CIBC World Markets' broadcast upfront preview estimated the broadcast upfront will rise by 2% (on flat unit sales), in line with both buy-side and sell-side expectations. CIBC, however, expects the networks to be more aggressive with ratings guarantees (at up 2%, not down 3%), implying CPMs will disappoint at +3% (vs. +5-6%).

Highlights:

* CPM increases will grow 100-200 basis points slower than projected U.S. nominal GDP for 2005/06. This compares unfavorably to the very robust 1994/95 upfronts, when the economy was similarly three years out of recession. CIBC believes some of the current weakness can be explained by a slowing U.S. economy, but a meaningful portion is secular as well.

* CIBC learned from its contacts that the retail and auto sectors will again shift much of their incremental spending away from broadcast and toward cable networks and the Internet. The good news is the broadcast network owners are more exposed to the still fundamentally strong cable network business by a factor of 1x-2x on revenue and 2x-4x on EBITDA.

* Expect retail & auto sectors to again shift much of their spending increases from broadcast and toward Internet & cable networks. Fortunately, the Broadcast network owners are more exposed to fundamentally strong cable networks by factor of 1x-2x on revs., 2x-4x on EBITDA.

* The primetime Upfront will be up a sluggish 2% from for the Big four networks. Including the WB and UPN, the overall primetime Upfront should come in more flattish Yr/Yr, considering their weak ratings.

* Beyond 2% higher guaranteed ratings, CIBC also assumed the networks sell the same level of inventory and CPMs are up just 3% overall.

* Expect ABC & CBS To Pick Up Material Share From NBC: CIBC anticipates a significant share shift in spending, with ABC and CBS the biggest beneficiaries, given their significant share gains on Sunday and Thursday nights, respectively. In fact, ABC's degree of relative outperformance of 21% this Upfront has only been accomplished once in the last 10 years and that was when ABC overexposed Who Wants To Be A Millionaire back in 2000/01.

* ABC's Setting Up For A Monster Upfront: CIBC expects ABC's primetime upfront to be up 23% year over year including the Super Bowl (18% excluding it) and mid-teens including the other dayparts. ABC appears to be on track to finish the season with an 18-49 rating of 3.3 (including summer ratings), up 14% year over year, and 14%-15% ahead of estimated full-season guarantees. CIBC believes the recovery has been more broad-based than many have given credit for thus far and goes beyond just Desperate Housewives and Lost (case in point, Grey's Anatomy), with ratings up on four of seven nights season to date and five of seven nights in the second half.

* CBS Is Ready For The #1 Spot After Another Solid Year: CIBC estimates CBS' upfront will be up 7%, with share gains, particularly on the lucrative Thursday night (32% of primetime spending), worth an estimated 220 million after normalizing for the absence of Everybody Loves Raymond (an estimated 30 million impact) in next season's lineup. This should finally vault CBS to the number one spot in the 18-49 demo following NBC's dramatic decline this past season. Interestingly though, the network's new hit show this season, CSI: NY, is unlikely to provide the same incremental profit lift from the DVD and TV syndication markets as ABC will see with its new hit shows. The reason being is that Viacom doesn't fully own the show and will likely be replacing any missing profit stream related to an additional season of Raymond, rather than adding much incremental.

* FOX Is More Levered To Idol But Also More Stable: CIBC estimates FOX's upfront will be up about 1% overall, including the absence of the Super Bowl on FOX in the 2005/2006 season. Guaranteed ratings should likely be around a 3.4, down 2% year over year including the Super Bowl, but up 1% excluding the Super Bowl. The slight share gains at FOX, mostly resulting from weakness at NBC and great ratings from American Idol 4, should modestly offset the 3% declines in its non-Idol show ratings. While FOX has become even more levered to the success of the American Idol franchise with Idol 4's ratings up 6% Yr/Yr and its other shows' down 2% on average, not to mention the fact that the show will contribute an estimated 16.4% to full-season gross ratings points (GRPs), CIBC sees more stability in FOX's ratings than in season's past. Also, FOX's strategy of moving shows built around Idol to other nights has worked out well, with The O.C. and 24 moved to Thursday and Monday nights, respectively, where they've picked up share.

* NBC Was Hit With 15%-Plus Declines on 4 of 7 Nights: CIBC estimates NBC's primetime upfront will come in down about 12% from last year following an estimated 13%-14% decline in this season's ratings (excluding the Summer Olympics). Other dayparts should offset some of these primetime share losses, but a solid double-digit decline in primetime and total day spending appears unavoidable, in our opinion. Ratings appear to be getting worse in the second half, down 19% through the first 14 weeks, after only finishing down 10% in the first half. Weakness on Thursday nights, which most expected absent Friends, is not the only culprit, as the network has experienced ratings declines on every night season to date, and declines of 15% or more on four nights-Sunday, Monday, Wednesday and Thursday-in the second half.