March Madness Could Mean Big Buying Opportunity For CBS

With the NCAA basketball tournament commencing, this could be a “big week” for both CBS Corporation CBS and Time Warner Inc’s TWX Turner Networks, Loop Capital Markets’ David Miller said in a report.

“Based on recent conversations within the media buying community on both coasts, we believe the whole tournament...is 97% sold out of all advertising inventory, with CPMs [cost per thousand] up, on average, 9.3% over last year's record,” Miller wrote. He maintained a Buy rating on CBS, with a price target of $76, which represents 12 percent upside.

What The NCAA Means To CBS

CBS and Time Warner entered into a $10.8 billion NCAA contract in 2010 and are now in Year 7 of their 14-year contract. The contract gives both companies live broadcast rights to select first and second round games, as well as to the Sweet 16 and the Elite 8.

Related Link: Why Trump May Have Given CBS A Reason To Look At Buying New TV Stations

Miller noted “contacts within the media buying community” had indicated the average price for a 30-second spot at $71,000 in the round of 68 and 32, for the Sweet 16 at $160,000, for the Elite 8 at $393,000 Eight and for the Final Four at $640,000.

While CPMs rise every year of the NCAA tournament, but this year interest had been “stoked incrementally higher by the NCAA tournament selection committee's decision to release all four of the #1 seeds on February 11, as well as the top-16 teams overall, giving fans a glimpse into what might play out as the Sweet 16, and of course in the process, generating a lot of controversy,” the analyst mentioned.

With the Radio segment close to being disposed, CBS should be valued by the market as a content producer, rather than a broadcaster, Miller added.