Download Title set in Georgia 50pt - Television Bureau of Advertising :: TVB

A Look Forward At The
Media Landscape
Marci L. Ryvicker, CPA, CFA
New York, New York
September 16, 2010
Please see page 26 for rating definitions, important disclosures and required analyst certifications.
Wells Fargo Securities, LLC does and seeks to do business with companies covered in its research reports.
As a result, investors should be aware that the firm may have a conflict of interest that could affect the
objectivity of the report and investors should consider this report as only a single factor in making their
investment decision.
H1 Broadcast Television Trends
Revenue at the stations was +20%
Network upfront was +8%
Scatter pricing is + double digits
Auto ad spend was +50%
Source: Company data, TvB and Wells Fargo Securities, LLC
1
Is The Glass Half Empty…
TOTAL TV ADVERTISING IS DOWN
$8 BILLION SINCE PEAKING IN ‘06
Total TV Advertising (in billions)
$60.0
$50.0
$48.4
$40.4
$40.0
$30.0
$20.0
$10.0
$0.0
2006
Source: MAGNA, NAA, U.S. Postal Service, Census Bureau, Public Filings, IAB, OAAA, RAB, TVB, and Wells Fargo Securities, LLC estimates
2009
2
Or Is It Half Full…
TOTAL TV ADVERTISING SHOULD
RECOVER ~50% OF THE LOSS IN ‘10
Total TV Advertising (in billions)
$60.0
$50.0
$40.0
$40.4
$44.2
$48.4
$30.0
$20.0
$10.0
$0.0
2009
2010E
Source: MAGNA, NAA, U.S. Postal Service, Census Bureau, Public Filings, IAB, OAAA, RAB, TVB, and Wells Fargo Securities, LLC estimates
???
3
Strong Network Upfront
Writer’s Strike
$10
$9.0
$8.2
$8.2
$8.9
$8.3
$8.2
$8
$6
$8.2
$7.2
8%
7%
8%
7%
3%
0%
0%
$2
(4%)
(4%)
$0
'0
8%
4%
5%
$4
12%
CPM Growth
Total Big 4 Network Dollars
(in billions)
Big Four Network Trends
(8%)
3
-
'0
4
'0
4
-
'0
5
'0
5
-
'0
6
Source: SNL Kagan, company data and Wells Fargo Securities, LLC
'0
6
-
'0
7
'0
7
-
'0
8
'0
8
-
'0
9
'0
9
-
'1
0
'1
0
-
'1
1
4
Strong Network Upfront
2009-2010 Network Upfront Results
Network
$ Amount (B) CPM Growth
Sell-Out %
ABC
$2.20
9%
80%
CBS
$2.50
10%
80%
FOX
$1.85
9%
80%
NBC
$1.60
7%
80%
Source: Company data and Wells Fargo Securities, LLC
5
Advertising and the Economy
Using our GDP regressions, we determined how
advertising would react in 4 different scenarios:
GDP
Advertising
Scenario 1
4.0%
2.6%
Scenario 2
2.0%
(0.6%)
Scenario 3
1.0%
(2.2%)
Double Dip
(1.0%)
(5.4%)
• Scenario 1 – 4% GDP Growth
• Scenario 2 – 2% GDP Growth
• Scenario 3 – 1% GDP Growth
• Scenario 4 – (1%) GDP Growth or Double Dip
Source: Wells Fargo Securities, LLC estimates
6
Advertising And The Economy
20%
Advertising & GDP are highly correlated, at 74%
15%
10%
5%
0%
-1%
-5%
4%
9%
14%
y = 1.5972x - 0.0376
R2 = 0.5484
R = 0.74054
-10%
Source: MAGNA, NAA, U.S. Postal Service, Census Bureau, Public Filings, IAB, OAAA, RAB, TVB, U.S Dept of Commerce: BEA, Wells Fargo Securities, LLC
7
Local Media and the Economy
Scenario 1
Scenario 2
Scenario 3
Double Dip
GDP
4.0%
2.0%
1.0%
(1.0%)
Advertising
2.6%
(0.6%)
(2.2%)
(5.4%)
Outdoor
5.8%
2.9%
1.3%
(1.9%)
Radio
2.0%
(2.6%)
(4.2%)
(7.4%)
Spot TV
(3.2%)
(8.6%)
(9.6%)
(11.6%)
Total TV
0.2%
(1.6%)
(3.2%)
(6.4%)
Source: Wells Fargo Securities, LLC estimates
8
Broadcast Television Takes Share
Broadcast TV GAINED share during the recession
25%
24%
23.6%
23%
22%
22.0%
21.7%
22.4%
20.9%
21%
20%
19%
2006
2007
2008
2009
Source: MAGNA, NAA, U.S. Postal Service, Census Bureau, Public Filings, IAB, OAAA, RAB, TVB, and Wells Fargo Securities, LLC estimates
2010E
9
Broadcast Television Takes Share
Broadcast TV & internet GAIN while newspapers LOSE
25.0%
21.8%
21.7%
2005
2006
20.9%
22.0%
22.4%
2008
2009
23.6%
20.0%
15.0%
10.0%
5.0%
0.0%
Newspapers
2007
Broadcast TV
Radio
Outdoor
Source: MAGNA, NAA, U.S. Postal Service, Census Bureau, Public Filings, IAB, OAAA, RAB, TVB, and Wells Fargo Securities, LLC estimates
2010E
Internet
10
Opportunities: Revenue Streams Today
Revenue Stream
% Of Revenue
Retransmission Consent
5% - 10%
Spectrum (Mobile/Digital)
0% - 5%
Internet
5% - 10%
Core Advertising
75% - 85%
Source: Wells Fargo Securities, LLC estimates
11
Opportunities: Retransmission Consent
We estimate that retrans will grow 25% per yr, on avg
$4,556
12.0%
10.0%
$4,000
10.0%
8.0%
$3,000
$2,000
$1,000
$314
$0
0.7%
2007A
Source: SNL Kagan and Wells Fargo Securities, LLC estimates
$500
1.1%
2008A
$2,278
6.0%
5.0%
4.0%
$762
Percent of Industry
Revenue in Millions
$5,000
2.0%
1.9%
0.0%
2009A
2012E
2017E
12
Opportunities: Spectrum
Mobile Video – OMVC/Pearl
Multicasting
Lease Spectrum
National Broadband Plan
Source: Wells Fargo Securities, LLC
13
Opportunities: Internet
Fisher Communications Inc.
Source: Company website and Wells Fargo Securities, LLC
14
Forecasting Advertising Trends
What We Track….
GDP
Inflation
Consumer Confidence
Unemployment
Housing
Auto
Retail Sales
15
Auto Vehicle Sales v. Auto Advertising
Auto advertising has a strong relationship with
vehicle sales
16.0
16.5
$14.0
$15.1
$13.9
14.0
$16.0
16.1
12.0
13.2
$11.7
10.4
11.5
$10.5
10.0
$9.3
8.0
$12.0
$10.0
$8.0
$6.0
6.0
4.0
$4.0
2.0
$2.0
0.0
$0.0
2006A
2007A
2008A
Source: BEA, TVB, CAB, RAB, OAAA, NAA, MPA, and Wells Fargo Securities, LLC estimates
2009A
Total Auto Ad $s (B)
New Vehicle Sales (M)
18.0
2010E
16
Auto Vehicle Sales and Television Advertising
Auto advertising on TV has a strong relationship with
vehicle sales
16.0
14.0
16.5
$8.0
16.1
$7.0
$7.4
$6.7
12.0
13.2
$5.9
10.4
10.0
11.5
$5.0
$5.0
$4.4
8.0
$6.0
$4.0
$3.0
6.0
4.0
$2.0
2.0
$1.0
0.0
$0.0
2006A
2007A
2008A
Source: BEA, TVB, CAB, RAB, OAAA, NAA, MPA, and Wells Fargo Securities, LLC estimates
2009A
Total TV Auto Ad $s (B)
New Vehicle Sales (M)
18.0
2010E
17
Retail Sales and Total Advertising
Advertising & retail sales are highly correlated, at 94%
10%
5%
(10%)
(5%)
0%
0%
5%
10%
(5%)
(10%)
(15%)
y = 1.3797x - 0.0621
R2 = 0.8786
R = 0.9373
(20%)
Source: BEA, MAGNA, NAA, U.S. Postal Service, Census Bureau, Public Filings, IAB, OAAA, RAB, TVB, and Wells Fargo Securities, LLC estimates
18
SS Sales Growth and Total Advertising
8%
15%
10%
4%
5%
2%
(4%)
Q
2
(2%)
0%
'0
Q 7
3
'0
Q 7
4
'0
Q 7
1
'0
Q 8
2
'0
Q 8
3
'0
Q 8
4
'0
Q 8
1
'0
Q 9
2
'0
Q 9
3
'0
Q 9
4
'0
Q 9
1
'1
0
0%
(6%)
(8%)
(10%)
Source: BEA, MAGNA, NAA, U.S. Postal Service, Census Bureau, Public Filings, IAB, OAAA, RAB, TVB, and Wells Fargo Securities, LLC estimates
(5%)
(10%)
Total Advertising
Same Store Sales
6%
(15%)
(20%)
19
Retail Sales And Television Advertising
TV Advertising & retail sales are highly correlated, at
15%
84%
10%
5%
(10%)
(5%)
0%
0%
(5%)
5%
10%
(10%)
(15%)
(20%)
y = 1.3718x - 0.0509
R2 = 0.7032
R = 0.8386
(25%)
Source: BEA, MAGNA, NAA, U.S. Postal Service, Census Bureau, Public Filings, IAB, OAAA, RAB, TVB, and Wells Fargo Securities, LLC estimates
20
20%
6%
15%
4%
10%
2%
5%
0%
0%
(4%)
Q
2
(2%)
'0
Q 7
3
'0
Q 7
4
'0
Q 7
1
'0
Q 8
2
'0
Q 8
3
'0
Q 8
4
'0
Q 8
1
'0
Q 9
2
'0
Q 9
3
'0
Q 9
4
'0
Q 9
1
'1
0
8%
(5%)
(10%)
(6%)
(15%)
(8%)
(20%)
(10%)
(25%)
Source: BEA, MAGNA, NAA, U.S. Postal Service, Census Bureau, Public Filings, IAB, OAAA, RAB, TVB, and Wells Fargo Securities, LLC estimates
Broadcast TV
Same Store Sales
SS Sales Growth and Television Advertising
21
Appointment Viewing
DVR, PPV, VOD
Hulu, YouTube
Netflix, Amazon, Red Box
CBS.com, ABC.com, etc.
Internet-Ready TVs
Apple TV, TiVo, Boxee, Sezmi, VUDU
22
Advertising Growth By Medium - Historical
2006
2007
2008
2009
Broadcast TV
5%
(4%)
(0%)
(13%)
Total U.S. Advertising
5%
0%
(5%)
(14%)
4%
1%
8%
(0%)
7%
(2%)
8%
(8%)
2%
(9%)
(5%)
(17%)
(3%)
(18%)
(16%)
(27%)
Cable TV
Radio
Outdoor
Newspapers
Source: MAGNA, NAA, U.S. Postal Service, Census Bureau, Public Filings, IAB, OAAA, RAB, TVB, and Wells Fargo Securities, LLC
23
Advertising Growth By Medium - Forecasts
Broadcast TV
Total U.S. Advertising
Cable TV
Radio
Outdoor
Newspapers
2010E
2011E
10%
0%
4%
2%
8%
8%
4%
(7%)
8%
2%
6%
(5%)
Source: MAGNA, NAA, U.S. Postal Service, Census Bureau, Public Filings, IAB, OAAA, RAB, TVB, and Wells Fargo Securities, LLC estimates
24
Questions?
Marci Ryvicker, CFA, CPA
Wells Fargo Securities, LLC
[email protected]
212-214-5010
25
Disclosures
To view price charts for all companies rated in this document, please go to https://www.wellsfargo.com/research or write to
7 Saint Paul Street, 1st Floor, R1230-011, Baltimore, MD 21202
ATTN: Research Publications
Additional Information Available Upon Request
I certify that:
1) All views expressed in this research report accurately reflect my personal views about any and all of the subject securities or issuers discussed; and
2) No part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me in this research report.
Wells Fargo Securities, LLC maintains a market in the common stock of Cablevision Systems Corp., CBS Corporation, Clear Channel Outdoor Holdings, Inc.,
Comcast Corporation, DISH Network Corporation, Entercom Communications Corp., Gray Television, Inc., Lamar Advertising Company, LIN TV Corporation, Saga
Communications, Inc., Sinclair Broadcast Group, Inc., The DIRECTV Group, Inc., Time Warner Cable Inc.
Wells Fargo Securities, LLC or its affiliates managed or comanaged a public offering of securities for CBS Corporation, Comcast Corporation, Gray Television,
Inc., Lamar Advertising Company, LIN TV Corporation, Time Warner Cable Inc. within the past 12 months.
Wells Fargo Securities, LLC or its affiliates intends to seek or expects to receive compensation for investment banking services in the next three months from
CBS Corporation, Comcast Corporation, DISH Network Corporation, Gray Television, Inc., LIN TV Corporation, Saga Communications, Inc., Sinclair Broadcast
Group, Inc., The DIRECTV Group, Inc., Time Warner Cable Inc.
Wells Fargo Securities, LLC or its affiliates received compensation for investment banking services from CBS Corporation, Comcast Corporation, Gray Television,
Inc., Lamar Advertising Company, LIN TV Corporation, Time Warner Cable Inc. in the past 12 months.
Wells Fargo Securities, LLC and/or its affiliates, have beneficial ownership of 1% or more of any class of the common stock of CBS Corporation, Clear Channel
Outdoor Holdings, Inc., Sinclair Broadcast Group, Inc.
CBS Corporation, Comcast Corporation, Gray Television, Inc., Lamar Advertising Company, LIN TV Corporation, Time Warner Cable Inc. currently is, or during
the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided
investment banking services to CBS Corporation, Comcast Corporation, Gray Television, Inc., Lamar Advertising Company, LIN TV Corporation, Time Warner
Cable Inc.
Cablevision Systems Corp., CBS Corporation, Clear Channel Outdoor Holdings, Inc., Comcast Corporation, Time Warner Cable Inc. currently is, or during the 12month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided
noninvestment banking securities-related services to Cablevision Systems Corp., CBS Corporation, Clear Channel Outdoor Holdings, Inc., Comcast Corporation,
Time Warner Cable Inc.
Gray Television, Inc., Lamar Advertising Company, Sinclair Broadcast Group, Inc. currently is, or during the 12-month period preceding the date of distribution
of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided nonsecurities services to Gray Television, Inc., Lamar
Advertising Company, Sinclair Broadcast Group, Inc.
Wells Fargo Securities, LLC received compensation for products or services other than investment banking services from Cablevision Systems Corp., CBS
Corporation, Clear Channel Outdoor Holdings, Inc., Comcast Corporation, Gray Television, Inc., Lamar Advertising Company, Sinclair Broadcast Group, Inc., Time
Warner Cable Inc. in the past 12 months.
Wells Fargo Securities, LLC or its affiliates may have a significant financial interest in Cablevision Systems Corp., CBS Corporation, Clear Channel Outdoor
Holdings, Inc., Comcast Corporation, DISH Network Corporation, Entercom Communications Corp., Gray Television, Inc., Lamar Advertising Company, LIN TV
Corporation, Saga Communications, Inc., Sinclair Broadcast Group, Inc., The DIRECTV Group, Inc., Time Warner Cable Inc.
26
Disclosures
CBS: Risks include a deeper and longer recession and a slower ad recovery than is currently anticipated.
CCO: Risks include a slower-than-expected economic recovery and a potential CCMO bankruptcy (long-term).
CMCSA: Risks to achieving this range include price declines due to competition in the pay-TV market and unexpected concessions associated with
the NBCU deal.
CVC: Risks to achieving this range include greater sub losses than expected and a slowdown in the SME segment.
DISH: Risks include an unpredictable response to the TiVo litigation and higher churn, lower ARPU and bigger net losses than currently expected.
DTV: Risks include higher coss (both retention and SAC) than currently anticipated and international exposure (foreign exchange/macro).
ETM: Risks to our valuation range include a downturn in the economy or an advertising recovery that is slower than expected.
GTN: Risks include a weaker recovery than currently expected and competition from other media.
LAMR: Risks include a slower-than-anticipated recovery and a slower-than-anticipated ramp in digital billboards.
SBGI: Risks include high investor expectations and a potential slowdown in auto spending.
SGA: Risks to achieving our valuation range include an economic and/or advertising downturn, a longer-than-anticipated lag between ratings
improvement and revenue growth and potential integration difficulties with recent acquisitions.
TVL: Risks include the company being unable to meet/exceed the Street's high expectations and the inability to show sustainable growth levels
post 2010.
TWC: Risks include more subscriber losses and higher programming expenses than currently expected.
Wells Fargo Securities, LLC does not compensate its research analysts based on specific investment banking transactions.
Wells Fargo Securities, LLC’s research analysts receive compensation that is based upon and impacted by the overall profitability and revenue of
the firm, which includes, but is not limited to investment banking revenue.
STOCK RATING
1=Outperform: The stock appears attractively valued, and we believe the stock's total return will exceed that of the market over the next 12
months. BUY
2=Market Perform: The stock appears appropriately valued, and we believe the stock's total return will be in line with the market over the next
12 months. HOLD
3=Underperform: The stock appears overvalued, and we believe the stock's total return will be below the market over the next 12 months. SELL
SECTOR RATING
O=Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months.
M=Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months.
U=Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months.
VOLATILITY RATING
V = A stock is defined as volatile if the stock price has fluctuated by +/-20% or greater in at least 8 of the past 24 months or if the analyst
expects significant volatility. All IPO stocks are automatically rated volatile within the first 24 months of trading.
27
Disclosures
As of: 9/10/2010
47% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Outperform. Wells Fargo Securities, LLC has provided
investment banking services for 43% of its Equity Research Outperform-rated companies.
50% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Market Perform.
Wells Fargo Securities, LLC has
provided investment banking services for 44% of its Equity Research Market Perform-rated companies.
3% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Underperform. Wells Fargo Securities, LLC has provided
investment banking services for 37% of its Equity Research Underperform-rated companies.
Important Information for Non-U.S. Recipients
EEA – The securities and related financial instruments described herein may not be eligible for sale in all jurisdictions or to certain categories of
investors. For recipients in the EEA, this report is distributed by Wells Fargo Securities International Limited (“WFSIL”). WFSIL is a U.K.
incorporated investment firm authorized and regulated by the Financial Services Authority. For the purposes of Section 21 of the UK Financial
Services and Markets Act 2000 (“the Act”), the content of this report has been approved by WFSIL a regulated person under the Act. WFSIL does
not deal with retail clients as defined in the Markets in Financial Instruments Directive 2007. This report is not intended for, and should not be
relied upon by, retail clients.
Australia – Wells Fargo Securities, LLC is exempt from the requirements to hold an Australian financial services license in respect of the financial
services it provides to wholesale clients in Australia. Wells Fargo Securities, LLC is regulated under U.S. laws which differ from Australian laws.
Any offer or documentation provided to Australian recipients by Wells Fargo Securities, LLC in the course of providing the financial services will
be prepared in accordance with the laws of the United States and not Australian laws.
Hong Kong – This report is issued and distributed in Hong Kong by Wells Fargo Securities Asia Limited (“WFSAL”), a Hong Kong incorporated
investment firm licensed and regulated by the Securities and Futures Commission to carry on types 1, 4, 6 and 9 regulated activities (as defined
in the Securities and Futures Ordinance, “the SFO”). This report is not intended for, and should not be relied on by, any person other than
professional investors (as defined in the SFO). Any securities and related financial instruments described herein are not intended for sale, nor
will be sold, to any person other than professional investors (as defined in the SFO).
Japan – This report is distributed in Japan by Wells Fargo Securities (Japan) Co., Ltd, a Japanese financial instruments firm registered with the
Kanto Local Finance Bureau, a subordinate regulatory body of the Ministry of Finance in Japan, to conduct broking and dealing of type 1 and type
2 financial instruments and agency or intermediary service for entry into investment advisory or discretionary investment contracts. This report
is intended for distribution only to professional customers (Tokutei Toushika) and is not intended for, and should not be relied upon by, ordinary
customers (Ippan Toushika).
About Wells Fargo Securities, LLC
Wells Fargo Securities, LLC is a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the New York
Stock Exchange, the Financial Industry Regulatory Authority and the Securities Investor Protection Corp.
This report is for your information only and is not an offer to sell, or a solicitation of an offer to buy, the securities or instruments named or
described in this report. Interested parties are advised to contact the entity with which they deal, or the entity that provided this report to them,
if they desire further information. The information in this report has been obtained or derived from sources believed by Wells Fargo Securities,
LLC, to be reliable, but Wells Fargo Securities, LLC, does not represent that thisinformation is accurate or complete. Any opinions or estimates
contained in this report represent the judgment of
Wells Fargo Securities, LLC, at this time, and are subject to change without notice. For the purposes of the U.K. Financial Services Authority's
rules, this report constitutes impartial investment research. Each of Wells Fargo Securities, LLC, and
Wells Fargo Securities International Limited is a separate legal entity and distinct from affiliated banks. Copyright © 2010
Wells Fargo Securities, LLC.
28
Television Bureau of
Advertising (TvB)
Forward Conference
Marci L. Ryvicker, CPA, CFA
New York, New York
September 16, 2010
Please see page 24 for rating definitions, important disclosures and required analyst certifications.
Wells Fargo Securities, LLC does and seeks to do business with companies covered in its research reports.
As a result, investors should be aware that the firm may have a conflict of interest that could affect the
objectivity of the report and investors should consider this report as only a single factor in making their
investment decision.