In Depth

CBS's Opening Bid for Upfront: 18% Price Hikes--Rival Networks Ignore Fox Deals, Move to Maximize Sellers' Market

By Brian Steinberg
Advertising Age

CBS is pushing against advertisers' stance that they shouldn't be paying solid double-digit increases for TV time in the fall.

The Tiffany Network is making an initial request for price hikes around 18% in the cost of reaching 1,000 viewers, a measure common in haggling over "upfront" TV time that is also known as a CPM, according to media buyers. The figure may raise an eyebrow, given that rival Fox, moving toward completion in its upfront talks, has opted to settle for significantly smaller increases. Fox has done deals between 9.5% and 12%, media buyers said, with the majority of agreements struck around 10% and 11%.

Ad buyers, eager to dampen TV-network appetites, question whether CBS will get its wish. "That may be their going-out number," said one buyer, but "it doesn't indicate where they really want to close." Another buying executive said: "That was their opening request, which hopefully was not agreed to anywhere!"

But CBS -- and other networks, perhaps -- might beg to differ. Indeed, CBS's starting bid suggests that other broadcast outlets may push for hikes that do not use Fox's trading as a benchmark.

CBS's leadership has been out for months suggesting that its lineup deserves the premium. CBS Corp. CEO Leslie Moonves has played up the network's relatively stable lineup and its status as the most broadly watched broadcast network in the U.S. Of course, Fox is the most watched by viewers between the ages of 18 and 49, the demographic most advertisers say they covet.

The opening ask also shines a light on the process of selling TV advertising. Many networks typically ask for a higher-than-anticipated price, knowing that a client will likely counter with something lower than desired.

When selling ad time for the series finale of "Lost," Walt Disney's ABC asked for as much as $950,000, according to buyers familiar with negotiations at the time, though the network would also have accepted something close to $850,000. Likewise, NBC has been out in the market seeking around $3.5 million for a 30-second berth in next year's Super Bowl, even though Fox sought between $2.8 million and $3 million for this year's game.

CBS's stance surfaces as haggling in the upfront, that late-spring bazaar during which the networks sell the bulk of their ad inventory for the coming season, inches forward. Walt Disney's ABC is said to be moving along in its process, pushing for CPMs that are 10% or higher. CW has been doing business, while buyers suggested NBC continues to engage in talks while making the pitch that its TV time should be priced along with the rest of the marketplace. In the last few upfronts, NBC has typically sold time in the lower range of the market.

Pressure may be on some networks to do deals because Fox has moved so quickly by following a strategy that proved successful in 2010. The network is taking smaller price increases in favor of driving a larger volume of ad dollars while rivals are in the midst of their own negotiations. Fox, which typically moves early in the upfront each year, has fewer hours of prime-time to sell, and does not have daytime or news programming to fill, either.