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CBS competes with broadcast networks like ABC, owned by Disney (NYSE:DIS), and Fox, owned by News Corp (NASDAQ:NWS), for the dwindling ad dollars available for network TV. We estimate that the CBS TV Network constitutes 32% of the $9 Trefis price estimate for CBS’s stock and that the company’s stock is highly sensitive to the prevailing prices for TV ads.

We estimate that CBS earned about $5.30 for every 1,000 ad impressions (1,000 views of a 30-sec TV ad) that it delivered in 2007 and that this figure declined to about $4.70 in 2009. CBS’s recent ad pricing declines are attributable primarily to two factors:

  1. the broader decline in the ad market caused by the recessionary environment
  2. the on-going shift in viewership from broadcast networks (CBS, ABC, Fox, NBC) to cable channels (TBS, USA, Nickelodeon)

We expect CBS’s ad pricing to decline to about $4.10 per 1,000 impressions by the end of the Trefis forecast period as ad spend continues to shift away from broadcast networks to cable channels as well as to other mediums like the internet.

You can modify our forecast for CBS Ad Pricing above to see how the company’s stock would be impacted if pricing declines were even more severe than we forecast.

For additional analysis and forecasts, here is our complete model for CBS’s stock.

Trefis prices for related stocks: Disney ($34.84), News Corp ($17.78), Viacom ($35.32)

Disclosure: No positions

Source: CBS TV Network Ad Pricing Declines Expected