Analysts see double digit gains in Upfront CPMs


Following the network presentations in New York of their fall program lineups, the analysts at Wells Fargo Securities are looking for spot CPMs to be up double digits. And they’re also looking for more inventory to be sold this year in the Upfront.

“With the fall programming schedule unveiled at the upfront presentations over the last four days, the tenor of this year’s negotiation is expected to be quite different from 2009. We’ve moved from a clear buyer’s market to one that is more balanced in our view – meaning one where neither the buyer nor seller will be completely satisfied when business finally wraps up. Broadly, looking ahead to the 2010/11 broadcast season, current scatter growth rates will be unsustainable, in our view, though likely still healthy relative to the upfront,” wrote the team of John Janedis, Marci Ryvicker, Jaime Morris and Brendan Metrano. “However, we note that the correlation between stock prices and upfront CPMs is generally low, though we think the final tally may be modestly below the consensus view,” they added.

“For the broadcasters, we assume mid to high single digit growth in CPMs compared to last year, enough to get the networks a modest premium to 2008 upfront levels. However, with the macro backdrop still somewhat cloudy and fears related to Europe, our sense is that CPM increases will come in below high end estimates, leading the networks to hold some inventory for scatter,” the team said in a research report.

So, what television/cable stocks do they like?

“Overall, our general thesis is intact, in that we prefer companies with exposure to cable networks – from a growth perspective, we think 2Q will mark the cyclical peak in ad growth for the majority of networks. Our top picks include the shares of CBS, Discovery, News Corp and Time Warner,” the Wells Fargo Securities analysts told investors.

The analysts expect CBS to score the biggest growth in CPMs this year, at 8-9%. Growth for Fox is estimated at 7-8%, ABC and The CW at 6-7% and NBC 5%. “We expect ABC to be aggressive this year given its seven new fall shows, with a likelihood that it may write the first deals of the upfront season,” the report noted.