Analyst: ABC to owe $110M make-goods

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Ratings for Walt Disney Co.'s ABC in the second half of the TV season are running 15% below guarantees, which could cost the network $110 million in advertiser make-goods.

That's the conclusion of a research report by CIBC World Markets analyst Michael Gallant, who estimated the beleaguered broadcaster "is on track to finish the full season 9% short of its guarantees."


"That's a pretty big number," said Mr. Gallant. "Media buyers didn't tell me that they were going to wind up paying out that much, but I think based on current trends, ABC will be forced to pay this back." While most networks end up paying make-goods, the amount is typically less than $20 million, making ABC's predicted tally significantly higher than average.

ABC disputed the number. "This is 180 degrees from what the company believes and has stated regarding ABC and its profitability track," a spokesman said.

Fox is also in trouble, according to Mr. Gallant's research. According to the report, Fox started out significantly underperforming at the start of the season, 19% shy of its guarantees in the final 10 weeks of the first half. Thanks to "American Idol," the News Corp. network is now just 1% below its estimated guarantees.

However, because the network does not have other breakout hits, with the exception of "The O.C.," Mr. Gallant expects Fox will weaken and come up 4% short of its ratings guarantees by the end of the second half. That should cost the network about $35 million in make-goods.

Fox executives were unavailable for comment at press time.

The other broadcast networks are faring better. "CBS continues to perform in line with its guarantees following a slow start. Viacom remains the best-positioned heading into the upfront," said the report, which cited the media company's stable broadcast ratings, improved performance for its MTV Networks and "our belief that NBC's loss of its lock on Thursday night ad dollars will benefit the other five broadcast networks and the top 20 ad supported cable networks (Viacom owns five of the 20)."

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