In Depth

Syndie Ad Sales Stay Strong in Soft Market

Packaged Goods, Pharmaceutical Clients Help Soften Impact of Economic Downturn

Syndication is holding up well in the advertising market, partly because many of its key sponsors are in categories that haven’t been creamed by the economy.

“I can’t speak for everybody, but we’re less dependent on the industries that are having the most trouble,” said Howard Levy, executive VP of Disney-ABC Domestic Television.

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“I don’t have any financial stuff on my air and I never have. I have very little car business on my air,” he said.

Instead, the key sponsors of his shows are in the packaged goods and pharmaceutical industries.

“No matter what happens in the economy, people, if they have [high] cholesterol, they’re still going to take a cholesterol drug. And they still have to wash their hands and clean their floors,” Mr. Levy said. “I’m not saying that I’m totally protected in a soft economy, but we’ve been less impacted than maybe some others.”

For the first nine months of 2008, while all of television registered a 2.1% gain in ad spending, national syndication was up a whopping 9%, according to TNS Media Intelligence, outpacing both network and cable.

Of course, as the credit crisis metastasized into a full-blown recession, consumer spending slowed, as did ad spending.

“I think we all recognize that 2008 started strong and that it’s been tapering off as we’ve gone through the year. That tapering started in Q3 and moved into Q4, and that’s for the marketplace as a whole. Syndication is no exception,” said Amy McMahon, associate activation director at media agency Starcom.

“I think that a lot of people are pausing to see what happens as we move forward. Options in second quarter are around the corner, and people will see how that breaks out,” Ms. McMahon said. “Ultimately, the question will be whether there’s enough demand in the market to make sure they can sell the remaining inventory.”

Upfront Helped

Like their colleagues at the broadcast and cable networks, syndicators sold more inventory than normal during the strong upfront market, making them less dependent on the scatter market, which has slowed of late.

“It’s not as if business has been cut off completely, but obviously it’s a little bit slower than we would like,” said Michael Teicher, executive VP for media sales at Warner Bros. Domestic Television Distribution. “But I don’t think we’re in much different shape than any of our other national distribution competitors.”

To be sure, there are aspects to syndication that are attractive to ad buyers and their clients.

For one thing, syndication weathered last year’s Writers Guild of America strike better than other forms of TV, Ms. McMahon said.

Syndication also serves as “an alternative for reach in a lot of important dayparts,” she said. “They have ratings parity to a lot of broadcast programs with [pricing] efficiencies.”

Syndicated shows also tend to be the ones that have already succeeded on broadcast television.

“They are tried-and-true, proven ratings deliverers,” said Nicole Romanik, VP and account director for national broadcast at media buyer Initiative. “‘Seinfeld’ has been off the air 10 years and it’s still performing relatively steady in syndication. ‘Two and a Half Men’ has been great in syndication. They just don’t have to deal with as much failure.”

DVR Factor

Syndicated shows have shorter commercial pods and are less likely to be affected by digital video recorders than shows on the broadcast networks, Ms. Romanik said.

But this year, syndicated shows, particularly in the daytime hours, have been ratings-challenged, including Warner Bros.’ freshman “The Bonnie Hunt Show.”

“I would be surprised if it were renewed,” Ms. Romanik said.

But Mr. Teicher said being in some tough time periods is the reason the ratings for “Bonnie” started off light.

“But we have seen some improvement over the last few weeks,” he said. “More importantly, we’re hearing consumers, stations and advertisers all say it’s a good program.”

Mr. Teicher also said it was an unusual fall for daytime TV because of the presidential election and the ailing economy.

“Soccer moms were watching CNN and CNBC and other news outlets in record numbers during daytime, so we do believe it took its toll on normal daytime viewing and sampling of new programs,” he said. “But now that the election is over—I can’t speak for the economy yet—we are hopeful that we’ll see more normal viewing patterns.”

Buyers suggest Warner Bros. is giving advertisers experiencing under-delivery with “Bonnie” make-good spots in more established shows like “Ellen,” but Mr. Teicher declined to be specific about how shortfalls are being made up.

“We are known for our service orientation. We’re not going to leave our clients high and dry,” he said.

But with ratings down, particularly in daytime, make-goods are cutting into the amount of spots the syndicators have to sell in scatter.

“The underages are creating an artificial tightness in the market. It was so well sold in the upfront … it’s going to be difficult to see an Oprah in scatter,” Ms. Romanik said.

That tightness is keeping prices up at a time when advertisers are looking to lower all of their costs—including the price of TV commercials.

“I understand how they could ask for that,” said Bob Cesa, executive VP for ad sales at Twentieth Television. But, he noted, “In syndication the better programs are usually pretty well sold, so there’s always a shortage of supply there,” which is helping to keep prices from falling.

Despite the lower ratings, daytime syndication remains an important daypart for many marketers.

“I think there’s a lot of advertisers that find daytime a very viable daypart to participate in,” Ms. McMahon said. “For agencies with female-focused clients, it’s a great place to reach women, depending on your strategic target. It’s still an efficient daypart.”

As for 2009, few are especially bullish.

“We are seeing some activity for first quarter. It would be disingenuous to call it a robust marketplace. I would call it a little quieter but somewhat steady,” Mr. Teicher said. “We do actually see some retail, some casual dining and pharmaceuticals that are spending money with us. But it’s certainly not gangbusters.”

“Overall I would concur that it’s going to be a tough year, but we’re still looking for syndicated opportunities to help our clients reach their goals,” Ms. McMahon said.

Mr. Cesa of Twentieth thinks that between President-elect Barack Obama’s expected economic stimulus package and the decline in oil prices, the economy might bounce back.

“We’ll have a bit of a pullback but I don’t think it will be as bad as some of the people are predicting,” he said.

And the outlook for next season’s upfront is even hazier.

Mr. Cesa said Twentieth has begun feeling out advertisers for the new Wendy Williams talk show. It’s also having preliminary discussions about “My Name Is Earl,” “Are You Smarter Than a 5th Grader?” and “Bones.”

One things for sure: Recession or not, there’s likely to be an upfront when spring rolls around.

“There are still enormous benefits derived from the upfront, for both buyers and sellers. And let’s face it, there are programs and networks and syndicators out there that advertisers do have a real attachment to, and there would be a risk of not getting the programming that you want. So I suspect we will have an upfront,” Mr. Teicher said.

“We’re in a tough period, but the sky isn’t falling, and I think anyone who thinks it is is in a premature panic,” he said.