Ad pricing soars for 1st quarter

Nov 25, 2002  •  Post A Comment

If you’re in television ad sales these days, life is good.
Consider this scatter snapshot: Insiders say first-quarter cost-per-thousand pricing at the broadcast networks is up by as much as 30 percent, and perhaps even more, over upfront prices, while at the cable networks, sellers put the scatter pricing uptick in the mid-20 percent range. And buyers and sellers agree that the number of options exercised recently by both broadcast and cable advertisers was at a historic low.
But of course, the blue-skies mentality and sunny optimism that prevailed in the go-go ’90s have yet to return to Madison Avenue or Broadcast Row, soaring scatter CPMs notwithstanding.
At ABC, for example, the packaged goods category has been coming in first and drawing those high percentage increases, said Mike Shaw, president, sales and marketing, ABC Television Network. But as the quarter continues and higher-end categories come into the marketplace, expect those percentage increases over upfront to be lower,
Mr. Shaw said, “because the lower-end business is coming in first, so that’s going to have the highest percentage attached to it initially.”
Options at ABC are “significantly lower than anybody’s ever seen,” Mr. Shaw said. “We run a 10-year average and they were the lowest [they’ve been] in the last 10 years.”
At Lifetime, one of ABC’s sister cable networks, the story is much the same: “We’re in the mid-20s” over upfront, said Lynn Picard, executive VP, advertising sales, Lifetime Television.
“Supply is getting limited, which is definitely putting pressure on price, and that hasn’t happened for a while in cable,” Ms. Picard said. “Contrary to everyone thinking there’s endless inventory [in cable], we are in fact upon a time where [the good stuff] is limited.”
Of course, buyers are not known for agreeing with the sellers’ view of the marketplace, and the buyers are quick to point out that a lot depends simply on which metric is used-cost per thousand or unit price.
CPM increases might be stellar, but the broadcast unit-price increase over upfront is, generally speaking, in the 10 percent range, said a top executive at a major advertising agency. As for those healthy cable increases, “Not here,” he said.
The executive agreed that when it comes to options, which came due last month, the numbers exercised were low, though he pointed out that the health of the second half would be determined more by second-quarter options than by current conditions.
CPMs are “north of the upfront,” said Rino Scanzoni, president, broadcast division, Mediaedge:cia, also pointing out that how healthy the marketplace seems depends to a certain extent on the metric used to measure it. “The broadcast networks are all in a good position because they’re all at a much higher sellout rate than they were last year.”
But the first quarter is far less important than the second in judging the health of the marketplace. “Historically, the quarter that is the most indicative of the marketplace moving forward is second quarter,” Mr. Scanzoni said. “Second quarter is going to require very healthy revenue growth to sustain healthy CPM increases in scatter.”
But buoyant marketplace notwithstanding, both buyers and sellers are still concerned, even though at first glance they may appear to be worrying all the way to the bank. Of course, Madison Avenue is awash in worries even in the best of times, but this particular disquiet begins with the shocks of the past two years and includes the sense that the economy or world events could yet derail the ad sales market. The disquiet specifically includes prospects for the fourth quarter, which may be less than bountiful.
“There’s something not jibing,” Ms. Picard said, pointing to the troubled state of the general economy. “Fourth quarter is a big test for automotive and retail. So far it’s not looking great.”
When all the numbers come in for the fourth quarter, revenue growth will be “very moderate,” Mr. Scanzoni said. “Clearly we are in a marketplace that’s growing, but I believe it’s growing quite moderately. I don’t think the CPM premiums being generated in the scatter marketplace are necessarily translating into comparable revenue increases by any stretch of the imagination”
Market strength
The “why” of the hot marketplace, “That’s the million-dollar question and it has been since last May,” said Mr. Shaw, who nonetheless expressed optimism about the market’s continued strength. “I also suspect that the economy is stronger than people think,” he said, indicating that fourth-quarter auto sales are not necessarily the be-all of the strong TV ad-sales market. “When [the] packaged goods [category] is up, which is not interest rate sensitive and is just a direct reflection of people’s need for goods, I personally take that as just a strong indication” of the market’s health, he said.
As for those audience deficiency units that so bedeviled ABC last year, right now the network is in “great shape,” Mr. Shaw said. “We’re still in sale in the current quarter [and] we’ve still got some December inventory available for last-minute shoppers, as it were. The reason we have inventory available still is that we’ve done well this quarter, both in terms of the ratings vis-a-vis a comparison to a year ago, and also, more importantly, vs. the ratings of what we sold.”