If the upfront marketplace does not appear to be as strong as broadcasters previously had anticipated, an inundation of political and Summer Olympics dollars will go a long way toward keeping the networks flush in 2012.
According to PricewaterhouseCoopers’ newly released global entertainment and media outlook for 2012 through 2016, U.S. broadcast ad revenues this year are on track to reach $18.9 billion, a boost of 7.3 percent versus $17.6 billion in 2011.
Per PwC’s calculations, broadcast’s compound annual growth rate through 2016 will be 4.6 percent, a formula that translates to a total ad sales haul of $22.1 billion in the next presidential election year. Should that indeed prove to be the case, broadcast sales revenues will have grown 16.8 percent between this year and 2016.
Naturally, if this year’s broadcast revenues are to expand in any significant way, the outlying scatter quarters will need to improve. With upfront budgets flat to slightly down versus the 2011-12 bazaar, demand for Q3 and Q4 scatter will have to pick up. As only The CW has completed its upfront deals, it’s too early to say how much inventory the nets will hold back for scatter; that said, with softer demand and unspectacular CPM increases, it stands to reason that when the market wraps later this month, all players in the broadcast space will have more inventory on their plates than they did a year ago.
Even if scatter remains unremarkable—Q2 pricing is up around 10 percent versus last year’s upfront rates, no great shakes when you consider that some nets were commanding premiums of as much as 40 percent heading into the 2011-12 bazaar—political and Olympics dollars will offer a reliable seasonal adjustment.
Higher ad spending in battleground states and an influx of Super PAC money should set the stage for a frenzy of national post-convention buys. All told, political expenditures could contribute as much as $2.5 billion to TV’s coffers, although naturally, local buys will account for a good chunk of that spend.
As the political season boils over, NBC’s coverage of the 2012 London Summer Olympics will capture at least $1 billion in ad sales commitments, a tsunami of business that is likely to include a wealth of auto, financial services, movies, telco and retail dollars.
As broadcast continues to put the lie to its perceived irrelevance, its cable counterparts are on track to enjoy even faster growth. According to PwC, national cable nets in 2012 will generate $25.7 billion in ad sales, an improvement of 8.4 percent versus a year ago.
Cable will get a boost in the upfront, and while only a handful of network groups are far along in the process, buyers now project dollar volume will be up between 5 percent and 7 percent. Should that come to fruition, cable will book between $9.75 billion and $9.95 billion in advance commitments, well beyond the projected $9.2 billion the broadcasters will land in a flat market.
Cable’s five-year CAGR is expected to be 7.4 percent, which translates to a total ad sales haul of $33.9 billion in 2016. Should those numbers hold, national cable sales revenue will have grown 32 percent between now and 2016.
Much of this projected growth may be counterintuitive to the Chicken Littles who’ve been clucking about the death of TV since Marc Andreessen rolled out the first Mosaic browser. Thing is, Americans are now watching more television than ever before; in fact, even teen viewing is on the upswing. And while there’s no question that viewing behaviors have changed irrevocably, the so-called “second screen” experience appears to augment engagement of linear TV.
“TV has benefited from growing Internet use, particularly around the social media sphere,” said Russell Sapienza, partner, PwC entertainment, media and communications practice. “TV has become an inflection point for social media and that promotes appointment viewing. The interest to participate in the conversation on Facebook or Twitter drives you to want to watch live TV.”
While TV usage continues to grow, the platforms that deliver TV content to younger viewers are destabilizing the core business model. Until Nielsen begins measuring iPad/tablet viewership and synthesizes the usage data with its linear ratings system, networks won’t be credited for that segment of the audience. “The shift from linear TV to online and mobile devices will dampen broadcast’s ad growth," Sapienza said. "And the number of disrupters keeps growing. A few years ago, it was the DVR. Now it’s the tablet, it’s the smartphone.”
Obviously, the hockey stick graph of smartphone and tablet adoption suggests that TV will lose share in time. But it will be an incremental process. Online TV advertising this year will generate some $2.51 billion in revenue, before growing 89 percent to $4.76 billion in 2016.
That’s admirable growth, but still nothing short of a rounding error when compared to the projected $56 billion set to be claimed four years from now by national broadcast and cable nets.
The mobile TV ad market will also experience vertiginous growth, but off an even tinier base. Per PwC, the segment this year will generate $881 million in ad revenue, before nearly tripling to $2.24 billion in 2016.
As TV remains the most effective way to reach a large audience quickly, broadcast remains the must-buy medium for most large national advertisers. Cable now enjoys the cachet of delivering TV’s watercooler shows, but broadcast can’t be beat on reach. (As much as your office was abuzz over the season finale of Mad Men, AMC’s gem delivered just 2.7 million viewers and a 0.9 in the 19-49 demo. A few days earlier, a repeat of CBS’ populist procedural NCIS served up 8.67 million viewers and a 1.2 in the demo.)
“All your favorite shows may be on cable, but the highest-rated shows are still on broadcast,” said Sapienza. “Broadcast television continues to command higher CPMs than cable. As much as we’ll see some slippage as online and mobile usage grows, only the very tip of the iceberg is in danger of melting.”