UBS 2015 Final Final WithNotes

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015
Good Morning
UBS 43rd Annual Global Media and Communications Conference
Welcome to the annual Outlook For The Broadcast Networks

from CBS.
First, the required preamble.

The CAUTIONARY STATEMENT REGARDING FORWARDLOOKING STATEMENTS
Following the format of past years, I will divide my

presentation into two sections. The first section will address
the short term picture and include my forecast for 2016.
The second section will address the longer term direction of
the advertising and media markets.
I am going to hit you with a lot of slides that go by fast.
The presentation will be available on the CBS Corporation
website tomorrow morning.
The first theme of my presentation today is, advertisers,

informed with an increasing array of measurement tools
providing comparative assessments of the digital
distractions and diversions which have been a preoccupation
for them during the past several years, are re-focusing on the
central role of television advertising in their marketing
programs.
My second theme is, since the recession, led by the growing
strength of their procurement staffs, advertisers have
become more obsessed with CPM efficiency as opposed to
reach in their media selection process. And, this efficiency
orientation has resulted in less effective television campaigns
that have not captured the full power of the medium in driving
short term sales or building long-term brand equity.
My message to you today is, in both of these cases, change
is now underway.
Lets get started with the short term forecast.
At the time of last years conference, when all of the

forecasters were predicting significant declines in broadcast
television advertising spending in 2015, I predicted a flat
market with 2% underlying growth when adjusting for the
2014 Olympics. I argued that new ROI-based research was
ratifying the superior ROI generated by television advertising
which would result in money flowing back into the medium in
the second half of the year.
The broadcast network television advertising market has
been improving each quarter with the early results for Q4
showing the significant gains that I predicted. For this reason,
I expect the final numbers to be very close to my forecast.
Recently, SMI released its October 2015 numbers. Their
reported double-digit gain for the broadcast networks
confirmed the growing strength of those networks. They also
reported a very strong Scatter market,
What we have seen this year is buyer resistance in the

Upfront market leading the networks to reduce their sellout
levels in that market and make a bigger bet on the Scatter
market. The Fourth Quarter turnaround is evidence that this
strategy is working and that the Scatter market is robust.
For this reason, I am going to stay with my original forecast

for 2015.
Moving to 2016, the first positive sign is the brightening

economic picture. Gains in real disposable income coupled
with lower unemployment are yielding growth in consumer
spending.
10
In 2007, prior to the recession, advertising accounted for

24% of marketing spending. By 2009, that percentage had
declined to 21.8%. As the economic recovery has
progressed, advertising has not yet captured back much of
that lost share. This is despite the emergence of a whole
array of new digital advertising offerings since that time.
Looking to 2016, the big question is: given the growth in
consumer spending, will advertising begin to recover its lost
share of marketing dollars? If advertising were to return to its
2007 24% share, that would add $20 billion in ad spending.
11
It is clear that marketers are beginning to respond to the

improving economic environment by increasing their
marketing investments. It is also clear that we have recently
seen a significant turn-around in broadcast network
advertising spending .
When these trends are combined with the normal Olympics
and Presidential election year stimuli, 2016 stands to be a
very strong year for the broadcast networks.
12
My forecast for broadcast network advertising revenues in

2016 is a gain of 9.5% from 2015. Adjusting for the Olympics
spending, that translates to a 5% underlying gain in demand
for the broadcast networks.
With a strong Olympics, we might even see double-digit
growth, If that happens, that would be the first double-digit
increase for the broadcast networks since 2004.
I realize this is a very bullish forecast. I will now make my
case supporting this number.
13
If the economy is strong, leading to greater marketing

spending, leading to greater advertising spending; and, if the
advertisers are beginning to shift dollars back to broadcast
television advertising, then there is only one thing that could
reduce the expected gains for the networks, that is poor
ratings performance.
Lets take a look at the increasingly complex audience
measurement results for the networks.
14
The new television season is starting out in similar fashion to

the previous few years.
15
Looking first at the Live+7 day results to-date, we see the

rankings of the four networks basically unchanged from last
year.
UBS 43rd Annual Global Media and Communications

Conference
16
The pattern for the composite four-network audience is one

of a slight decline in overall reported viewing and low-single
digit declines in the currency demographics.
The question for the last couple of seasons has been:
How much of this decline is a true decline in the viewing of
the network programs and how much of the decline is a
function of the viewing outside of the current measurement
system parameters?
17
Switching to the C3 currency measure, we see a pattern

similar to the Live+7 results.
Based on these early results, I would expect the networks to
have to deal with some Audience Deficiency Units, however,
they will be manageable. I do not see these make-good
obligations significantly limiting any network from
participating fully in the strong Scatter market. Remember
that the networks sold less time in the Upfront market this
year, lowering the volume of units with audience guarantees.
18
When we look at the results by network, we see that NBC

and FOX are actually performing above last season, CBS is
closest to the four-network average, and ABC is showing
double digit declines.
19
The performance of the broadcast networks also has to be

contrasted to that of their major cable rivals. After seasons of
cable gains and broadcast losses, last season we saw a
turn-around in the performance of the broadcast networks
versus their Top 10 cable competitors. That pattern has held
this season with the composite Top 10 cable network decline
exceeding the composite fourbroadcast network decline.
20
Lets take a closer look at the cable competition.
21
The majority of the Top 10 cable networks are down from last
season in the key demos.
22
If you broaden the view to encompass all of the Nielsenmeasured networks, you see a two-to-one ratio of down
networks to up networks .
23
To-date, the broadcast networks have won back one full

share point from the Top 10 cable networks.
24
The important summer season did not see the arrival of any
new strong cable programs and many of the bigger summer
cable franchise program s experienced significant declines.
25
That pattern has continued into the fall.
26
As a result of the declining performance of their original

series, many of the big cable networks have become more
reliant on broadcast network program reruns to fill their
schedules.
So, on the broadcast versus cable front, the broadcast
networks are more than holding their own.
27
Outlook For The Broadcast Networks - David Poltrack - December 7,

2015
Another key performance metric for the broadcast networks

is their ability to replenish their schedules with successful
new programs each year.
28
Last fall was a particularly strong one for the networks in the
introduction of successful new series.
While this season has not quite matched that performance, it
has been a solid year, significantly better than 2013.
29
On a Total Viewer basis, the networks have already

introduced six solid new series.
30
If you focus just on the younger Adult 18-49 currency demo,

you can add THE MUPPETS to the list,
Viewers are definitely finding and adopting these new series,
however, we did see a change in how the discovery process
is unfolding for these freshmen entries this fall.
31
In our daily tracking with our Entertainment Panel during the

first two weeks of the season, last fall we saw an increase in
VOD and Streaming as sources of this viewing and a decline
in the traditional DVR time shifting. This year we saw the
reverse, a gain in DVR viewing and declines in both VOD
and Streaming viewing of the new series. More about this
subject later.
Lets look at the viewing pattern for one of these new series.
32
Here are the results for LIMITLESS, one of this seasons top
performers.
When you add up the DVR time-shifted viewing beyond the
day of the telecast, plus the VOD viewing and the online
Streaming of this program, the total audience adds up to
almost 16 million viewers, 62% more than the Live+Same
Day audience of just under ten million.
33
In terms of currency Adult 18-49 rating, the time shifted viewing

more than doubles the Live+Same Day rating, +126%, and all but
half a rating point of post-three day DVR playback is monetized.
34
The discovery process continues far beyond the first two

weeks of the season. This chart shows the number of new
viewers that have sampled LIMITLESS as the season has
progressed. During the most recent week for which data is
available, Week 7 of the season, Limitless still added over
two million new viewers. That was actually up from the
previous week.
The number of viewers that have now sampled LIMITLESS is
approaching forty million.
(Pause)
When you add in all of the time-shifted viewing, viewing that
is in and out of the scope of the currency measurement, for
broadcast network programs
35
you find that the average network program today is being

watched by more, not less, viewers than was the case ten
years ago.
The average multi-platform audience for the CBS primetime
series programs this season to-date is 13.8 million viewers,
versus just 13.3 million ten seasons ago.
Clearly, the networks are benefiting from new media
platforms that are making their programs more accessible to
audiences. However, it is important to look at these
audiences in the context of
36

2015
media consumption dynamics. Early this year, right before

the beginning of CES, we conducted a survey at our
TELEVISION CITY research center in Las Vegas in which we
asked respondents about the changes in their media
consumption habits since the 2009 digital conversion.
37
Not surprisingly, we found that most respondents believed

that their media consumption habits had changed A Great
Deal (55%) or Significantly (33%) since 2009.
However, less expected were their answers regarding in
which year they felt the biggest change took place.
38
The majority of the respondents reported that the biggest

change for them came in either 2010 or 2011, with the
number naming each consecutive year declining each year.
Could we have already seen the major impact of the
proliferation of new media consumption options?
39
This could be the case, considering that each of these

technologies has been available since 2010.
40
Through the first two months of the new season, we are not
seeing significant increases in the sources of time-shifted
viewing compared to those early, post-digital conversion
years.
41
Lets look at each source separately. First, the DVR.
42
DVR penetration growth has slowed to a crawl as it nears

fifty percent.
While DVR playback continues to grow in primetime, we
have seen a reversal in where that growth is centered. Up
until recently, the younger, Adult 18-49 audience accounted
for most of the growth. This season we are seeing an actual
decline in primetime DVR playback among these younger
viewers and a gain among Adults 50+. It would appear that
some of the younger time shifters have moved on to VOD
and Streaming as the older, Late Majority and Laggard
portions of the population are just adopting the DVR.
43
The DVR, with its ad skipping feature, has been the most
problematic of the new time-shifted viewing options for the
broadcast networks. If, in fact, younger viewers are moving
to VOD and Streaming, where their viewing will be fully
monetized, that is welcome news to these networks.
44
Remember that the single biggest viewing choice during

each hour of primetime is DVR playback.
45
It would appear that the balance between the Live viewing of

broadcast network programming and the time-shifted viewing
of that programming is reaching a point of equilibrium,
particularly for the younger audience.
A significant amount of this viewing is to programs outside of
the three day currency window. If that delayed viewing is
shifting more to VOD and Streaming, where it is fully
monetized, that is a win/win for the broadcast networks.
46
Despite the fact that DVR viewing is trending towards an

older audience, the overall profile of the DVR viewers is
younger and more upscale than that of the Live audience.
All the more reason for the networks to want to redirect this
time-shifted viewing to the fully monetized VOD and
Streaming platforms.
47
This point becomes even more critical when we see that the
length of time from the Live broadcast to the DVR playback
of that broadcast is lengthening.
This post-seven day time-shifting is currently not monetized
by the broadcast networks. If they can convert it to VOD or
Streaming, it would be of value.
48
Moving to VOD, we see an actual decline in VOD activity

versus last season.
This is somewhat surprising since just about every network
program is available on VOD and more viewers seemed to
be using this form of time-shifted viewing.
49
VOD has grown to represent a significant portion of the

overall C3 currency audience since Nielsen added it to that
measurement. For the average CBS series, it now accounts
for a 5.3% lift in the key Adult 18-49 audience. On the high
end, it represents almost ten percent additional audience for
the hot, new LIMITLESS series.
50
The VOD audience also is a valuable audience, younger and

more upscale than the Live audience.
In addition to more of these viewers now being monetized
within the currency windows, the stand-alone VOD post-3
day market is growing as the MVPD providers build their
Dynamic Ad Insertion (DAI) capabilities.
51
The third time-shifted viewing source is online streaming.

This form of viewing continues to show growth, albeit at a
slower pace than past years.
52
The source of this viewing is gradually moving from the

desktop and laptop to mobile devices and tablets.
53
Despite this relatively modest growth in overall streaming,

many of our panelists continue to report that they were using
this form of distribution; More versus those reporting
Less.

Conference
54
Once again, these streamers were significantly younger than

the Live viewers.
Viewers are well into the process of establishing their viewing
protocols.
55
The one area in which we are still seeing significant growth in

penetration is in the multimedia devices such as Apple TV
and Roku boxes. However, due to the small current base, the
79% gain in activity only amounts to only 0.6 points.
These new devices along with the growing number of Smart
TVs are bringing OTT video services to the television screen,
further supporting the argument that it is all television.
Over three quarters of Netflix subscribers watch this service
on Smart TVs.
56
How has this changing media consumption pattern affected

broadcast and cable economics?
57
One form of impact we see is the gradual decline in the

performance of a repeat episode relative to the original
episode of a program. This has led the broadcast networks to
add more original content to their schedules. At CBS, our
schedule was almost three quarters original programming
for the just concluded 2014-2015 broadcast year.
Cable originals represent just under on quarter of all cable
telecasts. While that percentage has been growing, the cable
networks are not really gaining any significant ground on the
broadcast networks in this metric.
58
At CBS, we expect to add to our percent of originals next

year.
You may note that our Percent Original number is lower than
the four-network average. Fortunately, our schedule contains
several series that get very solid repeat audiences.
Nevertheless, we are adding more original product to our
schedule every year.
59
As I have pointed out in the past, the original/repeat ratio is

important because viewers of original episodes of a program
are likely to be more engaged and to recall the advertising in
those programs. Because cable networks air more repeats,
the fall-off in advertising recall between an original episode
and repeat telecasts of that episode is likely to be greater in
cable.
60
I will conclude the short term section of my presentation with

a look at the broadcast network programming outside of
primetime.
61
The composite network television audience is up for Late

Night, Evening News and NFL and down slightly for the
Morning News and Daytime.
62
I would like to point out that CBS has accounted for much of
the gains in these non-prime dayparts.
To conclude this portion of the presentation, I do not
anticipate that any performance issues will significantly
impact the broadcast networks ability to take advantage of
the stronger demand now being seen in the Scatter market.
63
I will now move to the Longer Term Outlook where I will

address some of the fundamental opportunities and
challenges the broadcast networks will have to address in
the next few years.
64
Here are the five areas of interest I will be discussing in this

section of my presentation.
Lets begin with a hot topic of discussion this year, audience
measurement dynamics.
65
There is certainly a great deal of controversy on the audience

measurement front. This controversy centers around the
unprecedented reported declines in overall television
viewing. And, in particular, there is continuous discussion
around the Millennial generation and the future role of
television in the lives of this generation.
I will also provide you with the latest viewing reports coming
from our Media Demand Landscape segmentation.
66
This is now the second season that is beginning with lower

reported viewing levels.
The questions that have to be addressed are:
First, whether or not these lower viewing levels are real or
just the result of more viewing happening outside of the
framework of the current audience measurement system.
And, second, what are these declines telling us about the
future of the television medium and, in particular, the future of
the broadcast networks.
67
Season-to-date, the reported decline is minus 2% on a

Household basis and minus 5% with younger viewers.
68
These levels are below last years declines.

Addressing this issue at last years conference, I isolated four
factors contributing to the decline.
69
The first reason for the lower reported viewing levels is a change in
the measurement itself. Nielsen is now including Broadband Only
homes in the base sample. From last season to this season, these
homes have grown from 2.6% to 3.2% of the sample.
Broadband Only households are defined as homes having a TV or
monitor with a broadband connection capable of showing online video
and no TV or monitor connected to a traditional source.
Needless to say, Broadband Only homes watch very little traditional
television. Their inclusion in the sample, therefore, lowers the overall
HUTs and PUTs. However, the little that they do view is added to the
audiences of the programs viewed.
The concern about adding these homes at this time is whether the
increases shown in the number of these homes are a function of real
growth in this type of household or Nielsen improving in its ability in
recognizing and effectively recruiting these homes.
70
(Build 1)
Nielsen is reporting no change in the number of Broadcast
Only Homes with High Speed Internet. Last year, that
percentage had grown from 5.0% to 5.6%.
(Build 2)
On the other hand, Broadcast Only Homes without high
speed Internet did continue to show growth, up 0.6% points.
(Build 3)
This change is good for broadcasters, since, in these homes,
they are losing their cable competition and not getting any
new internet competition.
(Build 4)
Netflix continues to add homes, albeit at a slower pace. This
years gain of 6% points is just half of last years 12%
increase in subscriber homes.
(Double click to go to next slide)
71
As we saw last year, the shift of homes from non-Netflix to

Netflix status results in a lowering of the reported TV viewing
level for Netflix households and an increase in reported
viewing for non-Netflix households. This is because the
households making the change to Netflix households were
lighter television viewing households to begin with.
72
The major reason that Nielsen-reported viewing levels are

lower in Netflix households is because Nielsen does not
include Netflix viewing in its HUT/PUT computation. They
cannot currently measure Netflix viewing with accuracy.
When you put all of these factors together, you get a two
percent decline in reported HH viewing levels and a five
percent decline in viewing by Adults 18-49.
73
Overall, the decline is centered on the Netflix issue of more

and more homes having a significant amount of their
television viewing not included in the Nielsen count
because that viewing is to Netflix and other unmeasured OTT
services.
74
Bottom-line, we see a decline in Nielsen-reported viewing of

two percent versus three percent last year. The contribution
to this decline from each of the four causal factors is lower
than last year, with the lower reported viewing in Netflix
homes responsible for the majority of the decline.
75
But is this a real decline or is this the case of viewing not

being captured by the measurement system?
Once you accept the argument that the viewing of television
programs via streaming should be included in the definition
of viewing television, then it is possible that overall viewing is
not down, it may even be up.
76
You can see from this chart that viewers in Netflix homes do
not confine their streaming to Netflix alone. You can also see
that they are more likely to record more than less streaming
activity to all of the streaming options.
Some of this streaming of television programs by Netflix
households is to the broadcast network programs on the
broadcast network websites.
But that viewing does not constitute the total involvement of
the broadcast networks. These networks also license past
episodes of their programs to Netflix and other SVOD
players.
77
Last month, we asked our panelists that had a current Netflix

subscription which of the thirty-six current broadcast network
primetime series available on Netflix they had watched on
Netflix in the past thirty days.
Forty percent of the Netflix subscribers named at least one
program, with the average response including three or more
programs. That translates to 1.3 programs viewed per Netflix
subscriber.
Netflix is not only a valuable purchaser of programming from
the broadcast networks. It also allows viewers to enjoy
episodes of these programs from past seasons, building the
overall engagement of each programs fans with that
program.
78
When industry observers report about declining television

viewing, they almost always focus on the young Millennial
generation.
79
From 2010 to 2014, measured viewing by adults over 35 actually

grew slightly while viewing by Adults 18-34 declined ten percent.
Then, in the most recent television season we saw a slight decline
in measured viewing among older adults and an alarming 11%
decline among the Millennial viewers.
Some of this decline is explained by the already discussed addition
of broadband only homes to the Nielsen sample in 2013. These
homes now represent 3.2 percent of all Nielsen homes and they
are concentrated among the Millennial homes. As I have already
pointed out, these homes watch less traditional television than the
average household.
And note my emphasis on measured. Are these young viewers
actually watching less television programs or are they just
watching more of those programs outside of the measurement
80

2014
framework?

Conference
80
This data from comScore clearly shows Millennials may watch

differently, with a significant portion of their viewing coming from
devices other than the TV. In fact, numerous other devices are
pushing north of 30% of their viewing.
And, as weve noted, many of these devices are not yet fully
measured in the same ways traditional TV has been.
81
When we say unmeasured, we are referring to the currency

measurement upon which the advertising industry relies.
There are many new measurement initiatives attempting to
measure the missing pieces of the viewing pie. One new
service, Symphony Advanced Media, has just introduced a
new all-sources measurement solution.
Symphony has built a 15,000 person panel for whom they
are measuring all video exposure on all devices, in or out of
the home, through innovative smartphone technology.
Their latest results show 30% of the viewing to broadcast
programs by the Millennials was from sources outside of the
established currency parameters.
82
Here is the breakdown as to the source of this unmeasured

viewing. Most of that viewing and almost one quarter of all
viewing of television programs by Millennials is OTT.
83
Are the Millennials truly different from previous generations? Will they
continue to stay away from television viewing as they age?
I have had to deal with this question twice before in my career. First, it was
whether the anti-establishment Baby Boomers would embrace alternative
media. Next, it was whether the Gen Xers, the so-called MTV generation,
would continue to reject the broadcast networks programming.
Lets see what happened.
(Build#1)
This three year snapshot of viewing patterns for 1990, 2001 and 2006 shows
that as these generations aged, their amount of television viewing increased
as well. The percentages were essentially the same for all three years.
The current question is whether the Millennial generation will follow this
pattern or continue to deviate from the path of previous generations.
The leading edge of the Millennials has now moved from the 18-24 to the 2534 age segment. How has their viewing changed as they made this
transition?
84
(Build#2)
They clearly appear to be following the pattern of previous
generations.
(Build#3)
TV viewing increased slightly more than the historical pattern to
+44%, as Millennials moved past 25.
85
(Build#1)
When we focus on the viewing of the primetime broadcast programs,
(Build#2)
the Millennials are shifting their viewing towards these programs
(Build#3)
at a far faster rate than previous generations, albeit coming from a lower
base.
And remember this is measured viewing. A significant amount of their
viewing of broadcast network programming is through distribution
sources not yet included in this viewership total, distribution sources
that were not available to previous generations.
The fact is that, when it comes to popular television programs, young
adults have always enjoyed them as much as older adults. The
difference in viewing levels has always been life stage related. Younger
adults spend less time in the home where measured television viewing
takes place. This is particularly true of the Millennial generation.
86
One of the distinctive attributes of this generation is their

reluctance to leave the nest. Today only two-thirds of Adults
18-34 live independently The percent of them living with
their parents has grown from 24% to 26% in the last four
years.
87
Even though the number of unemployed Adults 18-34 has

declined from 12.4% in 2010 to 7.7% today. Confronted by
the high cost of housing and the burden of student loans,
even those with good jobs are reluctant to leave their
parents homes.
However, you can be sure that they spend as little actual
time in these homes as possible.
88
The recession and the continued burden of high

unemployment, high housing costs and student debt have
significantly reduced the economic value of the large
Millennial generation up until this point in time. However, they
are now beginning to enter a period during which their
economic impact will grow substantially. This is the life stage
in which people get married and start families. It is also the
life stage in which more of the Millennials will finally leave the
security of mom and dads house and find a home of their
own.
And when they do, many of them will, like the generations
before them, purchase the biggest screen television they can
afford, get a recliner, and more fully enjoy the benefits of
broadcast television and broadcast television advertising.
89
But, as I have argued in past presentations, at CBS we do

not believe that the traditional age/gender classifications are
definitive enough to define television program audiences or
the prospects for any major product or service. That is why
we developed our Media Demand Landscape segmentation
in 2011 and then updated it in 2014. Nielsen, our partner in
the development of this comprehensive profile of the U.S.
adult population according to a combination of media
consumption, lifestyle and life stage characteristics, has
integrated it into the framework of its other research products
including the National Peoplemeter Panel. This allows
anyone the opportunity to look at Nielsen ratings by each of
these segments. Lets see how things look this fall.
90
First, here are the seven segments. As you may recall, we

have selected Media Trendsetters, Program Passionates and
the younger Engaged Streamers as the three most
important segments.
91
Here are the results of the Fall 2015 fusion of the Nielsen
Peoplemeter results and the Media Landscape
segmentation.
The composite ratings for the four networks vary somewhat
by segment, but the pattern is similar to the overall viewing
pattern.
CBS, the overall number one network, is number one in 5 of
the 7 categories and a close second in the other two.
92
And here are the top ten non-sports programs. Note how
many of the same programs can be found on all of the lists.
Certainly, the members of the Digital Selectives and the TV
Traditionalists could not be more different in life stage,
lifestyle and demographic composition. Yet. six of the top 10
programs are common to both segments.
Despite what you may have heard, the top broadcast
programs still have universal appeal.
93
That is also true in the sports area.

Sure, NFL telecasts of the various networks deliver their
highest numbers with Sports fans. But these games also end
up on the top ten lists of all of the other segments with the
exception of the older, female-skewed TV Traditionalist
segment.
It is hard to find anyone who does not watch one or more of
these top entertainment and sports programs at least
occasionally.
94
We believe that our segmentation, available to all Nielsen

clients, provides a superior way to develop target markets
versus the traditional age/sex demo approach.
A marketer using this segmentation approach will be
provided not only with the size of each programs audience
but also with valuable media consumption and life style
profiles of each programs audience that offers valuable
insights regarding how to effectively communicate with that
audience.
But the measurement tools have now moved beyond
measuring the size and composition of a programs audience
to measuring the actual results of exposure to the ads within
that program in terms of sales generated for the advertised
brand.
95
To demonstrate how we are using this new data to help

advertisers get the optimum return on their advertising
dollars, I will address two major issues that the broadcast
networks face today.
First, many advertisers have been leaning the television
mix since the introduction of cable television. This practice
really accelerated in the years following the recession.
Second, some advertisers have been using television dollars
to fund their new digital advertising programs.
With these new results-based measurement tools, we are
able to prove to advertisers that both the leaning of their
television mix and the movement of dollars from television
to digital will lower the return on their advertising.
96
The practice of leaning the television mix refers to the

reduction or elimination of high-rated television programs in
an advertisers television advertising campaign in favor of
low-rated, low CPM programs. This approach puts efficiency
over reach as the primary goal in selecting a television plan.
This practice has been prevalent with CPG advertisers since
the turn of the century, but has increased most notably since
the recession. We have found that the advertisers
implementing this approach have attained significantly less
weekly reach with their advertising. The question is:
Does added efficiency make up for the lost reach and
generate superior ROI results?
With the new single-source measurement tools now available
to us, we can answer that question for the advertiser.
97
This type of ROI analysis is the cornerstone of our Campaign

Performance Audit product, a five-step analytical research
process to help our advertisers first design and execute their
TV campaigns, then measure the ROI of those campaigns.
Our use of this product over the past year has provided us
with insights into how the leaning of the mix approach has
undermined many CPG television campaigns, reducing both
the short-term ROI and the longer-term brand equity
provided by television advertising.
98
This slide shows how CPG advertisers have been leaning

their television mix since the turn of the century. In 2000,
40% of CPG national TV dollars went into Primetime.
That level declined to just 22% in 2013 and held at that level
for 2014.
99
To illustrate the misguided nature of the leaning of the mix in

television campaigns, I will offer two case histories.
The first of these case histories deals with two food brands
that are top competitors in a large, crowded segment of that
category.
100
Looking first at the 4th quarter of 2013, we see that both

brands were active in prime and non-prime dayparts.
Brand B had the clear advantage in terms of reach among
category buyers, 57.2% to 48.7%.
101
Now lets move to the 4th quarter of 2014. We see that both
brands have now abandoned broadcast prime and both
brands have also seen significant drops in their weekly
reach.
Lets look a little deeper at the comparative reach of the
campaigns.
102
Together the two brands only reached about one half of the
category buyers each week.
Almost three-quarters of those buyers saw ads from both
brands. Brand A had more buyers exposed to their ads
exclusively, 15% compared to 11% for Brand B.
Lets look at how each brand did with the buyers that saw
both ads and the buyers that just saw the one brands ads.
103
First, Brand A.
We see that those exposed to their ads exclusively
accounted for 7% more in revenue than those that were not
exposed to their ads.
104
The difference between the unexposed and those exposed to

both ads is +6.4%, slightly less than the lift for those exposed
exclusively.
So the good news is that exposure to the ads increases
buyer activity and exclusive exposure to the ads increases
that activity even more.
Not surprising, but comforting.
Now, lets look at the results for Brand B.
105
Here the lift for those exposed to Brand Bs ads exclusively

versus those not exposed to their ads at all is a more
impressive 12.2%.
106
Brand B also does better with those exposed to both ads,

+8.9%
Do you see the problem here?
You have two major competing brands with effective
advertising, generating incremental sales moving in a parallel
manner, that is reducing the number of potential buyers they
reach with their advertising each week.
What if one of them had not cut the broadcast primetime that
was working so effectively for them in 2013?
107
Looking at Brand A, we added three spots a week in

broadcast primetime to their schedule.
The weekly reach went up from 48.5 to 54.6, a +13%
increase.
108
Not only does this increase the weekly reach, it increases the
overall campaign reach and it accelerates the reach build-up
trajectory.
It also increases the all-important Effective Reach level from
17.5 to 19.5%
Bottom line, either of these brands could have gained a
significant competitive advantage by adding broadcast prime
to their schedule, broadcast prime that had delivered a
positive ROI for them in the past.
Instead, they both cut out broadcast prime and reduced what
was a positive ROI TV campaign.
Bottom line, both brands lost market share and had sales
declines.
109
Case History #2 deals with two major brands in a competitive

household goods category.
110
In this case history, Brand A was running just five Broadcast

Primetime spots per week compared to 72 cable prime spots
and over 300 very low rated non-prime cable spots.
111
That schedule reached 57.7% of category buyers. The

primetime spots contributed 10.5 of those 57.7 reach points.
112
Since there were so few broadcast primetime spots on

theses schedules, we combined broadcast prime with highrated cable prime defined as a program with a rating of 1.5 or
more. Seventeen of Brand As cable spots qualified.
Those exposed to the ad in the high-rated prime spots alone
bought 4.1% more of Brand A than those exposed to the
balance of the television or not exposed to the campaign.
113
That translated to $3.56 in incremental revenue for every

dollar spent.
114
Those exposed to just the CBS prime spots

accounted for 5.5% more spending than the
balance of consumers.
115
That added up to $4.72 in incremental revenue for every

dollar spent on these CBS spots.
116
Brand B, a major competitor to Brand A, also ran just five

spots a week in broadcast network prime and had 400 spots
in low-rated non-prime cable each week.
None of this brands cable prime spots qualified as highrated.
117
The Brand B schedule delivered far lower reach, just 38.8%.

In this case, the contribution of the limited prime spots was
14.6 reach points.
118
Those exposed to the prime time spots spent 6.3% more on

this brand.
119
Which translates to $1.36 for every dollar spent on high-rated

primetime television advertising.
120
Again, the return for the CBS programs was higher, +7.5%...
121
...
or $1.64 per dollar spent.
122
For both brands, the incremental sales provided by

the prime time spots were relatively evenly divided
between current buyers and new buyers of the
brands.
123
.I would also remind you that through the years research has
shown that the longer term, brand equity building value of
television advertising multiplies the full ROI provided by
television advertising.
This historical work was confirmed by a major study
conducted by CBS, Nielsen and Kelloggs and first presented
at the ARF Audience Measurement Conference in June of
2014.
That initial work was then expanded and presented again at
this years annual ARF Conference.
124
That research proved that
Advertising does have a long-term effect and it can be

measured using true single source methodology
The full value of advertising may be higher than

previously believed: Nielsen Catalina Solutions (NCS)
measured the range between 1.8 and 4.5 times the short
term ROI.
125
The other misguided practice that is undermining advertising

spending television is the diversion of dollars by advertisers
from television into their Digital and Mobile adventures.
126
To measure
the wisdom of this tactic, we had Nielsen do a complete
.
reach/frequency analysis of the actual television and digital schedules
for over 300 brands covering a range of budgets, digital/TV mixes and
product categories.
Since the goal stated by many advertisers in most cases is to extend
the reach of the television campaign, we first looked at the reach of the
television and digital portions separately.
As you can see, the digital campaigns reached far less HHs in the
target categories. Over the 300 campaigns, the maximum threshold for
the digital campaigns was around 40% compared to the maximum
threshold of the television campaigns of around 80%.
If I could have you remember just one slide from this presentation, this
would be the slide.
127
Next, we divided the 300 campaigns into terciles by

television weight and digital weight. We then looked at the
campaigns by various high/low combinations.
For those campaigns that had high levels of both television
and digital, we found that, on average, they reached 81% of
the target market with television alone providing 63 of those
reach points, Both digital and television exposure accounting
for another 14 reach points and digital alone accounting for
just 4 incremental reach points.
128
For those campaigns that had high levels of television and

low levels of digital, we found that, on average, they reached
73% of the target market with television alone providing 72 of
those reach points, both digital and television exposure
accounting for another 1 reach point and digital alone
provided no unique audience.
129
In the reverse situation, high digital/low television we found a

significantly lower average overall reach level of 47%.
Despite the relatively high digital levels, television alone
provided 34 of those reach points, Both digital and television
exposure accounted for another 5 reach points and digital
alone still only accounted for just 4 incremental reach points.
It is clear from studying this comprehensive sample of crossmedia campaigns that currently digital is being employed
primarily as a supplement to broad reach television
campaigns by most national advertisers and that its value in
extending the reach of those campaigns is marginal at best.
130
We selected one campaign as an example of a campaign that

was highly weighted towards digital. This campaign for a major
retailer had a digital base that reached 34.4% of the target. Yet,
even at that level, the television portion of the campaign delivered
a greater unique audience with a TV only contribution of 34.4
points versus the Digital only contribution of just 11.9 points.
The dominance of television over digital in generating reach
within a given target market as each is currently deployed by
national advertisers is confirmed by this comprehensive analysis
of actual cross-platform campaigns. Other research has also
demonstrated that digital campaigns work better when supported
by strong television campaigns.
And, as we saw in our case histories, major brands are not
running television campaigns that have fully exploited the reach
capability of the medium.
So the last thing an advertiser should be doing is using
television dollars to fund its digital efforts.
131
Since the introduction of cable networks in the 1970s, the

broadcast networks have coveted the dual revenue stream,
subscription and advertising, of these competitors. When the
broadcast networks were granted the right to seek
compensation in turn for their granting permission for MVPDs
to carry their signals in 1992, they, for the first time, had the
ability to generate indirect subscription revenues through
their negotiation on carriage with these MVPDs.
It took several years but now the broadcast networks,
through their affiliated stations, are getting per subscriber
retransmission consent fees form the MVPDs.
132
These revenues, which were essentially non-existent just ten

years ago, have risen to over six billion dollars today. SNL
Kagen estimates that this second revenue source will grow to
over ten billion dollars at the end of the decade.
133
Another source of new revenue for the broadcast networks is

syndication fees from Netflix and the other new SVOD
players. These revenues do not go directly to the networks,
they go to the studios and production companies that
produce the programs for the networks. However, those
studios are most likely to be owned by the broadcast
networks parent companies.
And, with the competition in the SVOD sector heating up, the
value of these franchise network series to the players can
only go up.
134
Now lets look at an important part of the digital market,

online social media
135
One demonstration of the fact that the American public is not

losing its love for television programs is seen in the latest
report from Keller Fay, the research company that regularly
tracks the word-of-mouth interaction of the population. In
October 2015, Keller Fay projected that TV programs
accounted for 647 million word-of-mouth conversational
mentions, up 20% from last year.
Television programming remains a primary driver of the
interaction between people. This results in exponential social
amplification, social amplification that can include discussion
of the advertising messages contained within those
programs.
136
And, despite the attention paid to the new internet-based

social media, most of this social amplification comes from
offline conversations.
137
Compared to conversations about brands in other categories,

the WOM discussion about television programs is much
more likely to be positive in sentiment. This is particularly
true for CBS programs.
138
In 2012, I first addressed the potential for interactive applications

involving the television and a smartphone or tablet at this conference.
We had tested numerous beta versions of this type of application
including the earliest version of the Shazam app you now see
featuring Coca-Cola.
While I was very enthusiastic about the promise of this interactivity for
advertisers at the time, it was clear that the products were not yet
technically ready and the public was not comfortable enough with the
smartphone itself to embrace these products.
This year we tested a new interactive application called mobii, which is
being developed by actv8me. It was immediately clear to me that
actv8me had successfully addressed many of the technical issues that
had been holding back this technology. More importantly, the
respondents were now so adept in the utilization of the full power of
their smartphones, that they were able to immediately utilize the Mobii
product.
They were also very enthusiastic about its potential.
139
Following that research, actv8me conducted a live test of

mobii with Univision in Houston and Austin.
The results were very encouraging.
140
This test covered the audiences of the Univision stations in

these two markets. Almost one-half, 47%, of these homes
had someone download the mobii app. User growth
continued through the test at a rate of 5% per day.
During the test, over three million offers were made available
through the app. That led to an extraordinary response. In all,
over 670,000 offers were saved to Apple Wallet and Google
Wallet, 22% of all of the offers.
141
The delivery of offers and the downloading of those offers

increased each week and extended beyond the test period.
142
The test also went viral generating over 160,000 shares on

Facebook and Twitter reaching far beyond the two trial cities.
143
As you would expect, the major adopters of the app were

younger. However, there was a significant level of use among
all age groups.
The interactive applications possible from the linkage of the
television and smartphone screens during periods of
simultaneous use are endless. This test demonstrates just
how powerful a marketing tool that linkage might be. The
Mobii team at actv8me has several national tests scheduled
for 2016.
144
That concludes my opus.

I hope that I have conveyed to you my enthusiasm for, and
belief in the future of the broadcast network business.
I realize that I am considered far from an objective analyst.
That is why this presentation is filled with statistics supported
by sound research as opposed to the hyperbole,
misinformation and unsubstantiated projections that
characterize much of the dialogue around media and
advertising today.
Yes, I am a CBS executive. But I am also an individual that
has devoted his career to the study of television and
advertising, an individual that has served as an Adjunct
Professor of Marketing at both the NYU and Columbia
Graduate Schools of Business and who is currently the
Chairman of both the Advertising Research Foundation and
the Executive Committee of the Marketing Science Institute.
145
I believe in the preeminence of television advertising as a means

for generating both short term results and long term brand equity
for advertised products and services because over the years I
have measured and documented its impact.
I see nothing on the horizon that will threaten that preeminence
and many new developments that will serve to further enhance
the position of television advertising.
We now, for the first time, have the analytical tools that will allow
the advertiser to harness the full power of the medium, something
less and less of them have been doing in the recent, postrecession years of cost efficiency as opposed to reach building
media planning.
I also see the continued expansion of the new second revenue
streams centered on providing direct consumer access to our
compelling content both in the U.S. and throughout the world.
146
147

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Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

UBS 43rd Annual Global Media and Communications Conference

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

Welcome to the annual Outlook For The Broadcast Networks

UBS 43rd Annual Global Media and Communications Conference

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

First, the required preamble.

UBS 43rd Annual Global Media and Communications Conference

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

Following the format of past years, I will divide my

UBS 43rd Annual Global Media and Communications Conference

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

The first theme of my presentation today is, advertisers,

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

Lets get started with the short term forecast.

UBS 43rd Annual Global Media and Communications Conference

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

At the time of last years conference, when all of the

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

What we have seen this year is buyer resistance in the

UBS 43rd Annual Global Media and Communications Conference

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

For this reason, I am going to stay with my original forecast

UBS 43rd Annual Global Media and Communications Conference

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

Moving to 2016, the first positive sign is the brightening

UBS 43rd Annual Global Media and Communications Conference

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

In 2007, prior to the recession, advertising accounted for

UBS 43rd Annual Global Media and Communications Conference

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

It is clear that marketers are beginning to respond to the

UBS 43rd Annual Global Media and Communications Conference

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

My forecast for broadcast network advertising revenues in

UBS 43rd Annual Global Media and Communications Conference

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

If the economy is strong, leading to greater marketing

UBS 43rd Annual Global Media and Communications Conference

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

The new television season is starting out in similar fashion to

UBS 43rd Annual Global Media and Communications Conference

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

Looking first at the Live+7 day results to-date, we see the

UBS 43rd Annual Global Media and Communications

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

The pattern for the composite four-network audience is one

UBS 43rd Annual Global Media and Communications Conference

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

Switching to the C3 currency measure, we see a pattern

UBS 43rd Annual Global Media and Communications Conference

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

When we look at the results by network, we see that NBC

UBS 43rd Annual Global Media and Communications Conference

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

The performance of the broadcast networks also has to be

UBS 43rd Annual Global Media and Communications Conference

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

Lets take a closer look at the cable competition.

UBS 43rd Annual Global Media and Communications Conference

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015

UBS 43rd Annual Global Media and Communications Conference

Outlook For The Broadcast Networks - David Poltrack - December 7, 2015