• by David Goetzl  @dgoetzl, March 29, 2007

It's early. But as buyers and sellers continue to posture in advance of the coming upfront, an influential neutral observer gives the advantage to the sell-side. Merrill Lynch analyst Jessica Reif Cohen said in a report issued Wednesday that the spring bazaar would be "stronger" than a year ago, with total dollars rising 4% to $8 billion for the four major networks.

The basis for her projections is threefold: A tight scatter market encouraging advertisers to think twice about taking a pass on locked-in upfront pricing; dollars flowing to NBC for the Olympics, perhaps tightening inventory for other networks; and an economy trending upward.

Reif Cohen projects--unlike a year ago when some deals were believed to be done without price increases or declines--that CPMs will rise in the 3% to 5% range for the four major networks, with ABC leading the pace at 5%.

Fox will post the greatest volume increase--up 6% to $1.8 billion, she says. Among the networks with 22 hours of prime-time a week (Fox has 15), ABC and NBC will each rise 5% to $2.1 billion and $1.9 billion, respectively. Volume at CBS would be flat, but will still outpace the other three networks at $2.2 billion.

Reif Cohen did write that getting a handle on true upfront performance can be like finding a needle in a haystack--since networks, with the possible exception of ABC, are unwilling to release or confirm figures. They do, however, like to convey a sense of success and flush intakes to Wall Street.

In that vein, she adds, media companies "often play fast and loose" with what they hint are their upfront takes. Traditionally, sports dollars have not been counted as part of an upfront take--although nowadays, some networks "will slip sports into the numbers they discuss to cover up weakness."

Not mentioned was NBC, which despite ratings straits last year posted a flat upfront--largely because it was believed to include "Sunday Night Football" dollars in the take floated in the market. (NBC would likely argue that through its sports, "Sunday Night Football" airs in prime time and is a regularly scheduled program.)

Reif Cohen said her forecasts are based on discussions with advertisers and network executives--presumably each side has an agenda--and the trade press. She also tabbed the upfront as possibly "misleading," suggesting it may not merit the hoopla it generates in the media each spring. While it provides an indication of advertisers' and networks' views of the coming 12 to 18 months--and can serve as a barometer of current industry health--upfront commitments in May often fail to translate into real dollars. Advertisers have options to rescind into September and even during the January through June period.

"Therefore, a strong upfront does not guarantee strong results," she wrote, "and a weak upfront does not necessarily portend a poor market." Her forecast for the robust upfront this spring is based on current scatter pricing that's up in the low double digits versus upfront costs--meaning that if an advertiser is now spending 10% or more now for spots than it would have paid in the upfront, it's likely to buy the spots in May this time around. Reif Cohen said ABC is on track for the largest CPM jumps despite a 10% drop in 18-to-49 ratings this season in regularly scheduled programs - the core of what's sold in the upfront--and its "Grey's Anatomy"-infused leadership on Thursdays, where it has increased its 18-to-49 performance by 69%.

Reif Cohen projects the cable upfront will increase 3% in volume to $7.5 billion, with Discovery "the biggest winner" due to a ratings renaissance.