Network TV Ad Sales Stronger Than Expected (CBS, NWS, DIS, GE)

The broadcast TV networks’ dog-and-pony show known as the “upfront market” has gotten off to a good start this year. Advertisers get to see the coming season’s new TV shows and then mull over whether or not to buy advertising time on the shows. They have already indicated that they plan to increase spending this year, and the networks are expecting to see more ads pre-sold this year and at higher rates.

CBS Corp. (NYSE: CBS), parent of CBS-TV, and Fox Broadcasting, owned by News Corp. (NYSE: NWS) have the best ratings among 18-49 year-olds, the sweet spot for prime-time TV advertising. ABC-TV, owned by Walt Disney Co. (NYSE: DIS) and NBC-TV, owned by General Electric Co. (NYSE: GE), have both slipped among that demographic group.

Kantar Media, a division of WPP plc, is an ad-tracking firm that noted an increase in advertising spending of 5.1% in the first quarter of 2010, the first gain since 2008 and the largest gain since 2005. TV advertising rose 10.5% in the first quarter and Kantar expects that level of growth to continue in the second quarter.

Ad dollars are expected to increase from auto makers and telecommunications companies especially. According to Kantar, the auto industry increased its ad spending by 18.6% in the first quarter, and the telecom companies increased spending by 10.6%.

Auto makers will undoubtedly be pushing incentives, better mileage figures, and for those which have them, hybrid and hybrid electric vehicles. Telecom companies will continue to battle over subscribers.

The advertisers are counting on an improved economy to generate the viewers it needs to make their spending pay off. To advertisers, today’s report from the US Commerce Department that income growth is rising faster than spending means there are discretionary dollars out there just waiting to be spent.

Advertising rates at CBS are projected to rise by 8-9%. Fox and ABC could see a jump of 6%, while NBC rates likely to rise by 5%. Part of the reason for the rise is that the networks have spent heavily on new scripted programs, which are more expensive to produce than the reality shows, but which also help attract new advertisers and, if the shows catch on with viewers, have a long and healthy life. Think “M*A*S*H” and “Friends”. CBS is trying to hit that target with a re-make of that old favorite “Hawaii Five-0”.

A Credit Suisse analyst expects this year’s upfront to bring in some $8 billion, up 20% from last year. Higher rates and, presumably, better programming could make this a really good year for broadcasters. Book ’em Dan-o.

Paul Ausick