bc - 2012 upfront preview - may 2012
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EQUITY RESEARCH 30 April 20
U.S. MEDIA
TV Upfronts: What Investors Should Expect
As the annual TV upfront ad-selling process gets underway, the tone of the US TV
advertising market remains fairly upbeat. We think this could be another strong
upfront, although it may not be as robust as last years. We estimate 2012-2013
broadcast TV upfront revenue will increase 4% y/y, and we think cable will fare slightly
better with dollar volume up 6% y/y.
We expect another strong upfrontCBS continues to have the best ratings story of
the broadcasters, which should support best-in-class pricing. We project CBS will lock
in CPM increases of +10%, ABC +8%, Fox +9%, and NBC +7%. We believe this year the
broadcasters will generally sell slightly less inventory in the upfront compared to the
historically high levels of sell-out from last year.
although it may be difficult to top last years upfront. This time last year, the
economic outlook was generally optimistic and broadcast scatter pricing was pacing an
impressive ~25-40% above 2010-2011 upfront levels. While sentiment has improved
year-to-date, we believe the set-up for this years upfront is not quite as favorable as
last years; macro uncertainty and European contagion risks remain, which could
modestly limit upside.
Auto advertising driving ad improvement. The seasonally adjusted annual rate
(SAAR) for light vehicle sales in the US has sequentially increased for eight straight
months from June of last year through February of this year; March SAAR of 14.4M,
while slightly down sequentially from February, was still a solid result. We believe thesedatapoints bode well for auto advertising since it is the largest category and represents
an estimated 20% of all network and cable TV advertising.
Digital newfronts involving online advertisers in the upfront conversation. For the
first time ever, several digital media firms including AOL, Google, Hulu, Microsoft, and
Yahoo! will be having upfront presentations, in hopes of accelerating the shift of ad
budgets to the internet. Some digital media firms are emulating the TV sales process by
selling gross ratings points and guaranteeing impressions for online ads, much in the
same way that is currently done with TV.
Tweaking up US ad forecast, driven by higher internet estimates.Owing largely to
the improved / not as bad as once thought macro outlook, we are taking the
opportunity to tweak up our 2012 US ad forecast to +4.6% y/y (from +4.0%). We have
raised our estimates the most for internet advertising and have also tweaked up our
political advertising estimates.
Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companies coveredin its research reports. As a result, investors should be aware that the firm may have a conflict of interestthat could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision.
PLEASE SEE ANALYST(S) CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 14.
INDUSTRY UPDATE
U.S. Media
2-NEUTRALUnchanged
U.S. Media
Anthony DiClemente, CFA
1.212.526.1341
anthony.diclemente@barcap.com
BCI, New York
Bo Tang
1.212.526.9297
bo.tang@barcap.com
BCI, New York
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2012-2013 Upfront Preview
The upfront process has already begun for some networksincluding those for The Disney
Channel, Nickelodeon, FX, Discovery, Scripps, and MTVwith the broadcasters upfront
presentations to take place during the week of May 14. While the annual TV upfront ad-
selling season should be viewed as only one indicator of the health of the broaderadvertising market, it is important to the networks as it allows them to book a significant
portion (75-80% for the broadcast networks, 50-60% for the cable networks) of their
inventory in advance.
We think that for the networks best positioned heading into the upfront, double-digit
CPM increases could be within reach. This is consistent with comments from CBS CEO Les
Moonves at a competitor conference in late February in which he predicted that CBS is
going to get double-digit increases in the upfront. On the cable side, Fox Cable ad sales
president Lou LaTorre predicted at the FX upfront in late March that the high end of the
cable market would secure CPM increases of 11-12%.1
Based on season-to-date ratings and current pricing in the scatter market, we estimate
upfront prime-time sales to increase 4.3% y/y to $9.49 billion for the big 4
broadcasters (ABC, CBS, FOX, and NBC) and 6.3% y/y to $9.88 billon for the cable TV
market.
Figure 1: 2012-2013 Upfront Calendar
February & March April May
Date Network City Date Network City Date Network City
Mar. 7 BBC America LA Apr. 3 Scripps Networks DAL May 1 NBCU Digital NewFront NYC
Mar. 8 Fox News Channel LA Apr. 4 Bravo NYC May 2 YouTube Brandcast NYC
Mar. 8 The Hub CHI Apr. 5 Discovery NYC May 3 Scripps Networks LA
Mar. 13 Disney Channel NYC Apr. 12 BET Networks LA May 9 A&E Networks NYC
Mar. 14 Nickelodeon NYC Apr. 16 BET Networks CHI May 14 NBC NYC
Mar. 15 NBC News/MSNBC NYC Apr. 18 BET Networks NYC May 14 Fox NYC
Mar. 15 The Hub LA Apr. 18 Scripps Networks CHI May 15 ESPN NYC
Mar. 19 ABC Family NYC Apr. 18 Style Network NYC May 15 Univision NYC
Mar. 20 Scripps Network BOS Apr. 19 Discovery LA May 15 ABC NYC
Mar. 20 IFC NYC Apr. 19 Hulu NewFront NYC May 15 Discovery U.S. Hispanic NYC
Mar. 21 Fox News Channel CHI Apr. 19 Bravo DAL May 15 Telemundo NYC
Mar. 22 AMC NYC Apr. 19 BBC America NYC May 16 Turner Broadcasting NYC
Mar. 22 Discovery CHI Apr. 19 Nickelodeon CHI May 16 NCM Media Networks NYC
Mar. 27 Scripps Network DET Apr. 23 Scripps Networks NYC May 16 Fox Hispanic Media NYC
Mar. 27 Nickelodeon LA Apr. 24 MSFT Ad Digital NYC May 16 CBS NYC
Mar. 28 Cartoon Network NYC Apr. 24 AOL Digital NewFront NYC May 17 The CW NYC
Mar. 29 Scripps Network MIN Apr. 24 Syfy NYC May 17 USA Network NYC
Mar. 29 BBC America CHI Apr. 25 Yahoo Digital NewFront NYC
Mar. 29 FX NYC Apr. 25 Bravo CHIApr. 25 Oxygen NYC
Apr. 26 DIS Interactive NewFront NYC
Apr. 26 MTV NYC
Apr. 30 Scripps Networks ATL
Apr. 30 E! NYC Source: CAB, Digital Content NewsFronts, MediaBizBloggers.
1Upfront and Center, Ad Week, 4/16/12.
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We remind media investors that when looking at upfront statistics and trends, CPM
pricing is a more relevant indicator of projected advertising performance than sales /
dollar volume. One reason is that sell-out ratios obscure the Y/Y comparisons. Networks
have full control over inventory levels and can adjust how much inventory to sell in the
upfront market vs. hold back for the scatter market. Another reason is that scatter pricing
typically paces above upfront pricing, since advertisers must pay a premium for the
flexibility to purchase ad inventory later on in the scatter market, rather than upfront (the
only time in recent years when scatter paced below upfront pricing was in 2008, reflecting
concerns around the imminent downturn). Lastly, upfront contracts are cancellable.
Portions of the advertising contracts signed during the upfront season can be cancelled in
the 1st3rd calendar quarters. To be fair though, even though these cancellations dont
carry any formal penalty, the networks can disincentivize advertisers from exercising their
options by giving the ones who do cancel less favorable programming spots and charge
them more in the scatter market.
Broadcast TV upfront: CBS could be leading the pack again
We estimate 2012-2013 upfront dollar volume for the Big 4 (ABC, CBS, FOX, and NBC) toincrease to $9.49 billion, 4.3% above last years all-time high of $9.10 billion.
Figure 2: We estimate 2012-2013 upfront sales for the Big 4 (ABC, CBS, FOX, and NBC) to increase 4.3% Y/Y
Broadcast Network Prime-time Upfront Sales
ABC CBS FOX NBC Total "Big 4"
$in Billions Y/Y % $in Billions Y/Y % $in Billions Y/Y % $in Billions Y/Y % $in Billions Y/Y %
1992-93 $0.97 2.1% $1.10 10.0% $0.54 45.9% $1.05 (4.5%) 3.66 7.0%
1993-94 1.02 5.2% 1.04 (5.5%) 0.55 1.9% 0.92 (12.4%) 3.53 (3.6%)
1994-95 1.34 31.4% 1.21 16.3% 0.73 32.7% 1.21 31.5% 4.49 27.2%
1995-96 1.60 19.4% 1.30 7.4% 1.00 37.0% 1.70 40.5% 5.60 24.7%
1996-97 1.59 (0.6%) 1.18 (9.2%) 0.96 (4.0%) 2.01 18.2% 5.74 2.5%
1997-98 1.45 (8.8%) 1.20 1.7% 1.10 14.6% 2.15 7.0% 5.90 2.8%
1998-99 1.40 (3.4%) 1.15 (4.2%) 1.15 4.5% 2.10 (2.3%) 5.80 (1.7%)1999-00 1.70 21.4% 1.40 21.7% 1.30 13.0% 2.20 4.8% 6.60 13.8%
2000-01 2.45 44.1% 1.62 15.7% 1.30 0.0% 2.35 6.8% 7.72 17.0%
2001-02 1.60 (34.7%) 1.40 (13.6%) 1.30 0.0% 1.90 (19.1%) 6.20 (19.7%)
2002-03 1.50 (6.1%) 1.95 39.4% 1.30 (0.1%) 2.74 44.3% 7.50 20.9%
2003-04 1.70 13.0% 2.20 12.5% 1.60 23.5% 3.00 9.3% 8.49 13.3%
2004-05 1.60 (6.0%) 2.39 8.8% 1.60 0.1% 2.75 (8.2%) 8.34 (1.8%)
2005-06 2.10 31.2% 2.46 3.1% 1.59 (0.8%) 1.94 (29.6%) 8.09 (3.0%)
2006-07 2.21 5.5% 2.39 (3.2%) 1.62 1.7% 1.41 (26.9%) 7.63 (5.7%)
2007-08 2.36 6.8% 2.45 2.7% 1.81 11.8% 1.75 23.9% 8.37 9.8%
2008-09 2.50 5.8% 2.50 2.0% 1.95 7.8% 1.85 5.5% 8.80 5.1%
2009-10 1.90 (23.9%) 1.91 (23.6%) 1.61 (17.5%) 1.46 (20.9%) 6.88 (21.8%)
2010-11 2.40 26.2% 2.45 28.3% 1.98 23.1% 1.60 9.4% 8.43 22.5%
2011-12 2.50 4.2% 2.65 8.2% 2.20 11.1% 1.75 9.4% 9.10 7.9%
2012-13 $2.65 5.8% $2.92 10.0% $2.15 (2.1%) $1.78 1.4% $9.49 4.3%
Source: Media Week, SNL Kagan, Barclays Research.
Scatter pricing remains fairly resilient YTD
Upfront prices usually key off of scatter prices, and our upfront pricing assumptions reflect
management commentary on fairly robust 1Q scatter pacings (Figure 3). According to
comments from the February earnings season, scatter was pacing up in the mid-teens
(above upfront levels), which is particularly notable given the strong upfront from last year.
This year, we project CBS to lock in pricing increases of +10% Y/Y, ABC +8% Y/Y, FOX +9%
Y/Y, and NBC +7% (Figure 4).
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Figure 3: Scatter market still relatively strong
Scatter Pricing (Above Upfront Levels)
1Q11 QTD Pacings 1Q12 QTD Pacings
ABC Up 30% Up "mid-teens"
CBS Up 40% Up "mid-teens"
Fox Up 25-40% At "a premium"NBC NA NA
Source: Company transcripts.
Figure 4: We project high single digit CPM increases in this years upfront
CPM Pricing increases
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13EABC 9.5% 9.0% 0.0% 8.3% 10.5% 8.0%
CBS 8.5% 8.0% (2.0%) 9.0% 13.5% 10.0%
FOX 8.0% 9.0% (2.0%) 8.3% 10.5% 9.0%NBC 5.0% 5.0% (7.0%) 6.5% 9.0% 7.0%
Weighted Average 7.9% 7.9% (2.5%) 8.2% 11.1% 8.7%Source: Ad Week, SNL Kagan, Barclays Research.
Upfront sell-out levels could be modestly below last years levels
We estimate that the Big 4 broadcasters (ABC, CBS, FOX, and NBC) will sell slightly less
inventory in this years upfront compared to the historically high sell-out levels from last
years upfront (Figure 5). We think that a network like CBS that is well-positioned going into
upfront negotiations will be able to maximize sell-out while maintaining substantial pricing
increases. On the other hand, a network like NBC, which has more holes in its schedule and
weaker ratings momentum, may seek to try and hold back more inventory in the hopes of
getting better rates later on in the scatter market. On the whole, we think sell-out is likely
lower this year as some advertisers may want to maintain some flexibility in case of
macro choppiness, as we saw in the second half of 2011.
Figure 5: We estimate sell-out levels to be down slightly versus last year
Primetime Upfront Inventory Sold2007-08 2008-09 2009-10 2010-11 2011-12 2012-13E
ABC 80.0% 80.0% 70.0% 75.0% 76.0% 76.0%
CBS 80.0% 78.0% 65.0% 78.0% 80.0% 80.0%FOX 74.0% 75.0% 65.0% 80.0% 80.0% 77.0%
NBC 77.5% 80.0% 70.0% 80.0% 80.0% 75.0%
Weighted Average 78.2% 78.3% 67.4% 78.0% 78.9% 77.3% Source: Ad Week, SNL Kagan, Barclays Research.
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Broadcast upfront analysis by network: CBS should lead in dollar volume
We present our outlook for the 2012-2013 upfront by broadcast network below in Figure 6.
We have detailed our calculations in the tables below, but there are two key assumptions
that we wanted to specifically call out. The first is that as a proxy for estimating the
potential ratings shortfalls at a given network, we used the season-to-date change in TV
ratings for total U.S. households. Since the broadcast networks skew differently towardsvarious demos (CBS, for example, appeals towards older audiences, while Fox skews
towards younger audiences), we used total U.S. households as our target demo because it
encompassed the broadest reach. Another key assumption is that the broadcast networks
guarantee advertisers 2% ratings growth for spots sold in the 2012-2013 upfront. TV
networks typically guarantee a certain percentage increase in impressions to advertisers,
and we believe 2% ratings growth to be a reasonable assumption for the broadcasters.
While broadcast viewership growth has been tepid over the years, we believe the
broadcasters remain optimistic about their ratings trajectory and think this ratings erosion
will flatten out and potentially reverse. Also, ratings guarantees differ by network based on
various factors including perceived strength of programming line-up, competitiveness of
schedule on a given night, etc.
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Figure 6: We estimate CPM pricing increases of ~9% y/y and sell-out levels of ~77% for the Big 4
2012-2013 Upfront Sales By Broadcast Network
ABC Description
Total upfront sales from '11-'12 season ($B) $2.50 Per SNL Kagan, Ad Week
% of inventory sold in '11-'12 upfront 76% Per SNL Kagan, Ad Week
Upfront sales if 100% of inventory were sold ($B) $3.29 $2.50B / 76%
% change in ratings (4.2%) Y/Y change in Total HH season-to-date ratingsSales erosion from ratings shortfalls ($0.14) $3.29B x (1 4.2%) $3.29B
% growth in impressions from ratings guarantees 2% Barclays Research estimate
Sales uplift from increased impressions $0.07 $3.29B x (1 + 2.0%) $3.29B
% change in CPMs (cost per thousand) 8% Barclays Research estimate
Sales uplift from higher CPMs $0.26 $3.29B x (1 + 8.0%) $3.29B
Total upfront sales assuming 100% of inventory sold ($B) $3.48 $3.29B $0.14B + $0.07B + $0.26B
% of inventory sold in '12-'13 season 76% Barclays Research estimate
Total upfront sales based on 76% of inventory sold: $2.65 $3.48B x 76%
Y/Y % change in upfront sales 5.8% Y/Y change in upfront sales
CBS Description
Total upfront sales from '11-'12 season ($B) $2.65 Per SNL Kagan, Ad Week
% of inventory sold in '11-'12 upfront 80% Per SNL Kagan, Ad Week
Upfront sales if 100% of inventory were sold ($B) $3.31 $2.65B / 80%
% change in ratings (2.0%) Y/Y change in Total HH season-to-date ratingsSales erosion from ratings shortfalls ($0.07) $3.31B x (1 2.0%) $3.31B
% growth in impressions from ratings guarantees 2% Barclays Research estimate
Sales uplift from increased impressions $0.07 $3.31B x (1 + 2.0%) $3.31B
% change in CPMs (cost per thousand) 10% Barclays Research estimate
Sales uplift from higher CPMs $0.33 $3.31B x (1 + 10.0%) $3.31B
Total upfront sales assuming 100% of inventory sold ($B) $3.64 $3.31B $0.07B + $0.07B + $0.33B
% of inventory sold in '12-'13 season 80% Barclays Research estimate
Total upfront sales based on 80% of inventory sold: $2.92 $3.64B x 80%
Y/Y % change in upfront sales 10.0% Y/Y change in upfront sales
FOX Description
Total upfront sales from '11-'12 season ($B) $2.20 Per SNL Kagan, Ad Week
% of inventory sold in '11-'12 upfront 80% Per SNL Kagan, Ad Week
Upfront sales if 100% of inventory were sold ($B) $2.75 $2.20B / 80%
% change in ratings (9.3%) Y/Y change in Total HH season-to-date ratingsSales erosion from ratings shortfalls ($0.26) $2.75B x (1 9.3%) $2.75B
% growth in impressions from ratings guarantees 2% Barclays Research estimate
Sales uplift from increased impressions $0.06 $2.75B x (1 + 2.0%) $2.75B
% change in CPMs (cost per thousand) 9% Barclays Research estimate
Sales uplift from higher CPMs $0.25 $2.75B x (1 + 9.0%) $2.75B
Total upfront sales assuming 100% of inventory sold ($B) $2.80 $2.75B $0.26B + $0.06B + $0.25B
% of inventory sold in '12-'13 season 77% Barclays Research estimate
Total upfront sales based on 77% of inventory sold: $2.15 $2.80B x 77%
Y/Y % change in upfront sales (2.1%) Y/Y change in upfront sales
NBC Description
Total upfront sales from '11-'12 season ($B) $1.75 Per SNL Kagan, Ad Week
% of inventory sold in '11-'12 upfront 80% Per SNL Kagan, Ad Week
Upfront sales if 100% of inventory were sold ($B) $2.19 $1.75B / 80%
% change in ratings (0.8%) Y/Y change in Total HH season-to-date ratings
Sales erosion from ratings shortfalls ($0.02) $2.19B x (1 0.8%) $2.19B
% growth in impressions from ratings guarantees 2% Barclays Research estimate
Sales uplift from increased impressions $0.04 $2.19B x (1 + 2.0%) $2.19B
% change in CPMs (cost per thousand) 7% Barclays Research estimate
Sales uplift from higher CPMs $0.15 $2.19B x (1 + 7.0%) $2.19B
Total upfront sales assuming 100% of inventory sold ($B) $2.37 $2.19B $0.02B + $0.04B + $0.15B
% of inventory sold in '12-'13 season 75% Barclays Research estimate
Total upfront sales based on 75% of inventory sold: $1.78 $2.37B x 75%
Y/Y % change in upfront sales 1.4% Y/Y change in upfront sales Source: Media Week, SNL Kagan, Nielsen, Barclays Research.
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At the CBS network, we are modeling 10% y/y increases in CPM pricing, which is consistent
with CEO Les Moonves comments at a competitor conference in late February about
getting double digit increases in the upfront. While CBS ratings for total households in
the season-to-date are currently down 2.0%, they are the best-performing of the four major
broadcasters after adjusting for NBCs airing of the Super Bowl. CBS has very few holes in
its schedule. It continues to see strong ratings for its sitcoms including The Big Bang
Theory, How I Met Your Mother, Mike & Molly, and its newest hit Two Broke Girls.
Two and a Half Men has also held up remarkably well post-Sheen. The networks
dramasThe Good Wife, NCIS, and Criminal Mindshave continued to generate
solid ratings this season. In light of our expectation for 10% pricing increases given CBS
relative ratings outperformance (which gives us confidence in its pricing power), we think
that CBS will seek to maximize its sell-out levels. We estimate 80% sell-out this year, the
same level as last year.
At Disneys ABC network, we are modeling 8% Y/Y increases in CPM pricing. Season-to-
date, ABC ratings have been down 4.2%. Although some of the networks franchises are
aging (Greys Anatomy, Desperate Housewives), ABC continues to find success with
Dancing with the Stars andModern Family. Happy Endings has also become a breakout hit
this season, and Once Upon a Timehas quietly kept up in the ratings race. We assume that
ABC sells 76% of its inventory this year, same as last year.
At News Corps Fox network, we are modeling 9% Y/Y increases in CPM pricing. We think
Fox goes into the upfront slightly less well-positioned than in prior years. The network hasbeen #1 in 18-49 for seven consecutive seasons, but its ability to capture the 18-49 ratings
crown this season could be in question. This is partly due to ratings softness from
American Idol, which we estimate contributes roughly one-third of Foxs gross ratings
points in an average week. However, many of Foxs other shows have performed well,
including its newest hit sitcom New Girl. Also, Fox is comping against the 2011 Super Bowl
this year, which somewhat obscures ratings trends. We estimate that the network will hold
back slightly more inventory in the upfront and sell 77%, below the 80% it sold last year.
Figure 7: 11-12 Season-to-Date Live Ratings Total HH Figure 8: 10-11 Season-to-Date Live Ratings Total HH
(4.2%)(2.0%)
(9.3%)
(0.8%)
(25.0%)
(20.0%)
(15.0%)
(10.0%)
(5.0%)
0.0%
5.0%
ABC CBS FOX NBC
(6.0%) (5.7%)
(8.6%)
(19.0%)
(25.0%)
(20.0%)
(15.0%)
(10.0%)
(5.0%)
0.0%
5.0%
10.0%
ABC CBS FOX NBC
Source: Nielsen Media Research.Note: Season-to-date defined as 9/25/11 to 4/22/12. Source: Nielsen Media Research.Note: Season-to-date defined as 9/26/10 to 4/24/11.
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At Comcasts NBC network, we are modeling 8% Y/Y increases in CPM pricing. NBC ratings
in the season-to-date are down -1.0%, the lowest decline of the major broadcasters,
although this is helped by NBCs carriage of the Super Bowl this past February. We think
NBC will try to hold back more of its inventory for the scatter market in the hopes that
ratings trends will improve. We estimate NBC to sell 75% of its ads in the upfront as
opposed to 80% last year.
Cable TV Upfront: Could be up in the mid-to-high single digits
A decade ago, the 1992-1993 cable TV upfront was only $0.81 billion in size, representing
18% of total upfront dollars. Last year, total cable TV upfront revenues surpassed that of
broadcast for the first time in history, with cable upfront dollar volume representing 51% of
total upfront commitments. For this year, we estimate cable to retain its 51% share of the
upfront, equating to a total upfront haul of $9.88 billion, or 6.3% y/y growth.
As cable penetration approaches that of broadcast, cables upfront dollar volume has
caught up with that of broadcast as well. While cable networks typically sell less inventory
in the upfront than broadcast networks do (50-60% for cable vs. 70-80% for broadcast),
the cable TV upfront has nevertheless become as important as the broadcast TV upfront.
Figure 9: We estimate Cable TV to maintain its share of upfront dollars committed
Cable Network Upfront Sales
Cable Cable as % of
$in Billions Y/Y % Total Upfront
1992-93 $0.81 8.0% 18%
1993-94 0.90 11.1% 20%
1994-95 1.11 23.3% 20%
1995-96 1.67 50.5% 23%
1996-97 1.97 18.0% 26%
1997-98 2.29 16.2% 28%
1998-99 2.72 18.8% 32%
1999-00 3.60 32.4% 35%2000-01 4.75 31.9% 38%
2001-02 4.03 (15.2%) 39%
2002-03 4.60 14.1% 38%
2003-04 5.35 16.3% 39%
2004-05 6.23 16.4% 43%
2005-06 6.54 5.0% 45%
2006-07 6.60 0.9% 46%
2007-08 7.00 6.1% 46%
2008-09 7.60 8.6% 46%
2009-10 6.73 (11.4%) 49%
2010-11 8.00 18.9% 49%
2011-12 9.29 16.1% 51%
2012-13 $9.88 6.3% 51%
Source: SNL Kagan, Barclays Research.
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Auto advertising driving ad improvement
The seasonally adjusted annual rate (SAAR) for light vehicle sales in the US has sequentially
increased for eight straight months from June of last year through February of this year;
March SAAR of 14.4M, while slightly down sequentially from February, was still a solid
result. Barclays Autos & Auto Parts analyst Brian Johnson recently raised his US SAARestimate to 14.4M for the full-year, which implies approximately 13% y/y growth (for more
info, please see his 3/2/12 note, February sales continues surge; raising 2012 SAAR
forecast to 14.4mn on strong fundamentals). Bigger picture, SAAR still remains below the
peak levels of 16M-17M reached in 2005-2007. We believe these data points bode well for
auto advertising since it is the largest category and represents an estimated 20% of all
network and cable TV advertising.
Figure 10: SAAR improved sequentially for eight straight months from June 2011 February 2012
13.0 13.1
11.7 11.512.2 12.2
13.1 13.2 13.6 13.6 14.2
15.1
14.4
6.0
8.0
10.0
12.0
14.0
16.0
Mar-
11
Apr-1
1
May
-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-1
1
Nov-1
1
Dec-11
Jan-12
Feb-
12
Mar-
12
US Light Vehicle SAAR
Source: Barclays Research.Note: SAAR in millions.
Digital newfronts joining the upfront conversation
For the first time ever, several digital media firms including AOL, Google, Hulu, Microsoft,
and Yahoo! will be having upfront presentations of their owncalled newfrontsin
hopes of accelerating the shift of ad budgets to the internet. (We attended Hulus newfront
a couple of weeks ago; please see our 4/19/12 note Hulu Upfront Highlights Increasing
Focus on Originals for more info.)
Some digital media firms are emulating the TV sales process by selling gross ratings points
and guaranteeing impressions for online ads, much in the same way that is currently donewith TV. While its unclear how much upfront commitments these digital newfronts will
generate, we think they are emblematic of digital media playing a larger role in advertising
budgeting and planning.
Some advertisers have already indicated their plans to increase advertising spending on
online video. According to a recent Wall Street Journal article2, GM plans to increase its
digital ad spend by 3-5% this year, using its TV and print ad budgets to fund the new digital
expenditures, which will be mostly in online video. Samsung Mobile plans to take 30% of its
2Online Video Turns Up Heat, Wall Street Journal, 4/23/12.
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upfront money and put it into online video. If nothing else, some advertisers believe the
added option of buying online ads gives them added leverage in its negotiations with the TV
networks.
Tweaking up US ad forecast owing largely to higher internet
estimatesWe are tweaking up our U.S. advertising forecast to +4.6% Y/Y (from +4.0% Y/Y) in
2012E and to +2.3% Y/Y (from +1.6% Y/Y) in 2013E. Our estimates are driven primarily
by higher internet estimates (where we are raising our estimates by ~500 bps in 2012 and
2013) and a slightly higher political advertising forecast, offset by lower traditional/print
media estimates.
Within internet, we have raised our online ad forecast following the release of the Interactive
Advertising Bureaus 2011 results. The reported results came in above our expectations,
with paid search and mobile driving much of the upside. The desktop-based search market
continues to see solid volume growth, even in light of the rapid proliferation of mobile
devices and mobile search, as we believe the mobile market is in large part incremental to
PC-based search. This is also the first time that the IAB has explicitly disclosed mobile
online advertising revenue, which is recording impressive growth as advertisers continue to
seek ways to reach audiences on mobile devices. While there have been some concerns
around the ability to achieve similar CPCs and CPMs on mobile as on PC, the volume growth
in mobile has served to offset softness in pricing, and we believe we are still in the very early
innings here. While the display market recorded weaker overall growth than we had
projected in 2011, we continue to forecast robust growth in certain formats such as Digital
Video, which we believe is becoming an increasingly attractive brand advertising platform
for large advertisers.
Within political, we had previously written about how this year would be a record election
season for political advertising as two judicial decisions in 2010 essentially lifted restrictions
on corporate spending for federal candidate elections, giving way to the rise of super PACs
(for more info, please see our 1/31/12 note, Does Political Advertising Drive Media
Stocks?). But the impact of these super PACs has been larger than we expected. Not only
do these court decisions allow the PACs to raise and spend unlimited amounts of
contributions, but the PACs must also pay full-fare / market rates for the ads it purchases,
another positive for political advertisers. Its important to point out that the candidates can
purchase political ad spots at discounted rates (called the lowest available rate), but if the
money comes from a PAC, then it must pay the market rate. As a result of all of these
factors, we are tweaking up our 2012 political advertising estimate.
Our estimate changes are summarized in Figure 11. Feel free to email us for the detailed
model.
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Figure 11: Barclays Advertising Forecast, Current vs. Prior (2012E-2013E)
Current 2012E Prior 2012E (in bps)National Broadcast TV (including Olympics) (1) 9.2% 9.1% +0 bps
Local Broadcast TV (including political) 15.4% 15.3% +10 bps
National Cable TV 7.5% 7.5% +0 bps
Internet (local & national) 18.3% 13.6% +470 bps
Outdoor 2.9% 2.9% +0 bpsRadio 0.4% 0.4% +0 bps
Magazines (1.7%) (0.5%) (120 bps)
Direct Mail (7.0%) (7.0%) +0 bps
Newspapers (7.7%) (6.7%) (100 bps)
Directories (18.0%) (17.0%) (100 bps)
Total U.S. Advertising (incl. political & Olympics) 4.6% 4.0% +60 bps
Total U.S. Advertising (excl. political & Olympics) 3.1% 2.5% +60 bps
Current 2013E Prior 2013E (in bps)National Broadcast TV (including Olympics) (1) (1.0%) (1.1%) +20 bps
Local Broadcast TV (including political) (6.7%) (6.1%) (60 bps)
National Cable TV 8.0% 8.0% +0 bps
Internet (local & national) 17.3% 12.3% +500 bps
Outdoor 3.6% 3.6% +0 bps
Radio 1.3% 1.3% +0 bps
Magazines (1.7%) (1.0%) (70 bps)Direct Mail (6.0%) (5.0%) (100 bps)
Newspapers (6.8%) (4.8%) (200 bps)
Directories (16.0%) (12.0%) (400 bps)
Total U.S. Advertising (incl. political & Olympics) 2.3% 1.6% +70 bps
Total U.S. Advertising (excl. political & Olympics) 3.9% 3.1% +80 bps
Source: Barclays Research.(1) English networks only.
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Figure 12: Barclays Annual U.S. Advertising Spending Forecast (2008A-2013E)
2008A 2009A 2010A 2011E 2012E 2013E '11-'14 CAGR
Newspapers (Local / National) $34,740 $24,821 $22,795 $20,728 $19,132 $17,826 (6.6%)
Annual Growth / Decline (17.7%) (28.6%) (8.2%) (9.1%) (7.7%) (6.8%)
Radio (Local / National) $17,756 $14,303 $14,992 $15,039 $15,092 $15,286 0.9%
Annual Growth / Decline (9.9%) (19.4%) 4.8% 0.3% 0.4% 1.3%
Outdoor $6,991 $5,901 $6,143 $6,389 $6,572 $6,806 3.3%
Annual Growth / Decline (4.0%) (15.6%) 4.1% 4.0% 2.9% 3.6%
Online $23,448 $22,661 $26,041 $31,796 $37,629 $44,126 17.3%
Annual Growth / Decline 10.6% (3.4%) 14.9% 22.1% 18.3% 17.3%
Magazines $19,533 $15,554 $15,573 $15,463 $15,208 $14,949 (1.5%)
Annual Growth / Decline (6.9%) (20.4%) 0.1% (0.7%) (1.7%) (1.7%)
Directories $11,195 $8,956 $6,890 $5,436 $4,456 $3,743 (15.4%)
Annual Growth / Decline (10.1%) (20.0%) (23.1%) (21.1%) (18.0%) (16.0%)
Direct Mail $23,459 $19,853 $20,600 $20,469 $19,041 $17,899 (6.0%)
Annual Growth / Decline (5.8%) (15.4%) 3.8% (0.6%) (7.0%) (6.0%)
Network Television $13,604 $12,889 $12,989 $13,318 $13,896 $14,397 3.8% Annual Growth / Decline (5.7%) (5.3%) 0.8% 2.5% 4.3% 3.6%
Cable Television $22,356 $21,472 $24,168 $26,241 $28,239 $30,408 7.4%
Annual Growth / Decline 4.1% (4.0%) 12.6% 8.6% 7.6% 7.7%
Local Broadcast Television $16,090 $13,762 $14,851 $15,099 $15,725 $16,244 3.5%
Annual Growth / Decline (27.5%) (14.5%) 7.9% 1.7% 4.1% 3.3%
Other Television $2,991 $2,784 $2,961 $3,106 $3,401 $3,596 7.0%
Annual Growth / Decline (376.0%) (6.9%) 6.3% 4.9% 9.5% 5.8%
Total Television $55,042 $50,907 $54,970 $57,765 $61,261 $64,645 5.6%
Annual Growth / Decline (3.5%) (7.5%) 8.0% 5.1% 6.1% 5.5%
TOTAL EXCL. POLITICAL & OLYMPICS $192,164 $162,955 $168,003 $173,084 $178,390 $185,279 3.8%
Annual Growth / Decline (6.6%) (15.2%) 3.1% 3.0% 3.1% 3.9%
TOTAL ADVERTISING $194,529 $163,410 $170,751 $173,661 $181,677 $185,938 4.3%
Annual Growth / Decline (5.6%) (16.0%) 4.5% 1.7% 4.6% 2.3%
Total Advertising as a % of GDP 1.36% 1.17% 1.18% 1.15% 1.15% 1.12% Source: MAGNA, Barclays Research.Note: Dollars in millions.
Note: The Nielsen material contained in this report represents Nielsen estimates and does
not represent fact. Nielsen has neither reviewed nor approved this report and/or any of the
statements made herein.
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ANALYST(S) CERTIFICATION(S)
I, Anthony DiClemente, CFA, hereby certify (1) that the views expressed in this research report accurately reflect my personal views about any orall of the subject securities or issuers referred to in this research report and (2) no part of my compensation was, is or will be directly or indirectlyrelated to the specific recommendations or views expressed in this research report.
IMPORTANT DISCLOSURES CONTINUED
Barclays Research is a part of the Corporate and Investment Banking division of Barclays Bank PLC and its affiliates (collectively and eachindividually, "Barclays"). For current important disclosures regarding companies that are the subject of this research report, please send a writtenrequest to: Barclays Research Compliance, 745 Seventh Avenue, 17th Floor, New York, NY 10019 or refer to http://publicresearch.barcap.com orcall 212-526-1072.
The analysts responsible for preparing this research report have received compensation based upon various factors including the firm's totalrevenues, a portion of which is generated by investment banking activities.
Analysts regularly conduct site visits to view the material operations of covered companies, but Barclays policy prohibits them from acceptingpayment or reimbursement by any covered company of their travel expenses for such visits.
In order to access Barclays Statement regarding Research Dissemination Policies and Procedures, please refer tohttps://live.barcap.com/publiccp/RSR/nyfipubs/disclaimer/disclaimer-research-dissemination.html.
The Corporate and Investment Banking division of Barclays produces a variety of research products including, but not limited to, fundamentalanalysis, equity-linked analysis, quantitative analysis, and trade ideas. Recommendations contained in one type of research product may differ
from recommendations contained in other types of research products, whether as a result of differing time horizons, methodologies, orotherwise.
Primary Stocks (Ticker, Date, Price)
CBS Corp. (CBS, 27-Apr-2012, USD 34.33), 2-Equal Weight/2-Neutral
CBS Corp. (CBSA, 27-Apr-2012, USD 34.72), 2-Equal Weight/2-Neutral
News Corporation (NWSA, 27-Apr-2012, USD 19.58), 2-Equal Weight/2-Neutral
News Corporation (NWS, 27-Apr-2012, USD 19.87), 2-Equal Weight/2-Neutral
Walt Disney Co. (DIS, 27-Apr-2012, USD 43.35), 2-Equal Weight/2-Neutral
Guide to the Barclays Fundamental Equity Research Rating System:
Our coverage analysts use a relative rating system in which they rate stocks as 1-Overweight, 2-Equal Weight or 3-Underweight (see definitionsbelow) relative to other companies covered by the analyst or a team of analysts that are deemed to be in the same industry sector (the "sectorcoverage universe").
In addition to the stock rating, we provide sector views which rate the outlook for the sector coverage universe as 1-Positive, 2-Neutral or 3-Negative (see definitions below). A rating system using terms such as buy, hold and sell is not the equivalent of our rating system. Investorsshould carefully read the entire research report including the definitions of all ratings and not infer its contents from ratings alone.
Stock Rating
1-Overweight- The stock is expected to outperform the unweighted expected total return of the sector coverage universe over a 12-monthinvestment horizon.
2-Equal Weight- The stock is expected to perform in line with the unweighted expected total return of the sector coverage universe over a 12-month investment horizon.
3-Underweight- The stock is expected to underperform the unweighted expected total return of the sector coverage universe over a 12-monthinvestment horizon.
RS-Rating Suspended- The rating and target price have been suspended temporarily due to market events that made coverage impracticable orto comply with applicable regulations and/or firm policies in certain circumstances including where the Corporate and Investment BankingDivision of Barclays is acting in an advisory capacity in a merger or strategic transaction involving the company.
Sector View
1-Positive- sector coverage universe fundamentals/valuations are improving.
2-Neutral- sector coverage universe fundamentals/valuations are steady, neither improving nor deteriorating.
3-Negative- sector coverage universe fundamentals/valuations are deteriorating.
Below is the list of companies that constitute the "sector coverage universe":
U.S. Media
AMC Networks (AMCX) CBS Corp. (CBS) CBS Corp. (CBSA)
Cinemark Holdings Inc. (CNK) Clear Channel Outdoor Holdings (CCO) Discovery Communications Inc. (DISCA)
DreamWorks Animation SKG Inc. (DWA) Interpublic Group of Companies Inc. (IPG) Lamar Advertising Co. (LAMR)
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IMPORTANT DISCLOSURES CONTINUED
National Cinemedia Inc. (NCMI) News Corporation (NWSA) News Corporation (NWS)
Omnicom Group Inc. (OMC) Regal Entertainment Group (RGC) Scripps Networks Interactive, Inc. (SNI)
Time Warner Inc. (TWX) Viacom Inc. (VIAB) Viacom Inc. (VIA)
Walt Disney Co. (DIS)
Distribution of Ratings:
Barclays Equity Research has 2308 companies under coverage.
42% have been assigned a 1-Overweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Buy rating; 54% ofcompanies with this rating are investment banking clients of the Firm.
42% have been assigned a 2-Equal Weight rating which, for purposes of mandatory regulatory disclosures, is classified as a Hold rating; 49% ofcompanies with this rating are investment banking clients of the Firm.
13% have been assigned a 3-Underweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Sell rating; 39% ofcompanies with this rating are investment banking clients of the Firm.
Guide to the Barclays Research Price Target:
Each analyst has a single price target on the stocks that they cover. The price target represents that analyst's expectation of where the stock willtrade in the next 12 months. Upside/downside scenarios, where provided, represent potential upside/potential downside to each analyst's price
target over the same 12-month period.Barclays offices involved in the production of equity research:
London
Barclays Bank PLC (Barclays, London)
New York
Barclays Capital Inc. (BCI, New York)
Tokyo
Barclays Capital Japan Limited (BCJL, Tokyo)
So Paulo
Banco Barclays S.A. (BBSA, So Paulo)
Hong Kong
Barclays Bank PLC, Hong Kong branch (Barclays Bank, Hong Kong)
Toronto
Barclays Capital Canada Inc. (BCCI, Toronto)
Johannesburg
Absa Capital, a division of Absa Bank Limited (Absa Capital, Johannesburg)
Mexico City
Barclays Bank Mexico, S.A. (BBMX, Mexico City)
Taiwan
Barclays Capital Securities Taiwan Limited (BCSTW, Taiwan)
Seoul
Barclays Capital Securities Limited (BCSL, Seoul)
Mumbai
Barclays Securities (India) Private Limited (BSIPL, Mumbai)
Singapore
Barclays Bank PLC, Singapore branch (Barclays Bank, Singapore)
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IMPORTANT DISCLOSURES CONTINUED
CBS Corp. (CBS) Stock Rating Sector View
USD 34.33 (27-Apr-2012) 2-EQUAL WEIGHT 2-NEUTRAL
Rating and Price Target Chart - USD (as of 27-Apr-2012) Currency=USD
Date Closing Price Rating Price Target
16-Apr-2012 32.31 32.00
04-Nov-2011 25.18 31.00
04-May-2011 27.21 30.00
25-Mar-2011 24.67 25.00
17-Feb-2011 22.35 23.00
05-Nov-2010 17.01 21.00
04-Aug-2010 15.64 19.00
23-Apr-2010 16.48 18.00
03-Feb-2010 13.75 17.00
06-Nov-2009 12.72 13.00
11-Sep-2009 11.76 12.00
11-Aug-2009 10.59 11.00
Clos ing Pr i ce Target Pr i ce Rat ing Change
Jul- 09 Jan- 10 Jul- 10 Jan- 11 Jul- 11 Jan- 12
5
10
15
20
25
30
35
15-May-2009 6.70 2-Equal Weight 9.00
Link to Barclays Live for interactive charting
Barclays Bank PLC and/or an affiliate is a market-maker and/or liquidity provider in securities issued by CBS Corp. or one of its affiliates.
Barclays Bank PLC and/or an affiliate trades regularly in the securities of CBS Corp..
Barclays Bank PLC and/or an affiliate has received non-investment banking related compensation from CBS Corp. within the past 12 months.
CBS Corp. is, or during the past 12 months has been, a non-investment banking client (securities related services) of Barclays Bank PLC and/oran affiliate.
Barclays Capital Inc., through Barclays Market Makers, is a Designated Market Maker in CBS Corp. stock, which is listed on the New York StockExchange. At any given time, its associated Designated Market Maker may have "long" or "short" inventory position in the stock; and itsassociated Designated Market Maker may be on the opposite side of orders executed on the floor of the New York Stock Exchange in the stock.
Valuation Methodology:Our $32 price target represents a 2012E P/E multiple of 13.7x on $2.35 of EPS. Our sum-of-the-parts valuation model isbased on a target EBITDA multiple of 9.0x. Segment multiples are based upon comparable public market and private market multiples ofcomparable companies and segments. Valuation is also supported by a discounted cash flow analysis.
Risks which May Impede the Achievement of the Barclays Research Price Target: Risks include: 1) Slowdown in local and national advertising;2) Continued significant declines in radio listenership; 3) Increased secular shift of viewers to cable television from the national broadcastnetworks and local station affiliates.
https://live.barcap.com/go/NYF/flex/equity/EquityChart.jsp?ticker=CBS&legend=CBS%20Corp.&shortlegend=CBS¤cy=USD&enddate=20120427&begindate=20110427&userId=tangbo1&appName=RPShttps://live.barcap.com/go/NYF/flex/equity/EquityChart.jsp?ticker=CBS&legend=CBS%20Corp.&shortlegend=CBS¤cy=USD&enddate=20120427&begindate=20110427&userId=tangbo1&appName=RPS -
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IMPORTANT DISCLOSURES CONTINUED
CBS Corp. (CBS/A / CBSA) Stock Rating Sector View
USD 34.72 (27-Apr-2012) 2-EQUAL WEIGHT 2-NEUTRAL
Rating and Price Target Chart - USD (as of 27-Apr-2012) Currency=USD
Date Closing Price Rating Price Target
16-Apr-2012 33.15 32.00
04-Nov-2011 25.57 31.00
04-May-2011 27.32 30.00
17-Feb-2011 22.52 23.00
Closing Price Target Price
Jul- 09 Jan- 10 Jul- 10 Jan- 11 Jul- 11 Jan- 12
5
10
15
20
25
30
35
05-Nov-2010 16.97 21.00
Link to Barclays Live for interactive charting
Barclays Bank PLC and/or an affiliate is a market-maker and/or liquidity provider in securities issued by CBS Corp. or one of its affiliates.
Barclays Bank PLC and/or an affiliate trades regularly in the securities of CBS Corp..
Barclays Bank PLC and/or an affiliate has received non-investment banking related compensation from CBS Corp. within the past 12 months.
CBS Corp. is, or during the past 12 months has been, a non-investment banking client (securities related services) of Barclays Bank PLC and/oran affiliate.
Barclays Capital Inc., through Barclays Market Makers, is a Designated Market Maker in CBS Corp. stock, which is listed on the New York StockExchange. At any given time, its associated Designated Market Maker may have "long" or "short" inventory position in the stock; and itsassociated Designated Market Maker may be on the opposite side of orders executed on the floor of the New York Stock Exchange in the stock.
Valuation Methodology:Our $32 price target represents a 2012E P/E multiple of 13.7x on $2.35 of EPS. Our sum-of-the-parts valuation model isbased on a target EBITDA multiple of 9.0x. Segment multiples are based upon comparable public market and private market multiples ofcomparable companies and segments. Valuation is also supported by a discounted cash flow analysis.
Risks which May Impede the Achievement of the Barclays Research Price Target: Risks include: 1) Slowdown in local and national advertising;2) Continued significant declines in radio listenership; 3) Increased secular shift of viewers to cable television from the national broadcastnetworks and local station affiliates.
https://live.barcap.com/go/NYF/flex/equity/EquityChart.jsp?ticker=CBSA&legend=CBS%20Corp.&shortlegend=CBSA¤cy=USD&enddate=20120427&begindate=20110427&userId=tangbo1&appName=RPShttps://live.barcap.com/go/NYF/flex/equity/EquityChart.jsp?ticker=CBSA&legend=CBS%20Corp.&shortlegend=CBSA¤cy=USD&enddate=20120427&begindate=20110427&userId=tangbo1&appName=RPS -
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News Corporation (NWS/A / NWSA) Stock Rating Sector View
USD 19.58 (27-Apr-2012) 2-EQUAL WEIGHT 2-NEUTRAL
Rating and Price Target Chart - USD (as of 27-Apr-2012) Currency=USD
Date Closing Price Rating Price Target
09-Feb-2012 19.21 22.00
04-Mar-2011 17.60 20.00
23-Apr-2010 16.12 18.00
03-Feb-2010 13.67 16.00
28-Jan-2010 12.52 15.00
05-Nov-2009 11.94 14.00
15-May-2009 8.60 12.00
Closing Price Target Price
Jul- 09 Jan- 10 Jul- 10 Jan- 11 Jul- 11 Jan- 12
6
8
10
12
14
16
18
20
22
24
07-May-2009 9.45 11.00
Link to Barclays Live for interactive charting
Barclays Bank PLC and/or an affiliate is a market-maker and/or liquidity provider in securities issued by News Corporation or one of its affiliates.
Barclays Bank PLC and/or an affiliate has received compensation for investment banking services from News Corporation in the past 12 months.
Barclays Bank PLC and/or an affiliate trades regularly in the securities of News Corporation.
Barclays Bank PLC and/or an affiliate has received non-investment banking related compensation from News Corporation within the past 12months.
News Corporation is, or during the past 12 months has been, an investment banking client of Barclays Bank PLC and/or an affiliate.
News Corporation is, or during the past 12 months has been, a non-investment banking client (securities related services) of Barclays Bank PLCand/or an affiliate.
Valuation Methodology:Our $22 target price is based on 14.2x our CY2012E EPS of $1.55. This implies a 6.2x EV/EBITDA and 5.9% FCF yield.Our target price is also supported by sum-of-the-parts and DCF analysis.
Risks which May Impede the Achievement of the Barclays Research Price Target: News Corp's revenues and earnings are very dependent onthe performance of its Fox assets given that the latter contributes roughly 60% of News Corp's consolidated group revenues and 70% of itsoperating profits. Global advertising markets have a significant effect on News Corp's earnings as close to half of the group's revenues areadvertising based.
https://live.barcap.com/go/NYF/flex/equity/EquityChart.jsp?ticker=NWSA&legend=News%20Corporation&shortlegend=NWSA¤cy=USD&enddate=20120427&begindate=20110427&userId=tangbo1&appName=RPShttps://live.barcap.com/go/NYF/flex/equity/EquityChart.jsp?ticker=NWSA&legend=News%20Corporation&shortlegend=NWSA¤cy=USD&enddate=20120427&begindate=20110427&userId=tangbo1&appName=RPS -
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IMPORTANT DISCLOSURES CONTINUED
News Corporation (NWS) Stock Rating Sector View
USD 19.87 (27-Apr-2012) 2-EQUAL WEIGHT 2-NEUTRAL
Rating and Price Target Chart - USD (as of 27-Apr-2012) Currency=USD
Date Closing Price Rating Price Target
09-Feb-2012 19.96 22.00
Closing Price Target Price
Jul- 09 Jan- 10 Jul- 10 Jan- 11 Jul- 11 Jan- 12
8
10
12
14
16
18
20
22
24
04-Mar-2011 18.72 20.00
Link to Barclays Live for interactive charting
Barclays Bank PLC and/or an affiliate is a market-maker and/or liquidity provider in securities issued by News Corporation or one of its affiliates.
Barclays Bank PLC and/or an affiliate has received compensation for investment banking services from News Corporation in the past 12 months.
Barclays Bank PLC and/or an affiliate trades regularly in the securities of News Corporation.
Barclays Bank PLC and/or an affiliate has received non-investment banking related compensation from News Corporation within the past 12months.
News Corporation is, or during the past 12 months has been, an investment banking client of Barclays Bank PLC and/or an affiliate.
News Corporation is, or during the past 12 months has been, a non-investment banking client (securities related services) of Barclays Bank PLCand/or an affiliate.
Valuation Methodology:Our $22 target price is based on 14.2x our CY2012E EPS of $1.55. This implies a 6.2x EV/EBITDA and 5.9% FCF yield.Our target price is also supported by sum-of-the-parts and DCF analysis.
Risks which May Impede the Achievement of the Barclays Research Price Target: News Corp's revenues and earnings are very dependent onthe performance of its Fox assets given that the latter contributes roughly 60% of News Corp's consolidated group revenues and 70% of itsoperating profits. Global advertising markets have a significant effect on News Corp's earnings as close to half of the group's revenues areadvertising based.
https://live.barcap.com/go/NYF/flex/equity/EquityChart.jsp?ticker=NWS&legend=News%20Corporation&shortlegend=NWS¤cy=USD&enddate=20120427&begindate=20110427&userId=tangbo1&appName=RPShttps://live.barcap.com/go/NYF/flex/equity/EquityChart.jsp?ticker=NWS&legend=News%20Corporation&shortlegend=NWS¤cy=USD&enddate=20120427&begindate=20110427&userId=tangbo1&appName=RPS -
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IMPORTANT DISCLOSURES CONTINUED
Walt Disney Co. (DIS) Stock Rating Sector View
USD 43.35 (27-Apr-2012) 2-EQUAL WEIGHT 2-NEUTRAL
Rating and Price Target Chart - USD (as of 27-Apr-2012) Currency=USD
Date Closing Price Rating Price Target
10-Jan-2012 39.63 2-Equal Weight
10-Aug-2011 31.54 44.00
23-Mar-2011 42.24 52.00
09-Feb-2011 43.36 50.00
01-Feb-2011 39.88 46.00
08-Oct-2010 34.51 42.00
04-Dec-2009 30.84 36.00
21-Sep-2009 28.00 34.00
Clos ing Pr i ce Target Pr i ce Rat ing Change
Jul- 09 Jan- 10 Jul- 10 Jan- 11 Jul- 11 Jan- 12
15
20
25
30
35
40
45
50
55
06-May-2009 25.87 1-Overweight 32.00
Link to Barclays Live for interactive charting
Barclays Bank PLC and/or an affiliate is a market-maker and/or liquidity provider in securities issued by Walt Disney Co. or one of its affiliates.
Barclays Bank PLC and/or an affiliate has received compensation for investment banking services from Walt Disney Co. in the past 12 months.
Barclays Bank PLC and/or an affiliate trades regularly in the securities of Walt Disney Co..
Walt Disney Co. is, or during the past 12 months has been, an investment banking client of Barclays Bank PLC and/or an affiliate.
Barclays Capital Inc., through Barclays Market Makers, is a Designated Market Maker in Walt Disney Co. stock, which is listed on the New YorkStock Exchange. At any given time, its associated Designated Market Maker may have "long" or "short" inventory position in the stock; and itsassociated Designated Market Maker may be on the opposite side of orders executed on the floor of the New York Stock Exchange in the stock.
Valuation Methodology:Our target price of $44 is based on a 14.2x multiple of our CY2012E EPS of $3.09. Our price target is also supportedthrough sum-of-the parts and DCF analysis.
Risks which May Impede the Achievement of the Barclays Research Price Target: Disney's theme park operations are sensitive to economiccycles. The recessionary environment could result in weaker advertising revenue for the ABC network and ABC TV station groups. Deterioratingconsumer confidence could impede the consumer's ability to spend on Disney vacations, impact advertising trends at ABC & ESPN, and/orimpact Consumer Products. Disney could struggle to produce successful movie/TV content. And finally, Disney could be vulnerable to thestructural shift of media properties from TV to the internet.
https://live.barcap.com/go/NYF/flex/equity/EquityChart.jsp?ticker=DIS&legend=Walt%20Disney%20Co.&shortlegend=DIS¤cy=USD&enddate=20120427&begindate=20110427&userId=tangbo1&appName=RPShttps://live.barcap.com/go/NYF/flex/equity/EquityChart.jsp?ticker=DIS&legend=Walt%20Disney%20Co.&shortlegend=DIS¤cy=USD&enddate=20120427&begindate=20110427&userId=tangbo1&appName=RPS -
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