Current strong demand for TV advertising means the networks should have a bigger and better upfront sales season this spring, according to CBS Chairman Leslie Moonves.
“Advertising is as robust as we’ve seen in a long time,” Moonves said Thursday in his comments to Wall Street analysts after the media company’s fourth-quarter earnings were announced.
Moonves said media buyers are paying prices for “scatter,” the time sold close to air time, that are “way up” over the rates commercials went for in the upfront selling season last spring. The upfront is where the bulk of ad time for the TV season is sold.
Strong scatter pricing is typically an indicator for the health of the upfront market for broadcast network television. Last year’s total market -- which finished in the range of $8 billion to $9 billion -- was considered lackluster as digital video companies competed more aggressively for a share of TV advertiser budgets.
But Moonves believes ad rate gains in the upfront for the 2016-17 TV season will be “substantially higher” than last year based on the increases advertisers paid in the scatter market in recent months.
“A guy who bought ads on CBS in October paid nearly 20% more than he would have if he would have bought from us in July,” he said.
Chief Financial Officer Joseph Ianniello added, “We haven’t seen a market like this in quite some time.”
TV network ad revenue for CBS was up 8% in the fourth quarter, according to the company’s earnings statement. Overall ad revenue for the company was up 1%, as local TV and radio revenue declined.
Retransmission fees paid by cable and satellite companies to carry CBS programs and licensing and sales of programs overseas were the biggest drivers of the company’s revenue, which was up 6% overall year-to-year to a record $3.9 billion. Operating income was up 6% to $747 million. Earnings per share also hit a company high of 92 cents, up 19%.
Moonves said he expects 2016 to be particularly strong for CBS, as it will include its telecast of Super Bowl 50 this past Sunday, where 30-second spots went for as much as $5 million. Local station sales for the game were up 45% from the last time they carried the game in 2013.
The year will also see a boost from heavy ad spending from presidential candidates. The company stands to benefit from political ad sales on its TV stations in Minnesota, Colorado, Florida and Pennsylvania, all potential battleground states in the general election, and on its radio stations.
Moonves also said the subscription rates for its recently launched online video service CBS All Access and its “over-the-top” version of premium cable channel Showtime are pacing ahead of expectations. Although no subscription figures were given for the services, which allow users to watch streaming video of CBS and Showtime programs online, they will begin to have a positive impact on the company’s financial performance this year.
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