Slower TV Upfront Activity, Networks Worry About Reach

• by Wayne Friedman , 7 hours ago

As the upfront ad market starts to percolate with some activity, one analyst worries that TV networks' long-held metric advantage over other media could be slipping: reach.

MoffettNathanson Research says broadcast’s reach has declined to 82% of viewers 2+ from 92% in the first quarter of 2011. Cable networks have declined from 89% to 80%.

Michael Nathanson, senior media analyst of MoffettNathanson Research, writes: “Playing this forward, we would expect a further 1,000 basis point drop in reach to occur at a more accelerated pace as more consumption continues to move away from the traditional TV screen."

Over the last four years, first-quarter reach has declined for all top 25 networks -- excluding cable network NBCSN -- in the percentage reach of viewers 2+.

Among broadcast networks, NBC had a 6% drop to 72.9%, ABC declined 12% to 63%, CBS was down 13% to 66.5%; and Fox saw a 28% drop to 54.3%. Big cable networks went in the same direction, with TNT down 16% to 42.6%; TBS off 23% to 41.3%; USA Network 31% lower to 32.8%, and AMC down 28% to 33.7%.

Nathanson adds: “The longevity of TV’s pricing power has been predicated on its ability to offer efficient national reach versus other marketing platforms that haven’t built the same national scale. However, in recent years, the decline in PUT [People Using TV] levels, the drip, drip, drip of cord-cutting and the increase in viewing options has negatively impacted linear C3 ratings.”

C3 is the Nielsen average commercial minute rating plus three days of delayed viewing.

Upfront activity has started, according to some analysts, with expectations that networks will seek mid-single-digit percentage increases on the cost-per-thousand viewer prices (CPMs) to the mid-teen percentage levels. 

John Janedis, media analyst at Jefferies, says the market could be a slow moving affair. “We believe upfront deals have started to get written, though complicated cross-platform deals and measurement have somewhat slowed down the pace.”

He adds: “We think ABC has started to write business, likely pricing at the lower end of the peer-group range. NBC continues to move closer to writing business, but CPM demands and measurement have slowed the process.”

At the same time, Nathanson cautions about too much early data in upfront deal-making: “After spending a career reminding people about how meaningless and unreliable these data points are, we get the feeling our indifference has caught on, given the lack of inbound calls on the subject.”