• by David Kaplan , May 16, 2005

As the major networks unveil their upfront presentations in New York next week, two Wall Street firms issued their analyses of how well the nets will do in this year's upfront on Friday, and there seems to be a general lack of consensus as to what the final outcome will be.

Last year, media buyers ended up spending about $9.3 billion--roughly the same amount they'd spent in 2003--with cost-per-thousand increases that averaged 7 percent across all the networks.

Taking a pessimistic view is Goldman Sachs, which is predicting that the networks' take from this year's upfront will be down 5 percent from last year, marking the first decline in five years. Nevertheless, ABC's and CBS' ratings have improved--and therefore, they should see some gains.

And taking in the strength of those two networks, CIBC World Markets is therefore forecasting a 2 percent increase in how much advertisers will plunk down overall.

"We expect the networks to be more aggressive with ratings guarantees (at up 2 percent, not down 3 percent), implying CPMs will disappoint at +3 percent (versus +5-6 percent)," CIBC noted.

The somewhat more optimistic CIBC also added that the retail and auto sectors will again shift much of their incremental spending away from broadcast and toward cable networks and the Internet.

But the real confidence is reserved mainly for ABC and CBS, which both Goldman and CIBC believe will benefit from "a significant share shift in spending, with ABC and CBS the biggest beneficiaries, given their significant share gains on Sunday and Thursday nights, respectively."

In addition, CIBC cites ABC's degree of relative out-performance of 21 percent this upfront, which has only been accomplished once in the last 10 years--when ABC overexposed "Who Wants To Be A Millionaire?" back in 2000/01.

ABC appears to be on track to finish the season with an 18-49 rating of 3.3 (including summer ratings)--up 14 percent year-over-year, and 14 percent-15 percent ahead of estimated full-season guarantees. CIBC believes the recovery has been more broad-based than many have given credit for thus far, and goes beyond just "Desperate Housewives" and "Lost" (case in point, "Grey's Anatomy"), with ratings up on four of seven nights season-to-date and five of seven nights in the second half.

In its report, Goldman said it expected NBC to fall from "first to worst among the 18-49 demographic," and that CBS should lead in total upfront dollars, while ABC should see the greatest increase (10 percent). Goldman also said it expected declines at FOX and NBC of 8 percent and 17 percent, respectively.

Overall, Goldman is forecasting that the major network upfront will generate $9.02 billion (in a range of 8.6-9.5 billion), and that average CPM increases of 5 percent will be offset by 3 percent lower audience guarantees, which could result in the networks limiting inventory sold to 75 percent (71 percent-79 percent) versus 82 percent a year ago.