Media Outlook 2011: Cable TV

Last week one could almost hear the sound of millions of American eyeballs rolling skyward in reaction to the news that the Great Recession was as dead as disco, and had been since June 2009. Per the National Bureau of Economic Research, the worst economic downturn since the 1930s officially ended the moment the GDP began growing again after six straight quarters of declines.That was cold comfort to the 16.7 percent of the American workforce who are un- or underemployed, or have simply given up the job hunt. It certainly doesn’t feel like we’re out of the woods just yet. And even if we have left the wolves behind in the gloaming, there’s no guarantee we won’t stumble into yet another dark thicket sometime next year. (Not since George Costanza’s celebrated party foul in 1993 has there been such an outcry about a double dip.)Malaise aside, for those who traffic in the cable TV marketplace, the NBER announcement only seemed to verify what has been evident since the year began. Even in the thick of the recession, ad spending on national cable nets last year fell just 5 percent to $20.4 billion, while broadcast network ad dollars fell 14 percent to $15.5 billion, per PricewaterhouseCooper data. Keep in mind that both figures represent year-over-year comparisons to ’08, a bonanza fortified by the Beijing Summer Olympics and the presidential election.Although advertisers slashed media budgets by some $10 billion in the first half of last year, cable actually gained ground, expanding 1.5 percent to nearly $8.8 billion, according to Nielsen.If some of those figures appear to contradict certain perceived realities, chalk it up to upfront myopia. While the annual bazaar provides some insight into how marketers are going to allocate their media dollars in the fall and winter quarters, it in no way reflects the strength of the TV marketplace. For example, according to Cabletelevision Advertising Bureau calculations, cable nets churned up $6.73 billion in advance commitments during the 2009-10 upfront, a 12 percent drop versus the prior-year haul. Despite that shortfall, cable nets actually boosted ad revenues for the calendar year, amassing $18.7 billion in sales, a 1.8 percent gain compared to $18.4 billion in 2008. If upfront performance were directly proportional to final annual gains or losses, ad-supported cable should have lost $2.21 billion last year, instead of adding another $330 million to the aggregate tally.“The confusion lies in the fact that the upfront bears no relationship to the health of the television business,” says Brian Weiser, global director of forecasting at Magna. “We can model the full-year revenues reasonably well without even looking at the reported upfront figures. It’s like how analysts will sometimes conflate the Consumer Price Index and the GDP; one doesn’t tell you anything about the other.” Indeed, while this past upfront marked ad-supported cable’s most lucrative summertime bazaar—advance sponsor commitments were up 19 percent to a hair over $8 billion—growth for all of 2010 will be more modest. According to Magna, ad-supported cable nets this year will boost sales by 7.5 percent, pulling in an aggregate haul of $19.4 billion. If annual growth faithfully reflected the brisk business of the 2010-11 upfront, cable nets could be expected to close out the year with $23 billion on the books. (Per Weiser, this mark won’t be reached until 2012.)Magna predicts strong and steady growth in the near term, with cable beefing up its ad sales total by 8.2 percent in 2011, to $21 billion. The following year, the rate of expansion will be 9.4 percent, while 2013 will see gains of 10 percent, total dollars adding up to around $25.5 billion. Meanwhile, national broadcast will be comparatively stagnant, growing 2.3 percent this year to $13.1 billion and just 0.6 percent in 2011 ($13.2 billion). The following year, network sales will inch forward another 1.8 percent, as overall advertising dollars reach the $13.5 billion mark.Media buyers believe that the relative strength of the overall TV upfront will have a chilling effect on the scatter market, although thus far, fourth-quarter deals continue to fetch double-digit premiums over upfront pricing. “We may not be able to make any long-term projections—there’s too much uncertainty out there right now,” says Ava Jordhamo, president, Zenith Media. “But everything we know about markets says that if you have an upfront that pulls in that much money, you’re bound to have a softer scatter market.”If scatter isn’t nearly as tepid as one might expect, ad sales chiefs suggest that they do anticipate a slackening in early 2011. “Knock wood, we probably shouldn’t be doing nearly as much scatter business as we are,” says one network exec. “But we went through the worst sh*tstorm I ever hope to see and came out on the other end relatively unscathed.”Looking further down the road, PwC projects that cable ad revenue will increase at a 5.8 percent CAgR through 2014.

Convergent TV

Media Outlook 2011: Cable TV

Anthony Crupi

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Anthony Crupi