CBS CEO Les Moonves has high hopes for 'Thursday Night Football.' Associated Press
Hopes that TV advertising will rebound this fall are beginning to dim.
TV networks have been banking on a surge in ad spending in coming weeks, ever since an anemic second quarter reported by media companies and a weaker-than-expected "upfront" advance ad-sales market for the new season.
The new season doesn't kick off until next week but already sentiment is starting to change. On Monday, Jeffries analyst John Janedis lowered his estimates for advertising revenue growth in the second half of the year for most of the biggest media companies, including CBS Corp. CBS -0.11% , Discovery Communications Inc.,DISCA +1.25% 21st Century Fox, Time Warner Inc. TWX +0.13% and Viacom Inc.VIAB -0.66%
He cited a combination of weak ratings in July and August and early research suggesting that in the "scatter" market—the term used for ad time sold close to air date—"may not see a significant pickup in demand" in the fourth quarter.
Sounding even more downbeat is Andy Donchin, director of media investment at Carat, a media-buying firm owned by Dentsu Inc. 4324.TO -0.72% "The TV community thinks a bunch of money is going to flow into the marketplace but I am not in that camp," said Mr. Donchin. He and some other buyers say that advertisers have more choices today and are somewhat less dependent on TV.
"Money is moving to other platforms, such as digital," he said.
A report out on Tuesday from ad research firm Kantar Media will say that four of the nation's five biggest advertisers, including Procter & Gamble Co. PG +0.10% andAT&T Inc., T +0.20% cut ad spending on traditional media and online display in the first half of the year. P&G, for instance, cut its spending on those categories by 17% in the first half. Kantar, which is owned by WPP Group PLC, doesn't track spending on online video, social media or paid search.
Companies such as MasterCard MA -0.48% and Mondelez InternationalMDLZ -0.34% and Verizon Wireless have said that they have moved a portion of their TV dollars to online outlets.
Last week several media company CEOs suggested at an investment conference sponsored by Goldman Sachs that their television segments may fall short of previously stated targets in the third quarter.
Discovery Communications CEO David Zaslav said the company was "a little bit behind heading into September," with regards to its guidance for mid-single-digit advertising growth in the third quarter, due to ratings weaknesses at its biggest networks.
Viacom CEO Philippe Dauman said the company was "working hard" to hit its low-single-digit domestic advertising growth guidance, citing softness in the TV market in August.
And Chase Carey, the chief operating officer of 21st Century Fox, said the weak ratings of the company's Fox network meant the company isn't expecting to hit its original targets for its television segment by 2016, though it planned to make them up in other areas. (Until last year, 21st Century Fox was part of the same company as Wall Street Journal owner News Corp. )
To be sure, several of those appearing at the Goldman conference predicted ad spending would return in coming months through the "scatter" market. Ad inventory not sold in the upfront is sold in scatter.
"I don't anticipate any problem getting great pricing on my scatter in the scatter marketplace," CBS CEO Les Moonves said. CBS has a bigger portion of its ad inventory to sell in the scatter market. Mr. Moonves noted that CBS sold only about 75% of its advertising for the coming season in the upfront, down from 79% the previous year.
But Mr. Moonves said, "Look, the addition of 'Thursday Night Football' alone, just think what that's going to do to Thursday night ratings. I'm looking forward to it. Now, unfortunately, it's only eight games, but that will still increase our ratings. So we're anticipating a very good fall."
Nonetheless, Mr. Janedis lowered his estimate for ad growth at the CBS network to 4.4% from 9.4% in the third quarter.
Both Time Warner CEO Jeff Bewkes and Mr. Zaslav said they had not seen evidence that the weak upfront was caused by a shift of money to digital. "We don't think so far that it represents…advertisers trying to move to digital," Mr. Bewkes said.
"I do think it's mostly the economy at its core," said Fox's Mr. Carey. "You've got a view that people have a lack of confidence in the economy, and advertisers would like to make decisions on shorter time frames, which means scatter."
Ad buyers say scatter pricing remains flat to slightly up from upfront prices, depending on the network. For Discovery, Mr. Zaslav told the Goldman conference that scatter pricing remains "quite good," and "maybe 20% higher than the upfront," though volume is "certainly not robust."
Ad buyers also say that some marketers are holding back cash so they can adapt more quickly to changes in the marketplace, although that doesn't necessarily mean that money will be put into TV networks' coffers.
Still, buyers believe that the TV networks will see the marketplace get stronger in the fourth quarter as retail spending and other categories ramp up ad expenditures for the holidays.
In addition to programmatic buying filtering in to capture available audiences. Now more than ever...local-direct revenue is still the bastion of growth potential for local TV and radio companies. Philip Jay LeNoble, Ph.D.