Bloomberg News

TV Networks Book $8.7 Billion in Ads as Economy Limits Gain

June 10, 2011

(Updates with closing share prices in 13th paragraph.)

June 10 (Bloomberg) -- The biggest U.S. TV networks locked in about $8.7 billion in advertising commitments for the season that starts in September, an 8.1 percent increase that would have been bigger without signs of a weakening in the economy.

CBS Corp., owner of the network with the largest overall audience, commanded the highest rate increase, averaging 13 percent to 15 percent, said a person familiar with the results. Comcast Corp.’s NBC, Walt Disney Co.’s ABC and News Corp.’s Fox raised prices from 9 percent to 11 percent, according to people who weren’t authorized to speak publicly.

The advertising market was the best in years, said Michael Morris, an analyst with Davenport & Co. in Richmond, Virginia. The results met his expectations and would have exceeded them if not for economic reports of rising unemployment and concern over housing prices that spooked advertisers in recent weeks.

“In general, the networks asked for the moon and they got very healthy increases,” Morris said. “It just wasn’t ahead of expectations.”

Overall sales rose from about $8.05 billion last year, based on totals provided by people familiar with each network’s results. Advertisers make commitments ahead of each television season, setting a benchmark for rates. The pledges can be altered based on factors including schedule shifts and options advertisers can exercise to pull back on spending.

CBS was said to receive $2.65 billion in prime-time commitments, up from about $2.5 billion last year. ABC’s haul increased to about $2.4 billion from $2.2 billion, and NBC took in about $100 million more than last year’s $1.6 billion. The network had fewer slots available for upfront sales this time because it will carry the 2012 Olympics from London.

Stronger Footing

Fox, which programs two hours of prime time each weeknight, a third than its rivals, was said to receive $1.95 billion in commitments, up from $1.75 billion. The network, the leader in the 18-49 age group advertisers target, finished its sales last week.

Advertisers are on stronger footing than last year, said David Bank, an analyst with RBC Capital Markets in New York.

“The networks exceeded expectations, especially CBS, from what the Street expected a month or two ago,” Bank said. “And they achieved these increases in a very fragile macro-economic environment, making it even more impressive.”

Sluggish Economy

Home prices in 20 U.S. cities dropped in March to the lowest level since 2003, according to the S&P Case-Shiller Index report on May 31, a sign that housing remains mired in its slump almost two years into the economic recovery. The U.S. jobless rate rose to 9.1 percent in April from 9 percent, Labor Department data showed last week.

“The macro environment showed signs of getting weaker, and I believe advertisers were coming back saying, ‘We’re not going to overpay,’” Morris said.

The networks also risk losing viewers if the National Football League and the National Basketball Association can’t resolve contract disputes with their players that threaten to cancel their coming seasons. While games air mostly outside of prime time, the networks rely on them to promote their entertainment lineup to younger, male viewers.

CBS, the New York-based broadcaster controlled by Chairman Sumner Redstone, fell 51 cents, or 1.9 percent, to $26.20 at 4:15 p.m. in New York Stock Exchange composite trading. Disney, based in Burbank, California, dropped 87 cents to $38.50.

News Corp., also based in New York and controlled by Rupert Murdoch, dropped 42 cents to $16.38 on the Nasdaq Stock Market. Philadelphia-based Comcast, which acquired control of NBC Universal in January from General Electric Co., fell 42 cents, or 1.7 percent, to $23.89.

--With assistance from Alex Sherman in New York. Editors: Anthony Palazzo, Stephen West

To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


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