Upfront 2013: A Cautionary Tale

The upfront marketplace may not be so up this year -- at least according to one media analyst.

While Michael Nathanson of Nomura Equity Research initially predicted overall advertising revenue market could be up 3.6% this year, he advised caution. He called the ad market "surprisingly weak" and the TV market particularly disappointing considering that, excluding the Olympics and political advertising, it only rose 2.2% year-over-year in 2012.

The big-ticket theatrical product of media and entertainment companies is among the advertising categories that could be eyeing fewer ad dollars. Last year these companies cut back 4.2% in advertising revenues. And what did they get for their efforts? Record box-office revenues. Might that mean a repeat performance in 2013?

There was no question about automotive advertising in 2012 -- it grew substantially for broadcast and cable networks, TV stations, local cable operators, and other local TV platforms. It wasn't just the Summer Olympics that was responsible, but a careful overall expansion after 2011 cutbacks. Nathanson says not to expect a repeat this year.



Other analysts have suggested TV is not generating a substantial increase in the supply of ratings points. Broadcast networks continue to slip, as well as many of the top 25 cable networks. TV viewing growth is happening because of the size 25-100 cable networks

Senior TV executives, during their recent earnings calls, have touted "double digit" percentage price increases in cost per thousand viewers for scatter programming.

But few, if any, talked about actual year-over-year scatter dollar volume. Not only that, but media agency executives have told MediaPost that there doesn't seem to be an overall urgency -- marketers don't have much trouble getting inventory if they need it. All of which means an iffy advertising marketplace.

Total advertising revenues didnt grow at all in 2012 when looking collectively at big media companies, said Nathanson. He believes many marketers are saving on marketing by throwing money at cheaper online media, especially in the display advertising marketplace.

As it has in previous years, CBS continues to tout that the all-important cost-per-thousand-viewers (CPMs) will be strong, perhaps climbing to "double digit" percentage increases. In last years upfront, CBS and other networks didn't get to the 10% level.

As Nathanson said, "If the companies fail to garner strong CPM increases at this years upfront, in our view, it [will be] difficult for those with ratings issues to manufacture ad growth in this environment."

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