Theory on CBS that gets the highest ad rates ($326k), which actually pales in comparison to the $570k-$595k for NFL content on NBC and Fox. Although pricing is mostly set in the upfront, these ad rates are broadly consistent with the ratings trend we have observed in the first few weeks of the new broadcast season.

Mobile Data Stats - Half of all internet connections globally are now at 4Mbps or higher, according to AKAM. The study notes that several early adopter broadband/fiber countries are seeing averages drop due to the increase of mobile connections. Interestingly, AAPL's Safari browser is responsible for the highest proportion of mobile requests (across cellular and wifi), with 54%, despite a greater proportion of Android devices. In addition to supporting the thought of higher usage by iOS/Safari users, the default cookie blocking on Safari means that marketing companies have to rely on alternatives. In this context, mobile FB app usage and sign-in can provide a significant advantage in obtaining and utilizing targeting data.

Cable Ad Spending – Cable advertising declined 1.8% in 2Q13 among the top 6 MSOs, despite the 1.3% increase at CMCSA, according to SNL Kagan. Several others saw steep declines of between 4% and 16%, while TWC experienced a relatively minor decrease of 1.9%. The cable numbers paint a less than stellar picture of local advertising, although this already includes declines from political advertising. Excluding political, CMCSA was up 5% and TWC actually increased $12 million. Advertising ARPU was $5.37 across the top 6 and down 3.6% YoY. Prospects for the back half of the year remain murky due to difficult political comparisons balancing good core trends and a strong finish from holiday spending. We believe local TV advertising by small business is more prone to move to social media given the lack of a sophisticated ad planning process that slows the move for large brands.

Big Data – The Direct Marketing Association is seeking to limit privacy initiatives by regulators by estimating that data driven marketing firms were responsible for $156 billion in revenues and employed more than 675,000. The DMA hopes that these numbers will give regulators pause before seeking to implement new laws to restrict a significant portion of these revenues and jobs. In addition to protecting jobs and revenues, the DMA touts benefits such as innovation, opportunities for small businesses and improved consumer choice from data-driven marketing. We continue to believe any measure that restricts cookies and tracking could actually help FB, other social networks, and large publishers as they will still have a means to target ads while their competitors operate less effective platforms.

Tony Wible joined Janney Montgomery Scott in 2008 and is a Managing Director covering the Media and Entertainment sector after spending the previous 10 years at Citigroup InvestmentResearch—most recently covering the Broadcasting and Entertainment Services industries.
Tony can be reached at twible@janney.com.

Janney Montgomery Scott LLC, is a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the New York Stock Exchange, the Financial Industry Regulatory Authority and the Securities Investor Protection Corp. Disclosures may be reviewed at Wible's Weekly.

Read all Tony's MediaBizBloggers commentaries at Wible's Weekly: Janney/MediaEntertainment.

Check us out on Facebook at MediaBizBloggers.com
Follow our Twitter updates @MediaBizBlogger

The opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaBizBloggers.com management or associated bloggers. MediaBizBloggers is an open thought leadership platform and readers may share their comments and opinions in response to all commentaries.