TV stocks may enjoy a rally soon. Why? There's a key change to the way ads are sold. According to The Hollywood Reporter, media-buying company GroupM has agreed to negotiate ad deals based on live plus seven days of delayed viewing, or "C7" as it's known in the industry. The agreement could forever alter how primetime TV ads are bought and sold.
To this point, most buyers have insisted on using the "C3" standard that counts views only through the first three days of airing. Network executives have long argued against C3 because it unfairly punishes shows that add millions of DVR and video-on-demand viewers in the final seven-day tally.
Who's right? Both, it turns out. AdWeek's study of the numbers found that most shows wouldn't enjoy a material boost on conversion from C3 to C7. And yet, there are notable exceptions, and most of them seem to air on Walt Disney's (NYSE: DIS ) ABC television network.
Through April 28, TVBytheNumbers.com had ABC as home to five of the top 10 gainers in live+7 days ratings. Modern Family, Grey's Anatomy, Marvel's Agents of SHIELD, and Scandal all gained between 1.6 and 2.0 ratings points under the broader standard. A shift to C7 would allow ABC to count those figures when negotiating new ad rates for those shows and others like it. Take Marvel's Agent Carter, for example, which is due to fill in next season when SHIELD is on hiatus.
So is it time to buy TV stocks? We're still in the early stages of the shift to C7. The good news is that we're likely to see continued momentum as the summer and fall TV seasons get under way, which could lead to more creative video-on-demand advertising campaigns, and additional support for niche hits that tend to draw best among audiences who watch at their own pace. In the meantime, Disney remains attractive because of its rich licensing pipeline, thriving theme park business, and box office bonafides. Better TV ad rates for ABC is gravy for the meaty earnings that the House of Mouse should deliver in fiscal 2014.
It's your turn to weigh in. Are you more willing to buy TV stocks now that ad buyers are looking at more comprehensive data? Leave a comment with your take, including your thoughts on whether it's time to buy, sell, or short Disney stock now.
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