UBS Conference: CBS Forecasts 3.4% Gain In Broadcast Ad Revenues

Fox only network with make good issues

It’s good to be a broadcast network again.

Speaking at UBS’ 38th annual global media and communications conference in New York, CBS’ Chief Research Officer David Poltrack said that network television advertising revenues are up 6.2% in 2010, up from his previous forecast of 5%.

For 2011, he said he expects ad sales growth to be 3.4. Since the Olympics contributed less than 2 percentage points to growth in 2010, that suggests an underlying growth rate of 5%, which he called “healthy.”

Driving the strength of broadcast ad revenues was a strong upfront where prices rose and about 80% of available commercial inventory got sold. Since then, the scatter market has been hot, with prices running 20% higher than in the upfront.

Poltrack added that you need to look at the networks’ rating performance to see if they can take advantage of the scatter market. If ratings are significantly lower, they must use available spots as make-goods for upfront clients.

“Overall the networks are in good shape on the audience deficiency front,” through the first seven weeks of the season, he said. Based on the C3 commercial ratings upon which most ad buys are based, CBS is up 1%, NBC is up 3%, ABC is down 7% and Fox is down 20% in the key 18-49 demographic.

Poltrack called ABC’s make good situation “manageable,” noting that “only Fox is down substantially and they have all those hours of American Idol to help cover their ads.”

During the recession, Poltrack said, network ad revenues were hurt hard as marketers shifted dollars from advertising to promotion. “Now marketing budgets are expanding again and marketers are moving more of this money into advertising, most specifically television advertising,” he said.

Marketers are moving more dollars into TV advertising because new single-source research linking viewing and product sales is showing a higher return on investment that previously thought. One way marketers are improving their returns is by targeting heavy users of specific products who are not brand loyal, he said.

The broadcast business is also being helped by more research showing that consumers will accept more ads when watching shows online. The CW, part owned by CBS, is running an ad load equal to broadcast when shows stream and CBS Interactive has more than doubled the number of ads in show available online.

“It is therefore likely that the new distribution services enabling access to this streaming content on television sets represent a potential superior form of delayed viewing to the DVR in terms of revenue” because DVR users skip more ads, Poltrack said.