Will Network TV Upfront CPM Increases Surpass the Double Digit Barrier?

As TV network Upfront indicators point to a very robust marketplace there is an interesting precedent pointing to a possibility that average Upfront CPM increases could catapult past the doubledigit barrier This precedent from 2002 and 2003 is detailed below Both buyers and sellers are preparing for an aggressive negotiating process as marketers maintain their budget shift from quarterly scatter buying to the Upfront market and as most major marketers maintain or increase their network TV budgets Only pharmaceuticals appear to be flat or down yeartoyear Networks are poised to hold out for at least high single digit costperthousand increases and the looming question is whether the doubledigit barrier will be crossed by one or more networks There are also several moderating issues that argue against doubledigit increases Below are the arguments why these increases may materialize and also why they may be unrealisticSELLOUT LEVELSLast year network sellout for the broadcasters and leading cable nets ranged from the low70 to low80 percent range Networks may opt to reduce sellout this year in order to place increasing upward pressure on CPMs Traditionally low CPM advertisers will be especially challenged as networks look not only at clientbyclient CPM increases but total revenue optimization Networks can be confident that scatter market costs will continue to be higher than Upfront CPMs and that scatter demand is sustainable In recent weeks however there have been reports of a cooling scatter market and available inventory at multiple networksNETWORK MANAGEMENT SHIFTSThe management shifts at ABCTV NBCTV FOXTV and Univision also assure an interesting and dynamic negotiation process With Comcast executives looking over the shoulders of a wellestablished NBCTV and NBCU Cable team it39s less likely the network will step forward with early and aggressive shareofmarket deals NBCU also has the best total market perspective with its broadcast cable digital and syndication assets and the most experienced team for analyzing market conditions At ABC and at Fox new teams have replaced highly respected veterans Mike Shaw and Jon Nesvig and can be expected to push the upward boundaries of market demand Univision and Telemundo are expecting to generate significant increases in both sellout and costsperthousand with management shifts and anticipated census results pressuring sales execs to deliver strong revenue gainsHISTORICAL PRECEDENT FROM 2002 and 2003 UPFRONTSSee the detailed charts below Following the 2001 recession when network Upfront revenues declined and scatter markets were soft the TV business rebounded quickly and forcefully in 20022003 and especially in 20032004 Similar market patterns appear to be emerging following the 2009 recessionIn the 20022003 Upfront average CPM increases for broadcast networks were 97 In the 20032004 Upfront which would parallel this year chronologically average primetime CPMs increased 153 All broadcast dayparts averaged 139 see charts below and cable CPM increases were 95 Will similar economic dynamics drive 20112012 CPM increases toward those same doubledigit increases Last year average broadcast network CPM increases were 8185 and cable networks generated CPM increases of 7080 If the pattern from a decade ago holds primetime broadcast network CPMs could increase this year by an average 120 to 135 CONTEXT AND COMMENTEarlier last month I reported that quotthe 20112012 Network TV Upfront Season should be satisfying for the networks with CPM growth in the 3 to 5 range for broadcasters and 58 range for cablers with exceptions of course for high and low outliersquot This forecast which now appears to have been overly conservative recognized that this recovery unlike the 20032004 rebound is being led by industrial production rather than consumer spending reduced unemployment and retail growth There continue to be clear indications such as soft retail sales and high unemployment that marketers will be forced to rethink their aggressive ad spending strategiesThere remains tremendous marketplace pressure and client procurement realities that work to hold CPM increases in the single digits Any number of economic factors may emerge to depress the market and the fact remains that marketers have not yet finalized their Upfront budgets Whether 20032004 Upfront CPM increases represent a fair comparison to this year39s Upfront is impossible to say but it is clear that similar positive patterns are emerging and this may be the most challenging Upfront negotiating period in years for buyers and for sellers20022004 Broadcast Network Primetime CostPerThousand Increases Source Jack Myers Media Business ReportUPFRONT MARKET NETWORK AND DAYPART SEASON amp160 20022003 20032004 Primetime amp160 amp160 ABC 50 150 CBS 110 180 NBC 80 140 Fox 70 140 WB 140 200 UPN 130 110 The CW amp160 amp160 amp160 amp160 amp160 Primetime amp160 amp160 Primetime Average 97 153 amp160 amp160 amp160 AM News 70 140 amp160 amp160 amp160 Daytime Flat 100 amp160 amp160 amp160 Evening News 10 80 amp160 amp160 amp160 Late Night 70 150 Total Broadcast Average amp160 139 amp160 amp160 amp160 You are receiving this email as a corporate subscriber to Jack Myers Media Business Report Redistribution in any form except among approved individuals within your company is prohibited As a subscriber you have full access to all archives and reports at wwwjackmyerscom If you require your ID and password contact maryannjackmyerscom INSERTS

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Will Network TV Upfront CPM Increases Surpass the Double Digit Barrier?

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