US television advertising levels have rebounded on both a national and local level, with indications that the upfront trading market is likely to be healthy, according to analysts at Merrill Lynch.
TV network scatter prices are up by 20% or more in Q2, with few cancellations, says the broker. TV station advertising is up in the 8%-10% range and the cable networks are showing even stronger revenue growth of around 15%-20%.
These findings concur with those of Jack Myers Report, which today said that huge scatter price increases are pushing advertisers to the upfront market. The upfront is a trading season where blocks of advertising are bought in advance; the scatter market comes after an upfront season and is based more on ad hoc sales.
Myers also indicated that the US broadcast networks are looking to withhold more inventory from the upfront market this year than they did in 2002. Around 70% is expected to be sold, compared to last year’s 80% sell-out. Whilst networks would like to push more spend back into the scatter market, the agencies want to resist this, says Myers.
This reduced inventory, coupled with an increase in demand, is set to send CPMs (costs per thousand) rising. Buyers are expected to put a ceiling on the CPM they will pay, beyond which they will shift spend to the smaller cable networks, predicts Myers. “Buyers have more leverage than ever to shift budgets away from broadcast primetime and cable networks that demand high CPM increases,” he says.
Reports from MediaPost claim that upfront CPM increases are likely to pan out at around +5%, slightly below some of the more optimistic double-digit growth predictions. It also reports that in uncertain conditions, many advertisers are returning to the tried and tested medium of television.
Radio lags TV’s growth Whilst US TV is looking strong, the radio sector continues to lag behind somewhat, according to Merrill Lynch. Figures from Viacom, one of the country’s largest broadcasters, show that the top ten markets were flat in Q1 and there appears to be little improvement in Q2.
The broker recently chopped its radio advertising growth forecasts from 4.3% to 3.3% for the full year 2003 and from 5.0% to 1.1% for Q2 (see Merrill Lynch Downgrades US Radio Growth Forecasts). The cuts came because analysts saw the US radio market as developing more weakly than had been expected.
