Analyst Forecasts Upfront Ad Spending Will Rise in Low- to Mid-Single-Digit Percentage Range
Morgan Stanley's Benjamin Swinburne estimates a total broadcast and cable haul of $18.85 billion, up 2.6 percent, expects some networks to hold back inventory and discusses the impact of online video advertising.
NEW YORK -- Morgan Stanley analyst Benjamin Swinburne on Monday forecast upfront revenue gains for broadcast and cable networks despite some weaker momentum compared with last year.
He predicted that total upfront dollars would rise in the low- to mid-single-digit percentage range, while average upfront pricing increases could be in the 5 percent to 10 percent range. His projection calls for 2 to 4 percent growth in the average revenue per spot for broadcast networks and 4 to 6 percent for cable networks.
STORY: Analyst Upgrades CBS Corp. to Top Stock Pick
"We see pricing growth below last year's solid double-digit market, and as a result, some networks hold inventory back for the scatter market," the analyst wrote.
In a chart, he estimated a 1 percent upfront revenue gain for broadcast to $9.16 billion and a 4.3 percent cable gain to $9.69 billion, which would leave the total upfront haul up 2.6 percent at $18.85 billion.
"A softer scatter market this season leads us to assume lower pricing growth in this year's upfront versus last year, but total dollars [will] still [be] up nicely," Swinburne said. "Ultimately, ratings and next season's scatter market will determine where revenue results come in." But he emphasized that he expects "auto advertising to again lead from a category perspective nationally in 2012-13."
In terms of specific networks, "CBS goes into the upfront with the strongest ratings and fewest holes in their schedule," the Morgan Stanley expert highlighted. "Among the cable networks, we see upside risk to Discovery Communications' 2012-13 advertising (season-to-date primetime ratings up 8 percent) and downside risk at Viacom (Nickelodeon live-only total-day key demo ratings down 19 percent)."
Swinburne also argued that ratings are flat, but TV viewing is up. "We believe this statistical conundrum is due to growth in on-demand and time-shifted viewing not picked up in C3 ratings along with the long tail of cable networks," he said.
STORY: CBS Corp.'s Stock Hits 52-Week High
Will growing online video advertising shift ad spending away from TV? The answer is often no, according to the analyst. "Of the about $3 billion we expect to be spent in online video in 2012, the majority is likely on professional content, such as TV shows, on sites like Hulu, ESPN and YouTube," he wrote. "More broadly, measurement issues and high [ad rates] act as limiting factors in accelerating growth in online video ad spend."