Peering into upfront’s crystal ball

Apr 30, 2001  •  Post A Comment

Only one thing is certain entering this year’s upfront market-uncertainty.
Most buyers and network executives are reluctant to predict what the final market will be for broadcasters, but nearly all agree that the take will be less than last year’s $8 billion upfront. Advertisers and networks are confronting not only the reality of a slowing economy, but also the prospect of strikes from the actors’ and writers’ unions. As a result, buyers and sellers appear to be keeping the cards close to the vest in the weeks heading into the upfront negotiating period.
“There’s a lot of uncertainty about what clients are going to be spending,” said Larry Blasius, senior vice president and director, national broadcast, at TN Media in New York. “There’s a lot of conjecture and a lot of rumors about what’s happening.”
Buyers are developing contingency plans depending on whether actors and writers strikes occur. But this much is certain: Buyers have the upper hand.
“In a soft economy, it’s a buyer’s marketplace,” said John Lazarus, senior vice president and director, national broadcast operations, at TN Media in New York. “We are expecting flat to negative [growth] in CPMs [costs per thousand]. There is no evidence that the economy is rebounding.” The total market for broadcast could be $7.5 billion or $7.6 billion, he said.
Networks with the highest CPMs, such as ABC and NBC, will be the least attractive, Mr. Lazarus said. “They have to pay particular attention if they are going to be higher-priced. There are alternatives,” he said, pointing to off-network syndicated shows like “Friends” and “Frasier.”
NBC said it isn’t worried. “That’s what they say every year,” said Keith Turner, president, sales and marketing, for NBC Television Network.
TN Media’s Mr. Lazarus warned that Viacom President Mel Karmazin’s suggestion that CBS may retain a large portion of its inventory for scatter won’t fly with advertisers. “If he holds his money back, we’ll go elsewhere,” he said.
But CBS’s Joseph Abruzzese, president of network sales, is hopeful that the marketplace will improve later this year, translating into better prices for the networks at that time. As a result, he expects the entire ad market for the year will be bigger, though the amount of money spent in the upfront could be less than last year.
Cable networks, with their lower rates, may reap the rewards of a tightening economy, said Chris Geraci, director of national TV buying for BBDO/OMD in New York. “People are looking to get more bang for the buck,” he said.
The strength of last year’s scatter market led to a bullish atmosphere for networks heading into the upfront, said a network executive who asked not to be identified. This year’s scatter market was not as strong, and advertisers, like everyone else, simply don’t know what direction the economy will take.
“I don’t think advertisers have a clue where things stand. I don’t think anyone [last September] saw … this slowdown coming, and I don’t think anyone has a clue when it will pick up, but most think in the second half,” the executive said.
The fourth-quarter scatter market for 2000 was difficult, while pricing for the first and second quarter of this year has been “OK,” said NBC’s Mr. Turner. “Money seems to be coming slower than it has historically [in the scatter market], but it looks like we will hit our numbers,” he said. “I don’t think [the upfront] will be as bad as people think.”
CBS enters the upfront with major improvements in the 18 to 49 demographic and should be rewarded, said a senior buyer. It should procure a bigger share of the dollars this year, while ABC may see less since its audience is getting older, said the buyer.
CBS’s Mr. Abruzzese believes there will be a shift of money from other networks to CBS this year. The Tiffany network’s position relative to NBC and ABC is good, said Aaron Cohen, director of broadcast with Horizon Media in New York. The WB has held its own, and Fox should fare well, he said. NBC and ABC are in the toughest spots. Still, broadcast networks shouldn’t expect any increases, he said.
ABC has aged up and may lose some money from younger demographics to Fox, said Marc Goldstein, president of national broadcast with MindShare in New York.
Despite buyers’ predictions, ABC remains confident entering the upfront, said Mike Shaw, president of sales and marketing for the ABC Television Network. “I think we’ve had the best development of any network. We’ve ramped up sitcoms, dramas and comedies,” Mr. Shaw said. While it’s true that “Who Wants to Be a Millionaire” has come down to earth since last year, he doesn’t think that warrants any sort of “correction” this year.
Many on the buyers’ side say networks can expect a protracted upfront negotiating season since advertisers are more cautious and want to get a good sense of the market before they buy.
The prospect of strikes should also prolong the upfront. While strikes would be disastrous for all involved, oddly enough they could have an unintended beneficial consequence, said John Rash, senior vice president and director of broadcast negotiations for Campbell Mithun in Minneapolis.
“Any writers or actors strike would severely hinder any momentum networks have developed for their programs, but if it delays the upfront marketplace there is at least a chance economic conditions may have stabilized,” he said.
But a strike could also accelerate the burnout of the reality genre, since most networks would up their reality offerings in the event of strikes, Mr. Rash added.
Fox, with the entire slate of Major League Baseball playoffs in October, is best poised for a strike, which could energize TV baseball viewing. Said Fox Broadcasting president of sales Jon Nesvig, “We’ve got some good ratings momentum going for several of our shows such as `Grounded for Life’ and `Boston Public’ and a lot of entertainment product in the can that would cushion us against a strike.”
Included in that product is not only baseball, but also episodes of “Undeclared,” “The Tick,” “Greg the Bunny,” and “Family Guy,” he said.
Strikes could actually play into the networks’ hands, said an executive who asked that his name not be revealed. Shrinking availability of gross ratings points could have a short-term positive effect on prices, he explained.
Buyers disagree. Advertisers will have a harder time making their necessary ratings points with replacement programming, said TN Media’s Mr. Lazarus. “Our strike estimates are lower because it would be non-original programming and wouldn’t cost as much,” he said.
TN Media’s Mr. Blasius said The WB, UPN and Fox would be hit the hardest by a strike since they can’t run a fifth night of “Dateline” or “Who Wants to Be a Millionaire.”
The WB, however, may be in a position to leverage its AOL Time Warner ownership structure and procure some programming from its sister cable networks, he said.