The basic messages that will be heard in the upcoming upfront negotiations got an early public airing in New York last week when buyer Irwin Gotlieb, chairman and CEO of MindShare, and seller Mel Karmazin, president and chief operating officer of Viacom, sparred at a panel during the Television Advertising Bureau’s annual marketing conference.
“If upfront [pricing] goes down too far, don’t worry about it,” Mr. Gotlieb said. “The scatter prices will make up for it. The total money gets spent.”
Mr. Gotlieb also said he was unaware of any network selling in the current spot market at prices below last year’s upfront.
“I don’t see any major differences in the way this upfront will be done compared to the last four years. It will just get done at a lot higher CPMs,” Mr. Karmazin retorted to knowing audience laughter.
Despite the perennial debate over the viability of the upfront, “The upfront serves our interests. We get there early for our larger clients,” Mr. Gotlieb said. “From the sellers’ standpoint, they get a bunch of their inventory taken care of early.”
In a bow to local television’s largest ad category (four of last year’s top five advertisers in local TV were auto companies), the TVB’s conference this year took place at the same time and at the same venue as the New York Auto Show.
Tom Wolzien, senior media analyst at Sanford C. Bernstein & Co., predicted that auto incentive programs would continue to take dollars from advertising budgets. But Mr. Gotlieb disputed the value of those incentives. “An incentive creates [only] one sale,” Mr. Gotlieb said, while advertising creates consumer loyalty and consumer aspirations. Incentives are “money down the toilet,” he said.
Mr. Wolzien predicted 1 percent revenue growth for television advertising overall this year, “picking up substantially” to a 5 percent growth level in 2003. He cautioned proliferating cable networks that they might not share in the recovery: “Too much capacity out there,” he said. “Downward pressure continues.”
Mr. Karmazin predicted that general entertainment cable networks will do poorly and targeted cable networks will do well, while cable-news ad prices will be down because of oversupply. Not surprisingly, Mr. Karmazin said that Viacom is not interested in adding either general-entertainment or cable-news channels to its inventory and that its TNN, formerly a general-entertainment network, has been rebranded as a targeted network aimed at males 18 to 49.
Mr. Karmazin and Mr. Gotlieb agreed that consolidation on both sides of the negotiating table is not a bad thing. Partly because of consolidation, upfront negotiations are “far less adversarial” than in the past, Mr. Gotlieb said.
“We’re both too big to do anything foolish,” Mr. Karmazin agreed.
Previous TVB conferences have been held in conjunction with the National Association of Broadcasters annual convention. Despite the TVB’s move away from the NAB, John May, the NAB’s executive VP for governmental affairs, was on hand to brief attendees on the Washington outlook for TV advertising.
Mr. May said the political contests ahead, which will determine whether Republicans or Democrats will control Congress, will be “hard-fought, costly and hopefully well-financed.” He cited a dozen Senate races, 50 congressional races and a handful of gubernatorial races and ballot referendums as where the money will be spent this fall.
“This is the last year of a sort of unfettered spending in the soft-money category,” he said. Campaign finance reform legislation signed by President Bush last week says that for political advertisers to qualify for the lowest-unit ad cost, they must “stand by your ad” by identifying the source of any political attack against the opposition. Another provision of the legislation seeks to keep unions and corporations from paying for issue ads in the final 30 days before a campaign. NAB will participate in the likely court challenge to that provision, Mr. May said.
“If the new law takes effect, it’s going to have a dramatic impact on the political category,” he said.