CBS Expects to Get Price Increases During Upfront

CEO Moonves Is Optimistic as Scatter Volume, Ad Rates Rise

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NEW YORK ( -- Yes, advertisers, CBS will ask for price hikes in this year's TV upfront marketplace.

Les Moonves
Les Moonves Credit: CBS
During a conference call with investors today, CBS Corp. President-CEO Leslie Moonves said that CBS's ability to increase its ratings in key demographics during the 2008-09 season would serve it well in the coming upfront broadcast TV market, in which networks typically sell 75% to 80% of their ad inventory for the coming season.

"Ad dollars will follow that growth, along with CPM increases," said Mr. Moonves, referring to the increase in the cost of reaching 1,000 viewers, a common measure in these negotiations. "Even if total volume is down in the upfront, we are confident that we will take share and maintain or increase our revenue in what remains a vital and lucrative marketplace. We continue to believe that network TV is still the best game in town, particularly for big brands coming out of a down cycle."

His bold talk may not hit the right tone with advertisers, who have been holding more tightly to their dollars in the first and second quarters, according to media buyers. Even so, Mr. Moonves' optimism echoes remarks from other network executives in the past week. These executives suggested that advertisers -- including those from the hard-hit domestic auto category -- have begun to spend.

Advertisers beginning to spend again
Speaking after making a presentation to advertisers earlier this week, NBC Universal Ad-Sales President Mike Pilot told Advertising Age that while advertisers are still spending slowly and much later than usual, he felt they had begun to "lean forward." He said domestic automakers had begun to spend in the second quarter, and movie studios had been strong. But he also noted that financial-services advertisers and pharmaceutical marketers had been "tough" in terms of spending.

Another broadcast-network executive suggested that both the CW and ABC are also seeing healthier-than-expected purchases of "scatter" advertising, or ad inventory purchased much closer to air.

Comments from Mr. Moonves and other network executives come even as buyers say marketers continue to move very slowly to spend, have yet to register significant budgets for the upfront, and continue to mull canceling portions of their third-quarter ad orders from last year's upfront.

CBS has reason to pitch its network's ratings story. The media company's revenue is more heavily reliant on traditional advertising than competitors and less insulated from the vicissitudes of the advertising market. Indeed, CBS said Thursday that it had turned in a first-quarter loss of $55.3 million, or 8 cents per share, down from a profit of $244.3 million, or 36 cents a share, in the same period a year ago. First-quarter revenue fell to $3.16 billion from $3.65 billion, despite the fact that CBS has been increasing its ratings while those of rivals have dropped. TV revenue fell 12% in the first quarter.

Scatter improving
Echoing sentiments heard from top executives at Viacom Inc. and News Corp. in recent days, CBS said it believed the economy would improve in the second half of the year. Mr. Moonves said the volume of scatter purchases has improved over the last six to eight weeks and indicated that some deals were coming in at prices "slightly above" upfront levels.

He also predicted NBC's decision to run a talk/variety show hosted by Jay Leno five nights a week would help both CBS and ABC grab market share. Assuming what he called a "ballpark figure" that CBS already takes in "38% of the revenue available at 10 o'clock," Mr. Moonves said if Mr. Leno's program is able to achieve the ratings fares well, CBS could increase its share of ad dollars for the time period to "maybe 45%, maybe 47%."

"We wish Jay well," he said, but he predicted the NBC move would be "a big plus for us and ABC in terms of revenue."

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