Guarantees dropped in scatter

Oct 21, 2002  •  Post A Comment

Guarantees have all but disappeared from broadcast scatter this year, but that doesn’t mean they can’t reappear suddenly, perhaps at one network, as a ploy to gain tactical advantage.
“I think that all things being equal, assuming that everyone’s writing business at the same levels, obviously the network that would guarantee [its scatter costs per thousand] would be more attractive,” said Ed Gentner, senior VP, group director, national broadcast, MediaVest, articulating a consensus view on Madison Avenue.
A guarantee is when a network promises advertisers that a TV show will perform at a certain ratings level. It’s commonly used in upfront buys.
The reason for the guarantee disappearance so far is as simple as the tight TV advertising marketplace, which has seen “sold out” signs posted on the most desirable properties all across the broadcast-schedule landscape, just as last year’s upfront advertising swamp prompted the networks to offer a high number of scatter guarantees to induce buyers to jump back in.
But even last year, after the upfront gloom lifted, “Once you started getting into the back-end of the year, the second and third quarters
of 2002, when things picked up and there was enough money to basically exhaust the inventory, there was less need to do that,” said Rino Scanzoni, president, broadcast division, Mediaedge:cia, North America.
“You’ve got to put it into context,” Mr. Scanzoni said. “Last year you had a significant contraction in the upfront marketplace. That contraction didn’t necessarily reflect the total marketplace. It was really a phenomenon of … people spending less in the upfront and more as they went along. When you have a lot to write, a guarantee is something you might want to do.”
Last year, before the money began to return to the marketplace, the networks needed to capture cash and they could always come up with some make-good real estate later if they didn’t make those CPM numbers. That was a careful but somewhat risky strategy in some network executive suites, and it depended on a careful CPM calculation. As long as the ratings weather didn’t get too harsh, with falling Nielsen numbers submerging a given network’s entire prime-time acreage, all would be well.
That calculation became part of the problem at make-good-strapped ABC last season, where upfront make-goods cascaded into scatter make-goods, and to a lesser extent at Fox as well.
Now those days are just memories at ABC, which has put its make-good problems behind it, a network spokeswoman said, pointing to prime-time scatter prices that are 25 percent to 30 percent higher than the upfront, daytime scatter prices that are 60 percent to80 percent over the upfront and an 80 percent to 85 percent sell-out level for Super Bowl ads. At ABC, as at the other networks, those prices come without guarantees.
Prices are up at Fox, too, and the scatter forecast is bright. “Knock on wood, it looks like first quarter is going to hold up,” said Jon Nesvig, Fox’s ad sales president. “Yes, there’s uncertainty out there, but we don’t see anything bad yet,” he added, reflecting the larger unease about the economy and the state of world affairs.
As far as scatter pricing in prime time, “We are significantly higher,” Mr. Nesvig said, “but the difference is in upfront. When you’re guaranteeing one level you’re using your numbers, and that’s one price. When you sell without a guarantee, the agencies have to use their own numbers. … On our own numbers, we’re probably selling 20 percent to 25 percent higher [than upfront in prime time], but on the agency numbers it may be 40 percent higher.”
Past scatter CPM guarantees, like upfront guarantees, are based on “inside numbers generated internally,” one senior advertising executive said, calling the internal numbers “conservative” and the network operations that generate those inside numbers “sophisticated” and “accurate.” Those inside numbers are factored into the overall network sales strategy. As long as the guarantee, the outside number, isn’t missed by so much that the inside number is missed too, the network strategy remains sound. “But all of a sudden, if your inside number is dramatically off, you’ve got a problem, because your whole game plan is turned upside down,” the executive said.
This year, the networks are capturing cash, too-this time without the come-on of high cost-per-thousand promises.
“This year the networks are looking at significantly higher sellouts than they were last year, which is dictating that there are little to no guarantees thus far,” Mr. Gentner said. “A guarantee was definitely more of an enticer to do business [last year], but … at what price level? … If the networks had their druthers, nothing would be guaranteed. Then they wouldn’t be on the hook for any underdelivery.”
He pointed out that ABC, for example, had no choice but to jump aboard last year’s scatter-guarantee bandwagon. “If everyone else was offering guarantees and ABC was not, they wouldn’t get the business,” he said. “I wouldn’t necessarily say though that ABC was saying, `I just want the dollars. I’m going to guarantee it, knowing there’s a good chance I can underdeliver it.”
Scatter, said Mr. Scanzoni, “is where the rubber meets the road. You know how much money is left in the market and potentially how many rating points are left. … When you do an upfront, you’re doing this in June and you’re buying through September of the following year. A lot can happen.”