Media Outlook 2011: Broadcast TV

Happy days are here again for the broadcast networks, following a 2010-11 upfront that saw ad sales bosses write $8.26 billion in advance client commitments, a 20 percent improvement over the previous year.

On the heels of that rebound, the scatter market continues to look strong, as nets are commanding CPMs at a 20 percent premium over upfront pricing. Sprinkled on top of the ad dollars is the first flush of retrans fees from cable MSOs, which in the long run will add hundreds of millions of dollars to the bottom line.

While budget constraints forced many marketers to cut back on their national TV spend in 2009, those with the wherewithal enjoyed an unqualified competitive advantage. Even in a recessionary economy, the immediate, mass reach of broadcast TV is key to getting marketers’ messages out to consumers. “Broadcast television is working for clients,” says Jackie Kulesza, senior vp, broadcast activation director at Starcom. “And it’s not just being used for reach. It’s meeting clients’ objectives and moving their products.”

Dave Poltrack, evp and chief research officer at CBS, adds that advertisers can’t afford to lose market share by cutting back on advertising, no matter how dire the economic landscape. “Even though the recovery is slow, it’s real enough where advertisers feel they have to be well-positioned with consumers for when the turnaround comes,” he says.

The  auto companies, and Ford Motor Co. in particular, have exemplified this strategy. As it works to turn its fortunes around, Ford has blanketed broadcast TV with ads featuring longtime spokesman Mike Rowe. (As in previous years, Ford has spent heavily on CBS, Fox and NBC’s respective NFL packages.) While sales still haven’t reached prerecession levels, the national ad campaign has gone a long way toward boosting the automaker’s profile. In Q1, Ford grew its U.S. market share by 2.7 percent to 16.6 percent, marking its largest quarterly increase in 33 years.

“2010 is turning out to be a bit of a better year than we expected for broadcast television,” says Matthew Lieberman, director, PricewaterhouseCoopers. “Overall, we are seeing no significant declines in any of the major ad categories, and broadcast advertising is going to continue to be quite significant in 2011.”

PwC is projecting the five English-language broadcast nets will take in about $16.3 billion in ad revenue in 2010, up about 5 percent from 2009.

Broadcast network revenue for 2011 is expected to be basically flat, at $16.2 billion, Lieberman says, largely because there will be no Olympics or election money flowing into the coffers. And while broadcasters will take a few more years to get back to historical highs of two years ago, ad revenues are expected to reach $17.2 billion in 2012.

Jon Nesvig, president of Fox Broadcasting sales, attributes that trend to battles for mindshare within various ad categories. “There is a marketing war going on in the insurance category among GEICO, State Farm and Allstate,” Nesvig says. “And there is major competition among cell phone companies and handheld devices. Studios have admitted they need broadcast television to premiere their movies. The imperatives are very positive for broadcast television.”

What also will help the broadcast networks going forward was a relatively strong summer.  Among the all-important 18-49 demo, broadcast TV viewing this summer was up 1 percent over the year-ago period, while ad-supported cable was down 2 percent, according to Nielsen data. (That said, share isn’t even close, as cable enjoyed a 55.3 to 20.2 advantage.) “We are holding our own versus cable, and we’ll be going into this season in a fairly strong position,” Poltrack says.

While many pundits have said there are few hits to be found among the new shows of the 2010-11 season, last week’s premieres of CBS’ Hawaii Five-0 and The Defenders enjoyed strong sampling. “We think we have some potential hits,” Poltrack says.

Despite the loss of the acerbic Simon Cowell, Nesvig believes Fox’s American Idol “is still a very valuable franchise for advertisers and is still the highest rated show on television.” And all the speculation this summer about the new judges has kept Idol in the news and given it ongoing buzz during its hiatus.

As the economy limps toward recovery, broadcast should continue to benefit. “With less discretionary spending, more people are staying home and watching television,” PwC’s Lieberman says. “Our consumer panel research shows that many people have either downgraded to basic cable from premium cable or dropped cable totally. This benefits broadcast networks because they still are able to offer premium content and special-event programming to draw viewers.”

Retrans fees will also help bolster the broadcast nets. Along with the incremental revenue that will start trickling in once the networks start selling advertising in their streaming online programming, retrans will serve to pad overall revenue figures in 2011 and beyond.