One of the oddities of this cable upfront has been the number of players claiming to do well when the overall result is weaker. Merrill Lynch analyst Jessica Reif Cohen thinks she spotted an answer during Viacom’s 2Q06 earnings call—digital’s contribution: “The relatively flat CPM’s are not surprising given weak demand in this year’s upfront. However, the mid single digit increase in commitments does present something of a conundrum. Essentially every single diversified media company with cable networks has suggested it is outperforming its peers in this year’s upfront. Although we have no doubt the large players are having more success than their smaller brethren, this nonetheless strikes us as a bit odd.
The one area that may be allowing them to garner more advertising commitments than the general tone of the cable upfront would suggest is the bundling of digital inventory along with their traditional television product. We are increasingly doubtful that digital advertising revenue will be incremental for the diversified media companies as a whole. Rather, it appears that a digital component will be necessary to maintain market share of advertising in the coming years.”