Doldrums: Broadcast Ad Sales Growth Slows in July

SMI Data Suggests Scatter Market May Be on the Wane

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Jojo Fletcher and Jordan Rodgers on ABC's 'The Bachelorette,' one of summer's top broadcast shows.
Jojo Fletcher and Jordan Rodgers on ABC's 'The Bachelorette,' one of summer's top broadcast shows. Credit: ABC/Carl Costas
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Media bosses during the most recent earnings season raved about the strength of the scatter market, but the July ad sales figures suggest that the once-torrid broadcast market may be cooling down.

According to Standard Media Index's newly-released full-market national TV data, July ad revenue among the Big Four broadcast networks improved by just 0.7%, or $5 million more than the year-ago tally, to $722 million. That slight growth was primarily a function of increased morning spend, while prime-time sales fell 11.4% to $411.8 million.

SMI aggregates its data directly from the billing systems of a group of media agencies that accounts for 70% of all U.S. ad spending. Scatter comprises the commercial time bought relatively close to airing, as opposed to inventory reserved well ahead during the TV industry's annual upfront market.

Some of the prime-time shortfall may be chalked up to tough year-over-year comparison. For example, Fox booked $40 million in sales in the run-up to the July 5, 2015, Women's World Cup Final, which marked a record haul for a U.S. Women's National Team broadcast.

If Fox suffered from an unfavorable year-to-year comp, CBS was the beneficiary of a schedule change that dumped as much as $35 million in additional sales revenue into its July lineup: The PGA Championship was shifted from its traditional mid-August perch to the last few days in July in order to accommodate golf's return to the Olympics after a 112-year absence.

NBC also saw a lift in its July sales figures, thanks to yet another strong showing by the indefatigable summer franchise "America's Got Talent" and the 10-day showcase that was the U.S. Summer Olympic trials. "America's Got Talent" is once again on track to beat all comers in the summer ratings race, as the competition series is now averaging 11.2 million viewers and a 2.4 rating among adults 18 to 49. The next-highest-rated summer broadcast series, ABC's "The Bachelorette," averaged a 2.0 in the demo during the course of its twelfth season.

Broadcast prime-time pricing fell 10% versus July 2015 to $62,400 per 30-second spot. Audience deficiency units, industry jargon for make-goods to advertisers when ratings fall short, dropped from 19% of all available units in the year-earlier period to 15% last month.

The SMI data arrives on the heels of an earnings season in which media executives said the scatter market remained robust, although at least in one instance the rate of change appears to be leveling out. CBS Corp. Chairman, President and CEO Les Moonves on July 28 told investors that scatter premiums in the first half of the year had been as high as 30% over upfront pricing, but he did not offer a read-out for the back half. The following week, Twenty-First Century Fox Executive Chairman Lachlan Murdoch told analysts that scatter pricing was now up "sort of mid-single-digit," which seemed like small potatoes compared to Walt Disney Co. CFO Christine McCarthy's August 9 assertion that ABC and ESPN were reaping 30% premiums over their respective upfront rates. NBC Universal CEO Steve Burke did not pin a number to his July 27 scatter report, saying only that the market is "as strong as we can remember it being."

SMI said broadcast scatter was down 10.5% in June from the month a year earlier. May scatter volume for the Big Four nets was up 5% year-over-year.

MoffettNathanson media analyst Michael Nathanson told investors that he expects scatter to weaken in the wake of what was the strongest upfront market in a number of years. "While television has benefited from a red-hot scatter market since fall 2015, we believe … that growth will return to normalized mid-single-digit levels," he wrote in an August 23 research report, adding that the "strong upfront will likely result in lower scatter demand." Mr. Nathanson said he anticipates the pace of elevated scatter pricing will begin coming down in September, when the 2016-17 broadcast season begins.

If broadcast's July was unspectacular -- and in terms of demand, the 31-day period generally represents an annual nadir -- cable enjoyed a solid month, with ad sales growing 5.6% to $1.59 billion. Per SMI, cable's growth could be credited to the pumped-up ad rates at the cable news networks and a strong showing by TNT, Bravo, HGTV and Food Network.

The average unit cost in cable prime rose 7% in July to $6,600 per 30-second spot. Cable audience deficiency units fell to 19% of all available inventory from 30% a year earlier.

Growth in digital advertising, for its part, slowed considerably in July, according to SMI, which said the 12% lift in the segment represents about half the growth it's been delivering over the last three years.

"We see national TV as an ROI powerhouse for advertisers in the current market," said SMI CEO James Fennessy. "We have seen digital's growth slow considerably in the past few months and we put this down to advertisers returning to TV after being a little too aggressive with their foray into digital."

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