Barclays Capital followed UBS today in predicting a significantly reduced upfront advertising market. The company suggests a 15% fall in upfront spending, pegging the spring market at $7.4 billion-less bearish than UBSs prediction of $6.7 billion issued last Friday. Barclays had pegged last years upfront at $8.76 billion, other estimates suggest the figure was $9.2 billion. A drop in upfront spending would be the first such decline since the 2001 bust which affected the 2002 market.
While media buyers and sellers often pooh-pooh Wall Street analysts predictions given the fuzzy math of deal making which involves any number of value-adds and packaging in return for CPM increases, analysts do get to spend time with network management who must guide the stock market as to how their markets are likely to play out.
The Barclays upfront preview, its first in some time, makes some key predictions about which networks will have a tough time of it and goes on to predict the extent of the hold-backs.
Breaking down each networks potential take, Barclays suggests total dollar volume could slide most at NBC, where it is predicted to be off some 20% (partly because of overall ratings declines and the disappearance of scripted drama in 10 p.m. slot). Barclays is forecasting CPM declines of between 2% to 3% across broadcast with NBC down 5%, ABC down 3% and CBS and Fox both down 1%.
In dollar volume, NBC is expected to be down the most, 20%, followed by 18% for Fox and 14% for ABC. CBS is forecast to see the smallest drop off, down 10%. According to Barclays' statistics, NBC booked $1.85 billion in last year's upfront while Fox booked $1.95 billion. ABC took in some $2.46 billion, close on the heels of market leader CBS which closed on $2.5 billion.
If, as expected, less money shows, the networks' trump card is to restrict inventory, which might help them hold the line on pricing. The rationale involves having more people chasing fewer ratings points, which in theory equals higher prices. Barclays suggests an average sell-out ratio of 72% between the big four networks (it's generally around the 80% mark). Barclays analysts suggest CBS will likely hold back the most, selling only 69% of inventory.
Of course, the gamble for the networks is that the economy picks-up and that there will be demand for the increased amount of inventory not sold in the upfront market but into the scatter market where rates are cheaper. Buyers are indicating that increased flexibility of scatter might be more welcome by clients than having the fixed commitment of an upfront buy so early in their sales calendar.
Whatever math is forecast, confidence in the future of the broadcast model is ultimately buoyed or destroyed by the strength of the programming concepts unveiled during mid-May presentations. Research tracking online buzz suggests ABCs Flash Forward, starring Kelsey Grammer as a former Wall Street CEO who's down on his luck, is gaining some attention.