What Did TV CEOs Tell Investors About the Weak Ad Market?

Telcos, cars and CPG underspent on television

Now that second-quarter earnings are over for the media sector, we can finally take a good look at what senior media company executives actually said on calls to investors when they were in the hot seat at the end of the summer.

Here are some of the reasons the market was down … and some of the spin. (If you'd like to check out the calls yourself, they've been helpfully compiled here.)

The holdouts: telco, automotive and CPG

Viacom CEO Philippe Dauman was brave enough to come out and say it: "In the advertising marketplace, there were certain advertisers in the consumer goods sector and the automotive sector who chose to either defer or withhold dollars from the upfront marketplace," he told investors bluntly. "And at the same time, there was some softness in some of the same sectors in demand in the scatter market." That's the kind of color we haven't necessarily been getting throughout the summer, doubtless because the deals were still being negotiated, and it's very valuable: cars and food are the culprits, at least as far as one of the largest television companies in the world goes.

21st Century Fox's Chase Carey concurred on the automotive front, and he called out the telecommunications business, too: "Telecoms and autos probably look a bit soft for the quarter," he said.

"We decided to sell less."

More than one executive went this route to quell the concerns of analysts, contending that low volume gains in this year's market were due to the networks themselves deciding to force buyers into scatter, where the prices are ostensibly higher (although given the amount of unsold inventory this year, that theory is going to be put to the test in a serious way in the coming weeks). "We decided to sell less into the upfront market," David Zaslav told analysts. "The volume was not as strong as it was last year—having said that, the pricing in scatter for the past two to three years has been strong and the pricing in scatter is strong today. So our view was, given that the pricing was mid-single [digits] and that the volume was a little lighter, that we didn't want to sell into it, so we've held more inventory back."

The other major nonfiction conglomerate, Scripps Networks Interactive, concurred. "We did hold back a little inventory because our sales team assessed the marketplace," Burton F. Jablin, president of Scripps, said. Jablin stressed that the company still passed the $1 billion mark—that's the third year running Scripps has done that—by way of minimizing the problems in the market at the moment, at least as far as SNI is concerned.

Digital video was bigger this year.

Walt Disney Company CEO Bob Iger was probably the right CEO to sell this one, given that the company recently acquired digital video company Maker Studios for $500 million.

"I think that you are definitely seeing more compelling growth in advertising spending on new media platforms, digital platforms than you are on the traditional," Iger said. He admitted, though, that this didn't explain the whole of the shortfall in TV advertising. "I don’t think all the money that’s flowed away from broadcasting in the upfront necessarily flowed directly into new digital platforms, even though I believe that these platforms have siphoned off some money from the traditional broadcasters."

Steve Burke, CEO of NBCUniversal, had a pretty good season, but he also concurred with Iger's assessment and suggested that some of the missing dollars would show up nearer the end of the year. "When you look at the ad dollars that are related to video, the shift to digital, in our opinion, doesn’t represent the majority of why the upfront was down 5 percent. We think the majority reason why the upfront was down 5 percent is because a broad array of advertisers and their agencies decided to be less aggressive in the upfront, and they will show up in scatter."

C7 is the way of the future.

CBS chairman Les Moonves mostly talked about the shift from C3 to C7 (which includes a longer period of timeshifted ad viewing)—a major victory for TV networks looking to monetize as much viewership as they possibly can in a world where viewer habits are constantly shifting. "I expect by next year's upfront, more than 75 percent of the deals will be C7. So we are well on our way to that a year from now." Moonves also touted the deals as forward-looking, saying that everyone wins with better measurement. "Advertising agencies want it because it's a more accurate way of counting people who are watching our shows." (Not all advertisers, but certainly GroupM) "And you saw the lift. I mean, the lift in certain shows is more than 50 percent. So it's pretty substantial. As I said, we as programmers, have to look at the world in an entirely different way. Nobody should even be looking at overnights anymore. The C7 number is really the number that matters, and it is a substantial amount of money that's gone into it."