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The price not right at CBS

Jun 25, 2001  •  Post A Comment

Media buyers are calling it Mel’s billion-dollar game of chicken.
In what is easily the most surprising development of the upfront marketplace, CBS has decided not to join ABC, NBC and Fox in offering significant single-digit cost-per-thousand decreases.
And it’s not only buyers who are chagrined. “I think you can safely say a lot of us here are truly shocked that Mel [Karmazin, president and chief operating officer of CBS parent Viacom] is not bending on this,” said one CBS insider.
At the same time, deals aplenty are being made at the other networks, including a mega $50 million pact with Pepsi-Cola at Fox.
While Mr. Karmazin has proclaimed publicly for months that CBS would maintain a strong position during the upfront, many observers thought that when the marketplace actually arrived he would compromise.
Late last week CBS was offering two types of prime-time deals: one calling for negative 1 percent CPMs this season with negative 3 percent CPMs next year, and another calling for flat CPMs this year with the understanding that the network would get clients’ CPMs into negative territory as the season progressed, according to a number of buyers.
“Basically CBS was trying to convince me that whatever the real deal is, is in the eye of the beholder,” said one buyer. “The idea was that I could tell a good story to my clients and Mel could still tell a good story to the Street.”
But few seemed to be taking CBS’s bait. “It’s a real shame,” said one buyer. “Almost everyone likes Joey [Abruzzese, president, sales, CBS Television Network], and he’s burning through so much good will. Les [Moonves, president and CEO, CBS Television] is doing a good job, and they’ve had some ratings and demo success, but it’s the economy, stupid. I can’t go to my clients with the decreases I’m getting at the other networks and say, `Oops, sorry, I couldn’t get you a decent deal at CBS.”’
CBS had been hoping buyers would swallow the company line that with the network’s improvement-and the fact that CBS’s CPMs are generally under those of NBC and ABC-CBS is still a bargain without having to go negative on CPMs.
A CBS spokesman said given the performance of CBS this past season-most notably with the success of “Survivor” and “CSI: Crime Scene Investigation” on Thursday nights-and a fall lineup of what the spokesman said many buyers considered the best among the networks, “Our prices are holding.”
The big Fox/Pepsi deal was said to be a multiyear pact that involves the soft-drink giant’s longtime tie-in with the “Star Wars” franchise, which sister company 20th Century Fox distributes. Pepsi had no comment, and Jon Nesvig, president of sales, Fox Broadcasting, could not be reached.
Another priceless multiyear mega-deal that’s quietly being talked about is one between MasterCard and a number of the Walt Disney properties. If a deal is struck, the credit card giant could replace American Express as the official card of the Disney theme parks, sources said. Disney’s second 10-year deal with American Express ends next year.
The one network writing CPM increases is The WB, buyers confirmed. “They’re generally in the plus 1 to 3 percent range,” one buyer said.
“The end is in sight,” said a WB spokesman. “If things continue to move on as we expect, we’ll see modest revenue as well as CPM increases.” There are at least 30 new advertisers coming in across various categories who are buying the 18 to 34 brand that The WB is selling, the spokesman said.
Earlier last week NBC Television Network President Randy Falco confirmed that the network was writing negative CPMs. “Absolutely,” he said. “We have given modest price concessions to this point to write some of the more important business that we do.”
ABC, also writing single-digit negative CPMs, was about 85 percent done by close of the business day Friday. Estimates are that the network would hit $1.65 billion to $1.75 billion in upfront sales, substantially below last year’s $2 billion-plus total but in line with expectations of this year’s softer market.
On the cable side, many budgets are being registered this week. But before there is much in the way of upfront action in cable, a “lot of the broadcast money is going to have to be registered first,” said one cable-network ad executive, who added that Mr. Karmazin’s “hold-the-line” stand at Black Rock is going to impact the timing of the cable upfront.
In other words, cable is stymied until CBS moves. Some deals might go down this week, the cable executive predicted, but the greater likelihood is that cable’s upfront won’t happen until after the Fourth of July holiday.
As for the cable networks in the best shape, a number of buyers said they are looking to some of the more upscale, targeted networks, such as E! and Comedy Central, as opposed to some of the more general entertainment cable vehicles.
And though some cable networks deny it, buyers insist they are being offered a number of cable deals at steep double-digit CPM decreases in exchange for significant increases in share of budget.
As one buyer said, “In this marketplace, with the kinds of deals we can command and with budgets being down, there’s no doubt that there are going to be some losers on the cable and syndication side this year.”