Analysts weigh in on upfronts

Highlight expected ad gains and scripted show boom

NEW YORK -- Broadcast networks will likely seek up to 10%-12% advertising rate increases in the upfront market, "but may ultimately settle for rates in the 6%-9% range," Janney Montgomery Scott analyst Tony Wible suggested Thursday.

In a report following most big fall TV schedule presentations, he also highlighted the increase in new scripted shows as a positive for big content producers like Time Warner.

Discussing ad pricing trends, Wible said this year's upfront selling season "should prove to be a seller's market based on the rebound in the economy."

But he also cautioned: "While reports of large improvements in scatter rates are a positive harbinger, we believe some of these growth rates may be outliers that skew network positioning as they go into negotiations."

Wible argued that the increase in new show pick-ups bodes well for big content producers.

NBC added 13 new shows, followed by ABC with 10, Fox with 7 and CBS with 6. Only two of the 38 new shows are unscripted, while about 40% rely on outside production.

"These new series show a promising trend for content producers - a shift back to higher-cost scripted programming and a large number of shows produced outside the network," Wible argued.

He cited NBC's reinvestment in programming, early benefits from retransmission fees, affiliate fee negotiations and the economic rebound as likely drivers of the increased demand for new shows.

Time Warner will produce 12 new broadcast shows this fall season, while having lost seven due to cancellations, according to Wible.

"The increase in scripted programming could improve rates, which helps TW's production business, but could lead to inflationary pressures on input costs," he argued.

Analysts on Thursday also started weighing in on the outlook for specific networks.

"NBC and ABC face the greatest risk this season based on the number of new shows, which are difficult, expensive to promote and generally have a higher failure rate that leads them to command relatively lower CPMs," argued Wible.
Miller Tabak analyst David Joyce in a note about CBS' decision to change its primetime schedule more than expected.

"We expect the company to remain competitive for viewers, ratings and ad budgets especially at the TV network and station assets, even with an unusually high seven show cancellations announced with their upfront presentation yesterday and the movement of many shows ('Survivor,' 'The Big Bang Theory,' 'CSI Miami') to new days and time slots, which is a new strategy after several years of relative stability," Joyce said.

"New programs such as a new 'Hawaii 5-0,' '$#*! My Dad Says' (with William Shatner), 'The Defenders' (with Jim Belushi and Jerry O'Connell), and 'Blue Bloods' (Tom Selleck) seemed to have a good reception at the upfront."