In Depth

Upfront Sales Surprisingly Strong

But Much of Money Seems to Be Shifting From Scatter Market

How’s the upfront going? Sales executives at the broadcast networks are grinning and cable network sales reps are rubbing their hands together.

But the buyers? Not so much.

An unexpectedly large amount of money is flowing into the upfront, filling network coffers at prices that are at, if not above, the high end of the networks’ wildest dreams.

“I certainly think the networks will be happy with the numbers,” said Carrie Drinkwater, senior VP and director of national broadcast at media buyer MPG. “As a buyer, I’m never happy when there’s an escalation in pricing.”

ABC started the upfront buying two weeks ago, getting price increases of 9% on a cost-per-thousand-viewers (CPM) basis.

NBC Universal last week finished its broadcast upfront deals. Industry sources said the network garnered commitments of $1.9 billion, up $100 million from last year, and CPMs rose 5% to 7%.

Top-rated Fox was getting bigger CPM increases than ABC, and CBS was tucked behind ABC, industry sources said.

The CW also finished its upfront sales, bringing in $350 million-$375 million in business, an increase of 7% to 8%, according to industry sources.

The CW’s revenue figures aren’t comparable to last year’s $660 million because The CW sold its Sunday night to Media Rights Capital, which will program and sell the block this fall. The move tightened up The CW’s inventory, helping keep its price high, and left it with a schedule of shows that do better in younger demographics. The CW, reportedly near its last legs because of disappointing ratings this season, was pleased with the results, a spokesman said.

However, the money going to the broadcasters will be flat at best with last year’s $9 billion, sales executives concede. And rather than there being new money coming into the upfront, a lot of that money appears to be coming from advertisers who are shifting money from the scatter market or calendar upfront deals. At the end of the year, the extra money in the upfront may not translate into more revenue on the books for the broadcasters.

Advertisers are moving to the upfront because they’re concerned that if broadcast ratings continue to erode, prices will skyrocket again in the scatter market because of a shortage of commercials the networks can sell. Low ratings mean spots have to be given to upfront advertisers as make-goods, rather than being sold in scatter.

But one senior buyer said there appeared to be more money in the market from the movie studios, which is good for younger-skewing networks Fox and ABC. And the automakers didn’t cut back as much as the market feared, the buyer said. Also, the pharmaceutical companies moving money from the calendar upfront helped older-skewing CBS by providing additional volume, helping it keep its prices up, the buyer added.

Cable network sales executives said they’re seeing more money coming to them than last year. Among those doing deals are Turner Broadcasting and Lifetime. Turner declined comment. Lifetime said it was writing business with CPM increases in the high single digits and was posting healthy volume gains.

“We’re about a week ahead of where I thought we’d be,” said one senior cable sales executive.
One buyer estimated that dollar volume in the cable market will be up anywhere from 5% to 10% from $7.68 billion last year.

The higher prices for broadcast are driving more money to cable, which costs about half as much as broadcast on a CPM basis.

“You need to bring in the cable in order to flatten out your overall cost for television,” Ms. Drinkwater said.

While buyers were not pleased by the price increases, there was some relief that clients were still interested in buying television advertising despite a lot of gloom and doom going into the upfront.

“That means job security for me,” said one longtime television buyer. “I was afraid I’d be wearing my Internet hat by now.”