Strong Scatter A Good Omen For Local TV

If national TV advertising is an accurate indicator of the national economy, you might not have to dump your stocks after all.

The message I get from Wall Street (and overseas exchanges) is that the U.S. economy is on the precipice. So far this year, the volatile Dow is down 9% after a flat 2015.

But the word from the Big Media’s fourth-quarter earnings reports and their chats with securities analysts is that the TV advertising business is fairly healthy, especially in the light of the unrelenting competition from digital media for viewers and dollars.

Brian Wieser, an analyst at Pivotal Research, summed up the year in TV:

“Now that the most owners of national TV properties have reported their calendar 4Q15 earnings, it appears that they will end up with [4Q] growth in advertising revenues of around +6% to +7% and full year 2015 growth of +1% to +2% on an unadjusted basis (ex-incremental Olympics activity in 2014).

“[T]his pace of growth broadly reflects what we think is a gradual erosion of growth for national TV, but far from the full-on doom-and-gloom that has emanated from virtually every corner of Wall Street and much of the industry over the past two years.

“With conditions strong in 1Q16, national TV looks likely to fare at least as well in 2016 as it did in 2015.”

The Big Media execs said that the first-quarter scatter spending continues strong and that they were looking forward to the robust upfront market this summer, after a so-so one last summer.

“The scatter market is as strong as it’s been any time in recent memory and when we went through the upfront, we were wondering — everybody was wondering — is more money going to digital and is that depressing the upfront or are advertisers just waiting?” NBCUniversal CEO Steve Burke told analysts.

“Now it appears, given that scatter has been strong now so consistently, that a lot of advertisers were waiting and placing their money later.”

CBS CEO Les Moonves seemed to be reading from the same script in his remarks to analysts late yesterday afternoon. “I think [the 2016 upfront] is going to be substantially higher,” he said.

There was “a little bit of nervousness” during last summer’s selling that digital was finally about to knock traditional TV off its high perch, Moonves said. But beginning in the third quarter, scatter rates rose to “high double digits” and that pricing has held through the fourth quarter and into the first.

“A guy who bought ads from CBS in October paid nearly 20% more than he would have if he’d bought them from us in July [in the upfronts].”

Why the surge?

The appeal of traditional TV is unmatched, said Wieser. “For those seeking broad reach, sight-sound-and-motion and brand awareness, traditional TV still utterly dominates all alternatives despite the growth of digital media owners and increasing consumption of video on internet-connected devices.”

Moonves said network TV is still the only way to reach the mass audience. “Twenty million people watch NCIS…. It takes a lot of hits on YouTube … to equal what we are able to do on an episode of NCIS or Big Bang or 60 Minutes.

“So, I think it comes down to it’s still the best bang for the buck.”

Moonves couldn’t resist taking a swipe at the digital competition, citing “noise” that digital doesn’t deliver the same return on investment as broadcasting and is subject to fraud. That viewer of an online video may not be a person, but “a machine,” he said.

I would guess a big factor in the scatter surge in the auto industry, which is TV’s chief advertiser. According LMC Automotive, 17.4 million cars and light trucks were sold in 2015, and the number is likely to increase to 17.8 million in 2016. The more cars they sell, the more advertising they buy.

At CBS, the good news did not filter down to its TV stations in the quarter. The company lumps radio and TV results together in its reporting, but it did break out that its TV station revenue was down 11%. That’s not surprising given the relative dearth of political advertising in the odd-numbered year, but, still, it suggests core growth in the low single digits at best.

We’ll learn more about local TV over the next couple of weeks when we hear from the publicly traded pure play station groups — Tegna, Sinclair, Nexstar, Scripps, Gray Television and Media General.

(Meredith has already reported that its core ad revenue in the fourth-quarters [its fiscal second quarter] was up 10%, but the percentage was inflated by the inclusion of the results from a couple of stations new to the group.)

In the meantime, let’s revel in the health of the national TV ad market — what’s good for scatter is good for local, they say — and what it portends about the national economy.

The ever-ebullient Moonves told the analysts that if the economy is about to go over the edge and drag ad-supported TV with it, he isn’t seeing it.

“Back in ’08 we saw it coming,” he said. “It was there in big shining lights. We’re not seeing anything remotely resembling that now, and we have visibility through Q2 in terms of our advertising, which is sort of normal if not even more aggressive than normal. So, that is why I am so optimistic about the upfront.”

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or [email protected]. You can read earlier columns here.