Ad sales continued their big comeback, judging by top TV executive comments during first-quarter earnings calls.
The increases were enough to distract investors from their concerns about cord-cutting, according to analyst Michael Nathanson of MoffettNathanson Research.
“Judging from the stock reactions, the Street now appears to realize that the white-hot ad market is a lot more important near-term driver than long-term fears about the cadence of affiliate fee growth,” Nathanson said in a note late Friday.
Nathanson said ad sales figures were being helped by Nielsen’s new NPX measurement, which is adding GRPs back to the industry in 2016 that only adds to the bounty.
He also noted that some programmers are deferring make-goods liabilities until later in the year.
“While we still continue to be cautious on longer-term growth rates for the domestic TV market,” he said, “we believe that strong 2Q ad commentary (including upfronts) should provide a solid narrative for these companies. However, we worry about the Olympics impact in 3Q across the group.”
Earlier in the week, CBS’ ebullient CEO Les Moonves said double-digit increases were possible in the upfront. Executives at other TV companies didn’t go quite as far, but their remarks were pretty bullish.
That commentary included Scripps Networks Interactive CFO Lori Hickok saying that first-quarter ad revenues were up 14% because of ratings growth and price increases.
“Scatter versus scatter CPM pricing was up in the low-double digits year-over-year and up low 20 percents over the broadcast upfront,” she said. “The strong advertising market has continued into the second quarter with scatter versus scatter CPM pricing up mid to high teens year-over-year and up low to mid-20 percents over the broadcast upfront. And along those lines, we are feeling confident about the upfront.”
Hickok said she expected Scripps Networks to continue to get premium pricing. “You're not just buying advertising across this network, you're buying solutions, you're buying maybe placement in dream home giveaways, smart home giveaways, Food Network Kitchen and what we're doing there and on and on and on. So it's a longwinded way of saying, yes, we think not only are we priced at the top of the market, but can continue to push that. Because, let's face it, at the end of the day, quality and exclusivity are always going to be at a minimum and, therefore, are going to be priced at the high end of the market.”
Discovery Communications also had high hopes for the upfront.
“Scatter is up high teens or in the 20 percents and volume is up. So that all bodes well. I love the fact that Les is talking about being double-digits,” said Discovery CEO David Zaslav.
Discussing the gap between broadcast pricing and cable pricing, Zaslav noted that “on a practical level across all of our domestic portfolio, we tend to be maybe one point behind. So if broadcast gets nine, maybe we get eight. If broadcast gets 11, maybe we get 10. If they get six, we get five. That's the way it's been historically.”
Zaslav said he didn’t have much information about the upfront yet, but “the pricing in scatter is very strong, and cancellations and options are down significantly from the last few years. So the environment feels quite good going into the upfront I think for us and the whole marketplace.”
At AMC Networks, “we're seeing continued strong demand for our programming among the ad community, and we believe we are very well positioned across our portfolio heading into this year's upfront,” said CEO Josh Sapan.
Analysts are concerned that AMC’s huge hit, The Walking Dead, is losing steam with ratings having apparently peaked and begun to decline.
Sapan said AMC was managing The Walking Dead as a franchise, looking at it in five-year chunks.
“The performance last season was good in 18 to 49 and particularly in 25-54, very good,” Sapan said.
“So, we think, just to say it bluntly, a great advertising vehicle. If you have a product you want to sell a spot in The Walking Dead sells stuff. It's really that simple. And some of that has been reflected in unit pricing that we've already seen,” he said. “And we think in today's market, as we go forward, if you have something to sell, you want to be in The Walking Dead and frankly we hear it. It has some unique qualities, both volume, scale, and deep depth of engagement. So, we will – we think it will be a good vehicle for the upfront. We think it will be a good vehicle next year and it will be very attractive and valuable for our business.”
Edward Carroll, AMC’s chief operating officer, added that The Walking Dead carried a disproportionate amount of 18 to 49 impressions this year.
“And so, we think we're in a very good position,” concluded AMC CFO Sean Sullivan. “And so we look at it two ways. Of course, on a monthly and quarterly basis, we will look at driving our scatter pricing or our CPMs higher. Right now, what's in front of us is the upfront, and we anticipate real pricing increases for The Walking Dead, significant pricing increases for The Walking Dead. Does that get to the root of your question?"