Broadcast TV Enjoys 'Upfront' Lift, but Long-Term Gains Uncertain
The problems plaguing digital advertising have helped broadcast TV networks achieve a positive outcome for the annual advanced TV ad selling season.
The top broadcast TV networks including CBS Corp., 21st Century Fox's Fox, Comcast Corp.'s NBC and Walt Disney Co.'s ABC have largely wrapped up their annual "upfront" negotiations, the time of year when advertisers commit to buying the bulk of ad inventory for the coming TV season.
Jefferies & Co. estimates that prime-time ad spending commitments for broadcast TV are up about 3% compared with last year, to $9.2 billion, while Pivotal Research Group estimates a 4% jump in volume.
Ad buyers and analysts said the upfront was more robust than some had expected. That is partly because some advertisers -- concerned over issues in digital advertising such as ad fraud, the viewability of ads, and risks for brands that appear adjacent to objectionable content -- moved money back into television, they say.
The positive momentum was also fueled by advertisers who have decided to make ad commitments early this year instead of waiting for the "scatter market," when ad time is bought closer to air date, according to analysts and ad buyers.
"The increase in total dollars is a combination of effectively selling digital and part of the scatter budgets being pulled forward into the upfront," said John Janedis at Jefferies, who earlier this year had predicted that the overall volume of ad dollars being committed during the upfront this year would be down.
Mr. Janedis added that the prime-time volume gains were largely driven by NBC. ABC had 3% to 5% increase in prime-time broadcast volume, according to a spokeswoman for the network.
Broadcast networks saw strong demand for morning news and late-night TV, ad buyers said. Morning news programming benefited from consumer packaged good companies that committed more ad dollars this year and were seeking cheaper inventory.
To be sure, the upfront ad-selling season is full of murky math -- ad buyers and network executives offer their best spin on negotiations -- and success at the upfronts doesn't necessary translate into long-term financial gains.
Moreover, advertisers have the ability to cancel a portion of their upfront commitments during the course of the year. And it's impossible to tell whether advertisers with bigger upfront commitments are increasing overall spending for the year or simply shifting spending they would have done in the scatter market.
"We caution over-reading into" upfront numbers because "negotiated volumes in upfronts do not necessarily turn into actual revenues," said Brian Wieser, a senior analyst at Pivotal Research. "We can note that last broadcast year's prime time volumes grew by approximately +6%, and yet it seems likely total revenues for owners of national TV properties are set to be flat or slightly down during the 2016-17 season," he said in a note to investors.
Despite the upbeat outcome, don't expect too much celebrating. The television business continues to be under enormous pressure, with ratings trending down and consumers increasingly gravitating to ad-free video services offered by the likes of Netflix and Amazon.
Despite its many issues, online advertising continues to grow.
Digital ad spending reached $71.6 billion in the U.S. last year, overtaking for the first time TV spending, which totaled $71.2 billion (excluding outlays on TV programming that runs online), according to estimates from eMarketer.
Write to Suzanne Vranica at suzanne.vranica@wsj.com
(END) Dow Jones Newswires
July 13, 2017 16:15 ET (20:15 GMT)