CBS Leading Adversting Market

Ronald Grover of BusinessWeek.com reports that CBS will bring in more advertising dollars than any of the other big four networks in 2009:

Everywhere you look these days, network TV executives seem to be shredding their playbooks and experimenting with their programming. The prevailing sentiment seems to be: We’ll do whatever it takes to cut costs and keep viewers tuning in. Exhibit A: Jay Leno, who has stepped out from behind his late-night desk to yuck it up on NBC during prime time.

 

Then there’s CBS, where it’s same old, same old. Yes, the Tiffany Network has added a Los Angeles spin-off to its military crime show NCIS, and launched The Good Wife, a ripped-from-the-headlines drama about the lawyer wife of a philandering politician. But mostly CBS is relying on sitcoms and police procedurals–the very definition of Old Media.

 

How is that working out for CBS? Pretty well, it seems. Three weeks into the fall season, it’s on a roll. With 12 shows in Nielsen’s top 20, including the top-rated comedy, Two and a Half Men, and its most popular drama, NCIS, CBS draws an average of 12.4 million prime-time viewers, 2.4 million more than runner-up ABC. Meanwhile, the stock has been handily outperforming those of its peers. “They’ve proven anyone wrong who thought that no matter what a network did, their audiences would continue to erode,” says Andrew Donchin, who works for the media buying agency Carat North America and helps buy ad time on CBS for such companies as Pfizer, Black & Decker, and Papa John’s International.

 

….

 

Fox can still charge advertisers a hefty premium for shows like Family Guy that have built huge followings among young viewers. But CBS’s large audiences have helped it to an additional 10% or more for 30-second ads compared to earlier this year. As a result, estimates industry analyst SNL Kagan, CBS will generate $4.7 billion in advertising revenues this year, allowing it to sneak past NBC (table).

 

For years, CBS CEO Leslie Moonves has called advertisers’ fixation on young viewers simplistic. Now, with 18- to 49-year-old Americans among the hardest-hit casualties of the Great Recession, his theory makes more sense. As Moonves told BusinessWeek in an interview: “Someone needs to show me where an 18-year-old consumer buys more than a 50-year-old.” The question for CBS is whether big audiences of graying Americans will jazz advertisers once the economy recovers.

 

GROSS AD REVENUES

(BILLIONS)*

CBS $4.7

NBC 4.6

ABC 3.8

Fox 2.8

*2009 estimate

Data: SNL Kagan

Payout Perspective:

CBS may be taking some flack for sticking close to home where the scripted television is concerned, but “The Tiffany Network” is currently the only one of the major four to bet on MMA (twice) in primetime.

I did find it strange that CBS CEO Les Moonves was so dismissive of the younger demographic. While, I concede that a 50 year-old is likely to purchase more, in aggregate, than an 18 year-old, this viewpoint fails to consider the difference in expected lifetime value between a newly acquired 18 year-old customer and 50 year-old customer. It also ignores the potential difference in product margins between the average purchase of someone who is 18 and someone that’s 50.

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It’s been estimated that the upfront advertising market is down nearly 10% this year from last year. However, the figures tell us little about how much each respective network has dropped over that time period.

The most important thing to glean from the news is the size of the overall market and the relative competitive strength that CBS has in relation to the other networks. CBS’s success thus far is particularly interesting, because many thought the network was going to have a very difficult time not only in the ratings department, but financially.

Source: MMAPayout.com: The Business of MMA