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ESPN Tearing Up Ad Sales Field

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ESPN’s advertising sales revenues are growing at a faster clip than any other cable television network, and all signs point to continued gains leading up to the spring upfront period.

Thanks to its coverage of college football’s Bowl Championship Series and a record year for Monday Night Football, ESPN saw its ad sales dollars soar 34 percent in the final three months of 2010. After adjusting for the addition of the Rose and Fiesta Bowls, ESPN’s FY Q1 ad sales improved 27 percent versus the year-ago period.

ESPN’s presentation of the Jan. 10 BCS National Championship Game between Auburn and Oregon delivered 27.3 million total viewers and 13.3 million adults 18-49, making it the single most watched program in cable TV history.

The NFL also did its share of heavy lifting. ESPN wrapped its fifth season of Monday Night Football with record deliveries, averaging 14.7 million total viewers over the course of 17 games. Bristol got a boost from its final NFL broadcast in 2010, as the Dec. 27 NFC South battle between the Saints and Falcons whipped up 19.1 million fans, making it the fourth most watched cable telecast of all time.
 
Analysts were effusive in their praise of Walt Disney Co.’s broadcast and cable TV units, but it was ESPN that really got Wall Street’s blood pumping. “Disney reported broad-based [growth] . . . in every major segment, but upside was most pronounced at the cable TV networks, where ESPN revenue upside drove operating margin expansion,” said Barclays Capital analyst Anthony DiClemente. “ESPN advertising grows at the fastest rate in cable TV.”

DiClemente also made note of ESPN’s affiliate gains, saying he believes that Q1 sub fees accelerated from prior normalized growth of 9 percent to “something in the double digits,” thanks to subscriber gains and rate hikes.

In the period spanning Sept. 27-Dec. 26, 2010, ESPN’s prime-time deliveries grew 5 percent with an average draw of 3.8 million total viewers. Bristol swept the demos in the quarter, averaging 1.88 million viewers 18-49 (up 6 percent year over year), 1.86 million adults 25-54 (up 3 percent) and 917,000 viewers 18-34 (up 11 percent).

“The sports advertising marketplace is extremely robust . . . and ESPN is seeing strength from multiple sectors,” said Bob Iger, president and CEO, Disney. “There’s certainly real strength in automotive, in retail, in telco, in various forms of consumer electronics, even to the point where programs like SportsCenter and PTI in this quarter have been able to add units to take advantage of demand.”

Iger went on to characterize ESPN’s current quarter as “gangbusters,” adding that the strength of the ad market should continue for the foreseeable future.

At the broadcast flagship, scatter CPMs in the quarter came in at a 24 percent premium above upfront pricing, and the market continues to hold strong and steady. “So far this quarter, scatter pricing for ABC is running over 30 percent above upfront levels,” said Jay Rasulo, senior executive vp and chief financial officer, Disney.

Speaking to investors during the Mouse’s Q1 earnings call, Rasulo added that local TV stations saw ad revenue grow 20 percent, driven by higher political advertising demand. Thus far in the current period, ad sales at the TV stations are up double digits versus a year ago.

Iger gave investors an update on ABC’s development slate under new programming chief Paul Lee. “In heading to the upfront in the middle of pilot season, it’s about making great shows, not about making a lot of them,” Iger said. “In development it’s not about volume; it’s about quality. And that doesn't mean you're looking to increase pricing or reduce pricing on what you make, but we ought to be making the right things. And if [Lee] sees product that he feels is mediocre, then he won’t make it.”

The Disney boss added that Lee is “being really disciplined” in his approach to bolstering ABC’s prime-time lineup. “It’s very early, but I like the product that he’s developing, and we’ll get a chance in May to see what he’s made and put a schedule together from there,” Iger said. “It’s important to make the right decisions and not just make a lot of product.”

Lee has a lot on his plate. Through the first 20 weeks of the 2010-11 broadcast schedule, ABC is last among the Big Four, averaging a 2.4 rating in the coveted 18-49 demo. That represents a decline of 10 percent versus the same time period a year ago. Fox is likely to finish first in the demo with its season-to-date 3.4 rating, followed by CBS (3.0) and NBC (2.6).