We’re getting close to the last word on the 2014-15 upfront, I promise.
Second-quarter earnings were marked by mostly low and disappointing advertising revenue growth that led to some analysts reducing their earnings forecasts for the remainder of the year.
Analyst Michael Nathanson of MoffettNathanson Research said that nine of the twelve advertising line items he tracks missed his estimates. Adding up the reported totals, he found that ad revenue grew at a 0.2% rate, the worst quarter since the recession.
Media company executives acknowledged the tough market but tried to put a happy face on their own performance in the upfront, which often tracks second quarter trends. Some also said the outlook for the rest of the year was brighter.
“There's much industry discussion right now about the lower dollars coming into this year's upfront. At AMC Networks, we are pleased with our performance,” CEO Josh Sapan said during his earnings call. “We increased both upfront pricing and volume, with the latter growing in the double digits, and are optimistic that the strength of our shows will draw additional dollars closer to air.”
AMC was one of the few programmers with higher upfront volume. Others included NBCUniversal, Viacom, ESPN and the Hallmark Channels.
Scripps Networks Interactive CEO Ken Lowe boasted that upfront sales topped $1 billion for the third straight year. But he declined to say whether it was up or down from last year, so we’ll wager it's in the down column.
Lowe said Scripps recorded price increases in the mid-single digit range.
Looking forward, Scripps executive VP for finance Lori Hickok said that so far in the third quarter, the ad market was healthy and that her company was seeing scatter prices in the mid to high single digits above upfront and in the mid to high teens over scatter a year ago. But she said that for the second half of the year, the company was likely to register only mid-single digit ad growth while finishing the year with high-single digit gains.
CBS CEO Les Moonves tried to put a bullish face on an upfront that was mostly brutal for broadcasters.
"Yes, there were winners and there were losers in the upfront. And here at CBS, we did very well and better than most people anticipated,” Moonves said. "We brought in more dollars and commanded higher pricing than anyone else with substantial CPM increases. Yes, volume was down slightly. But given the strength of our fall schedule, we'll be happy selling that extra inventory in scatter.”
He said sellout decreased to 74% of CBS’ ad inventory from 78-79% in last year’s upfront, which gives CBS 5% more to sell in scatter. “In 10 of the last 11 years, scatter pricing has been up and, in most cases, substantially, from upfront pricing. So we view that only as a positive thing,” he said.
Moonves also talked about doing C7 deals and how being able to measure more viewing of TV content would lead to more monetization.
The second half of the year would be an improvement compared to the first half, Moonves said. “You've heard recently about the challenges during Q2 in the advertising marketplace, which we saw as well. But we are now seeing pacing improve significantly here in Q3, both nationally and locally, and Q4 will be even better than Q3,” he said.