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4th quarter true test of TV ad market

Jul 29, 2002  •  Post A Comment

A quick look at the third-quarter TV ad market would suggest great news for TV programmers, as shows are posting 50 percent price increases over a year ago. But actual overall revenue gains will be slim; the real issue for the TV market is in the months to come.
“It’s the best market [in terms of pricing] they had in a long time,” said Richard Kostyra, president and CEO of Media First International, a New York media buyer owned by Interpublic Group of Cos. “[But] everyone is virtually out of sale. The real question is the fourth quarter.”
Media analysts expect little scatter-market money to materialize in the fourth quarter, which could mean a drop in prices vs. those made in the recently concluded upfront market.
The upfront is when advertisers commit to a season’s worth of ad time before the start of the broadcast season; scatter buying is when advertisers make near-term, quarter-by-quarter deals.
Less money will appear in the fourth-quarter scatter market because marketers have shifted spending from next TV season’s scatter into this past June’s upfront. Broadcast network prime-time upfront commitments rose 20 percent to $8.1 billion, according to an analysis.
There could be more bad news, with advertisers possibly lightening upfront commitments made in June. These commitments, called holds, traditionally played by an industry rule: An advertiser was 100 percent committed to its fourth-quarter upfront agreement but could cancel up to 25 percent of first-quarter and 50 percent of second- and third-quarter upfront commitments.
Two years ago, however, many advertisers broke with tradition as some $400 million in fourth-quarter holds was dropped on the eve of the 2000-01 broadcast season.
TV buyers said it could happen again this year. “It’s a combination of things,” Mr. Kostyra said. “The stock market is very shaky, and [corporate] management may need to reduce expenses for the end of the year.”
So a hot third-quarter scatter market is not necessarily indicative of a boom market going forward.
Strong third-quarter activity has followed up on the vigorous first and second quarters, which showed 15 percent to 25 percent gains in pricing on networks shows compared with 2001 upfront prices. This is primarily due to double-digit percentage declines in ratings at The Walt Disney Co.’s ABC and News Corp.’s Fox that forced those networks to give advertisers additional inventory to make good on their rating guarantees. As a result, there has been limited inventory to buy in the second quarter and, now, even less in the third period.
Rising prices in the third-quarter scatter are the result of networks looking to complete final make-goods before the start of the new season in September. ABC and Fox are virtually sold out, though Fox is having success in generating new ratings points due to its hit “American Idol.”
Overall, Viacom’s CBS and General Electric Co.’s NBC are beneficiaries. Agency executives said CBS’s and NBC’s prices can be as much as 80 percent more than the 2001 upfront. Other prices are 40 percent to 50 percent above upfront levels. One network spokesman concurred that average price increases have been in the 50 percent range.
Adding to the tightness is that summer viewing usually produces lower ratings, resulting in fewer gross ratings points (GRPs) to sell. “If an advertiser has to buy 100 points in the second quarter, they can do that with maybe 12 or 13 [prime-time spots],” one media agency executive said. “In third quarter, it would take about 25 prime units.”