Wall Street Analyst Suggests Upfront Results Are Leaky
He cannot be serious. A Wall Street analyst is suggesting that final tallies about upfront spending are not only flimsy, but the flimflam emanates from the networks.
There is just no way he's right. When networks hint they take in $2.125 billion, the figure is correct to the decimal point.
Yet, here is Nomura's Michael Nathanson boldly insinuating networks may be engaged in some legerdemain, massaging their numbers in a way that might just overinflate their performance. Further there's an indication that the press buys the spin - a vicious attack on the fourth estate (apologies are no doubt coming).
In a report titled "Let's Be Upfront About This," Nathanson writes: "We think only Disney circa 2005 ever put out an official release on their upfront take. All other numbers are unsubstantiated leaks from ad sales departments looking to tout their success."
In that vein, the purpose of Nathanson's report is to explain why he doesn't join other analysts in forecasting the upfront market's decimal points (though he does say he expects this year's bazaar to be "huge").
Among his reasons, there is no truth to be found. Networks do not report results using generally accepted accounting principles (GAAP).
Also, it is risky to predict the ultimate result in early summer when buyers make spending commitments, but don't have to firm them up until around Labor Day. (This is a bit flimsy on Nathanson's part since, while there have been pullbacks before, networks are unlikely to do major business with serial offenders.)
Nathanson also casts doubt on upfront numbers by saying similarly that advertisers have the opportunity to use cancellation rights starting in January. So, he writes, that what a network "booked in the upfront could be reduced by almost 33%."
Nonetheless, weighing in on the dynamics of the market's flow, he says that with the exception of a year with a down economy (2009, for instance), the networks are in a much stronger negotiating position than the buyers. Buyers submit budgets individually. But then networks count the house and then "usually behave as logically as OPEC does." Get what you can, though in their case maybe without being too greedy so as not to forget the bounty in the scatter market.
Nathanson also says once and for all stick a fork in the frequently thrown about suggestion that the upfront is outmoded, outdated and broken. And that pouty advertisers will just take their money and go home.
Au contraire. "We have come to realize that the TV upfront market is a beautiful thing that serves the purposes of both the buyer and seller."
So, the six media companies with 80% of viewership look to send prices soaring and don't really look to undercut one another. "Rarely do they break rank ..." (OPEC-y?)
For buyers, the market allows them to get what they pay (a lot) for: with definitive plans about product launches and other goals, there's the chance to lock in inventory at better prices than a scatter market might bring.
Nathanson should be applauded for his skeptical approach to upfront results. Still, even with crafty calculations, these alleged leaks from networks are -- sadly -- a benefit. Any clearing in the clouds is welcome because estimates provide some guidance on the overall health of the TV market. Even Wall Street has to take what it can get.