Broadcast TV ratings have dropped sharply this season. And that, combined with the weak economy and competition from other media, could mean a tough upfront for the big four networks, says a Wall Street Journal article.
More TV ad dollars are expected to move to cable channels, a shift that has accelerated in the past couple of years. But both broadcast and cable television are also facing more intense competition from online media, including web video outlets.
Magna Global estimates that the money raised in this year’s TV upfront market could be up about 2%. Magna expects broadcast networks’ dollar volume could fall 2% while cable TV’s volume could rise about 5%.
“Despite corporate profits being at a high, marketers are still taking a cautious approach in anticipation of lackluster consumer spending and, therefore, their willingness to invest in advertising is taking a conservative approach,” said Tim Spengler, Magna Global CEO.
Another major ad-buying company suggested that ad sales could be flat at broadcast networks and higher at cable networks. Meanwhile, Chris Geraci, president of national broadcast at Omnicom Media Group, said his firm foresees “flat demand overall, with continued strength from the technology and automotive sectors, balanced by potential reductions from retail and pharmaceuticals.”
These predictions suggest the upfront could be weaker than last year, when the ad-sales market was tepid, and volume was flat at most of the major broadcast networks. Networks don’t publicly disclose details of their upfront sales.
“Early indications are that the 2013/14 TV upfront could follow last year’s trend of slowing growth,” Michael Senno, an analyst at Credit Suisse, said in a note to investors last week. He said that ad buyers currently expect steady or slightly higher total dollar-volume growth.
Network predictions are mixed: One network executive said that volumes could be higher, while another said it was too early to make predictions.
One sign of the broadcast networks’ tempered expectations came from CBS Corp. CEO Les Moonves, who in the past couple of years has predicted “double digit” increases in upfront pricing. During an investor conference earlier this month, Moonves declined to project a specific number. He did, however, say ad demand was increasing and CBS would “lead” in “volume and CPM increases.” Moonves’s reason for taking a low-key approach: Last year, the network’s price increase failed to match his forecast. “Last year was only up 9% [in terms of upfront pricing], so I was a little bit of a liar,” he said during the conference.
One factor weighing on advertisers’ minds are the rating shortfalls that many networks have suffered this season. Ratings have weakened at the four big networks since the start of the fall season in late September.
Among viewers ages 18-49, this season’s average prime-time audiences through 3/17 were down 23% at Fox; 7% at NBC; 3% at CBS; and 8% at ABC.
Fox has been particularly hard hit because few of its new fall shows drew big audiences, while aging hit “American Idol” has been losing steam. CBS was the only broadcast network to show a rise in total viewership, with a 2% gain.
The audience figures don’t include time-shifted viewing.
The ratings declines have some marketers rethinking their ad-buying strategies, ad buyers said. Some are expected to shift money to cable channels, they said. While ratings have declined at some cable channels, ad prices on cable tend to be lower than on broadcast TV, according to the story.
In some cases, the web could take a share of those dollars. “Advertisers have seen a significant shortage of ratings, and some are willing to take some money and move it online,” said John Muszynski, chief investment officer at Spark SMG.
TV spending is also expected to weaken, in part because the year lacks an Olympics or presidential election.
ZenithOptimedia expects TV ad spend to grow just 2.8% this year to $63.9 billion. Zenith expects outlays on network-TV ads to decline 2% and spending on cable to increase 7%.
RBR-TVBR observation: Let’s face it. Most of the hottest new series are being introduced on cable networks. Top programming from the broadcast nets is also airing on cable nets via syndication. But the good news for broadcast is time-shifted viewing is increasingly on the table in upfront negotiations. Many of the eyeballs lost in live ratings are heading that way. Also, web viewing of network shows—whether or not all or some of it is factored in with upfront deals—is increasing geometrically and ad dollars will be placed there. That is money that goes to broadcast networks’ bottom line.