Advertising forecast: Broadcast Upfront To Top $8.6 Billion

May 5, 2003  •  Post A Comment

The broadcast upfront marketplace is expected to bring between $8.6 billion and $8.8 billion this year, marking a 5 percent to 7 percent year-to-year increase, media buyers and sellers told TelevisionWeek last week.
That broadcast tally would be at least $200 million shy of the prediction made last month by Viacom President and Chief Operating Officer Mel Karmazin, whose $9 billion estimate many in the marketplace deemed overly optimistic.
Last year the six broadcast networks raked in $8.2 billion. The anticipated increase for this year in mid- to high-single-digit percentage range would be despite the continuing decline of broadcast ratings. Season-to-date, the six networks combined are down 2 percent in adults 18 to 49 ratings and down 2 percent in total viewers.
“I think there will be more money in the prime-time market,” said Tim Spengler, executive VP and director of national broadcast, Initiative Media. “How much is still a question. Ten percent more money feels too high at this point to me.”
Bill Morningstar, executive VP of media sales at The WB, said signs of underlying strength in the television marketplace right now include a strong scatter market and the diversity of television advertisers.
“Last year’s upfront was very strong,” he said. “The scatter market has been incredibly strong all year long. Option pickup rates have been running much less than normal historical levels, which means advertisers are buying their media schedule, and they need it. They are holding onto it. That’s a positive barometer. You’re seeing a lot of different businesses spending money in the television world. It’s not just one category that is driving this. It’s coming from a lot of different business sectors.”
Advertisers are just now coming up with their budgets for next year, but many ad execs expect to see budgets up slightly this year. Upfronts could also be infused with more money from companies that got hurt last year by not buying as much in the upfront and then facing higher scatter prices later in the year.
While Mr. Spengler said some scatter money could move to the upfront this year, he pointed out that the networks sold about 90 percent of their inventory in the upfront last year, so they didn’t have that much scatter to sell, driving the scatter prices up.
This year, the networks could hold back more of their upfront inventory, hoping to capitalize on higher prices in scatter, but that’s always a gamble. “The only issue is how comfortable they are telling Wall Street they wrote less than they did last year,” Mr. Spengler said. “There’s no guarantee that next year’s scatter market will be as healthy as this year’s.”
John Rash, senior VP, director broadcast negotiations, at Campbell Mithun in Minneapolis, said he believes upfront negotiations will happen pretty quickly after the networks unveil their schedules in New York next week, because there has been consistent scatter activity.
Programming Pivotal
There is an unusual amount at stake with the programming announcements this year, Mr. Rash said, “because negotiators will be looking for cues and clues to see if Fox can solidify their ascendancy, how NBC plans to address the impending season as well as the eventual departure of Friends, if CBS can continue to build on their success, if ABC can recapture their fourth-quarter momentum, if UPN can re-establish a strategy to reverse their audience erosion and WB in particular will be looking to achieve sitcom success on top of their dramas.”
Media buyers and analysts say CBS, NBC and The WB are best positioned heading into the upfronts. Though NBC’s adults 18 to 49 ratings are down 13 percent season-to-date and many of their shows are aging, they still are No. 1 in the demo and have another year of Friends anchoring their lucrative Thursday night lineup.
CBS, which targets the 25 to 54 demographic, has shown steady growth and is up 2 percent in total viewers season-to-date. “In today’s economy-and this is where I think CBS is smarter-I don’t think it’s just the 18 to 49s,” said Chuck Bachrach, executive VP of media resources and programming at Santa Monica, Calif.-based agency Rubin Postaer. “How about the 25 to 54s, the 35-plus audience? That group of the population should have, if the economy’s in decent shape, more money than the 18 to 24s.”
The WB also got high marks for its consistent programming strategy and knowing its target audience.
Buyers said Fox and ABC raised questions because of their heavy reliance on reality, while UPN has to prove it has a strategy it will stick with.
Titles Key for Reality
While some advertisers have shied away from reality, media buyers said they think networks will be able to sell reality shows on their fall schedules as long as advertisers know which shows will air.
If a network schedules a reality wheel with shows to be named later, advertisers might hesitate because if they end up not liking the show that gets put in that time period, they wouldn’t have an option to get out of it because they bought reality going into the upfront, Mr. Spengler said.
Mr. Bachrach said he thinks advertisers will end up purchasing reality because it will get them better prices on scripted programming that advertisers want.
“[Networks] may sell it in tiers,” he said. “You buy some of my good stuff and we package it with your reality and you get a pretty good package. If you want just reality, the number will be low. If you want just the good stuff the number will be three times higher.”
While every year advertisers complain they get less for their money on broadcast, they then turn around and cough up the money for the networks instead of moving it to other mediums such as cable, radio, print or outdoors.
Mr. Bachrach, for one, is hoping this will be the year advertisers put their foot down.
“[Networks] are pricing on demand and not ratings,” he said. “I think the advertisers this year in the upfront are going to say I’m mad as hell and I’m not going to take these increases that you networks are giving us based on just demand. I’ll pay for what it’s worth, but I’m not going to give you an artificial increase. Some advertisers-and I hope there are some-should say we’ll look to other mediums to spend our money.”