Scatter Matters: Late Money Pouring Into TV
After a wobbly upfront that saw buyers commit the fewest advance dollars to broadcast TV since the 2010-11 bazaar, network execs are cautiously optimistic that an improving scatter market will go a long way toward making up for the summer shortfall.
According to Standard Media Index data, broadcast scatter volume improved 54% in July, and while that uplift was partly a function of the demand for inventory in and around Fox's coverage of the 2015 Women's World Cup, there are signs of organic growth. (For the uninitiated, "scatter" refers to the unguaranteed buys made outside of the upfront, which accounts for roughly 20%-to-25% of the networks' overall dollar volume.)
Speaking to investors earlier this month, CBS Corp. President-CEO Les Moonves said the company's flagship network was reaping the benefits of a growing scatter market. "Right now, we're seeing the scatter ad market accelerate rapidly in the third quarter with double-digit gains in pricing," Mr. Moonves said. "We see that extending beyond Q3 and are confident that the strength and stability of our lineup will lead to increases throughout the season."
Auto and pharma have been particularly active in scatter, according to CBS Chief Operating Officer Joe Ianniello.
Mr. Moonves acknowledged that while CBS' upfront sales "were not as robust as in years past," that wasn't necessarily a reflection of slackening demand. "People are just waiting longer to make their buying choices," Mr. Moonves said.
Upfront sales were also hampered by an unprecedented flurry of accounts in review -- marketers in the midst of identifying an agency-of-record are understandably less likely to make the long-term spending commitments -- and the steady drip-drip of media dollars shifting to digital platforms.
While CBS seems to have regained some of its characteristic bravado, the Walt Disney Co. was more understated in its assessment of the current scatter market. Newly minted Chief Financial Officer Christine McCarthy this month told analysts that scatter pricing at ABC is currently "pacing modestly above upfront levels."
ABC commanded the highest cost-per-thousand increases in this year's upfront, although it is believed to have traded volume for price hikes. Should scatter continue to improve, leaving a few hundred-million dollars on the table in July won't make any difference in January, when clients who held back on their upfront investments will pay significant premiums to buy their way back onto ABC's prime-time schedule.
NBC parent Comcast did not address the scatter market during its most recent earnings call, but insiders say the Peacock Network is in a particularly strong position as the 2015-16 broadcast season draws near. "Sunday Night Football" and "The Voice" continue to give NBC a leg up in crucial live deliveries, while its new drama, "Blindspot" in the Monday 10 p.m. "Voice" lead-out slot is pegged as the freshman show that's most likely to succeed in the fall.
According to buyers surveyed, "Blindspot" is the only new series expected to average a 3.0 or better in C3 ratings (three-day commercial ratings). Scatter dollars in the fall are most likely to accrue to established hits such as "The Voice," Fox's "Empire," CBS' "The Big Bang Theory," ABC's Thursday night lineup; the CW's DC Comics tentpoles and every available National Football League broadcast.
Cable scatter is also on the rise -- the operative term among ad sales execs is "gangbusters" -- although you wouldn't know by simply looking at the volume stats. Per SMI, July saw cable scatter dollars grow 1% versus the year-ago period, as tough comparables for ESPN distorted the overall picture. In July 2014, ESPN broadcast 10 World Cup matches, a slate that included Team USA's Round of 16 loss to Belgium and the Germany-Argentina final. The entire 64-match tourney generated $529 million in ad sales revenue.
Buyers and sellers caution that this is very much a haves and have-nots marketplace. Double-digit ratings declines at top cable outlets have strangled the amount of available ratings points to sell in scatter, while those with GRPs to move are raking it in. Whether the ratings leaders will continue to take advantage of this recent resurgence is obviously the $64,000 question, but historical precedent would suggest that a hot summer scatter market will only continue to burn bright in the fall.
Of course, even if scatter shores up a disconcertingly tepid upfront, there's no telling how all the exogenous factors that weigh on the TV business will play out in the long term. A shift by young viewers to unmeasured media platforms and the ongoing decline in live TV usage has effectively erased 15% of all targets in the 18-to-24 demographic. Over-the-top services like Netflix are hammering an already vulnerable TV model, and concerns about cord-cutting (and analyst fear-mongering) in the last two weeks have helped drain media stocks of more than $70 billion in market value. (And that was before this afternoon, when China cratered, oil plummeted and the Dow plunged 531 points.)
Last year, TV execs swore up and down that scatter would save their collective bacon; trouble is, the calvary never arrived. Modest improvements in first quarter scatter pricing were insufficent to offset the 16% shortfall in broadcast upfront volume, and the Big Four closed out the first three months of the year down 3% versus the first quarter of 2014.
"It's too early to make any projections about where the fourth quarter will be, but the marketplace has absolutely picked up, and the fact that we have ratings points allows us to take advantage of that," said Discovery Communications CEO David Zaslav, who noted that the network group in the second quarter had generated a record amount of scatter volume. "We can't say whether that will continue, but it feels good right now."