The rising cost of prime-time TV advertising and the future of the upfront process itself were hot topics at the third annual Upfront Summit, held last week in midtown Manhattan. The spirited debate ranged from those who think the networks are raising prices to a point where it is prohibitive for some buyers to a seller’s point of view that the ads will sell as long as demand remains strong.
“Some clients” will not buy broadcast prime time in this year’s upfront because of the prohibitive costs, warned David Verklin, CEO, Carat North America. “Mark my words,” he said, “the only people who can afford prime these days are … in pharmaceuticals, automotive and entertainment. And prime time is going to become the province of those three categories.”
“The fact is, the demand against that [limited broadcast] inventory creates an upfront,” said Mike Shaw, president, sales and marketing, ABC Television Network, defending the broadcast networks and what is expected to be their aggressive upfront pricing strategy. Upfront pricing was below the cost of scatter in 11 of the past dozen years, Mr. Shaw noted.
“Our distribution is second to none,” he said. “Nobody spends more money on programming than the networks. … Every major advertiser with national distribution lays their base with the networks.”
This will be “transition year” for the upfront process itself, said Peggy Green, president, national broadcast, Zenith Media. “What we bought in the upfront [in 2002] was not the final schedules that we ended up with,” when failing scripted shows were replaced by a flood of reality programs. “If that’s what happens [again] this year, the upfront probably might have to be revisited.”
The reality genre is just a “quick fix” for faltering network schedules, said John Muszynski, Starcom USA’s chief broadcast investment officer. Because of the reality factor, this year’s broadcast upfront might in effect be two-tiered, with a smaller pool of ad dollars going into reality shows, while buyers representing reality-skittish advertisers would make a “huge push for the scripted properties.”
In the cable panel, Court TV’s ad-sales executive VP Charlie Collier predicted the upfront would be a buyers’ market. “It’s a buyers’ market because … it feels like there’s a lot of money in the market,” and there are a “lot of places to put it.”
Cable’s general pitch to advertisers this year has been about its “value proposition” and about the CPM differential between it and broadcast. “The dollars are following” the Nielsen numbers into cable, said Steve Grubbs, CEO, PHD North America, with “up to 35 percent or so” of client spending going to cable. Some clients even spend their budget in cable, he added.
Traditionally, cable holds back more of its inventory for scatter than do the broadcast networks, although last year cable generally jumped into the deeper end of the upfront pool, with the result that they had less inventory available when scatter prices soared. “Strategically, this upfront we’re going to be a little more selective,” said Dave Cassaro, executive VP, sales and distribution, E! Networks, “and roll the dice on scatter.”
More than one buyer at the event warned the broadcasters that their high CPM demands could result in pushing more advertisers’ dollars to cable and syndication. One token of that nascent trend was the presence on a panel of two unexpected players in the upfront game-Channel One Network, which broadcasts into schools, and Clear Channel Advantage, which will offer its own upfront presentation this week,,
Carat’s Mr. Verklin repeated his contention that the upfront system was broken, recounting a meeting with the CEO of a client that spends “tens of millions” annually on broadcast and cable television. “He turned to me and said, `David, please help me understand why we do business in 72 hours. Help me understand why we’re taking all this money and you guys spend it at 4 o’clock in the morning while eating cold pizza.”’
One answer to the 72-hour cold-pizza-upfront conundrum came from Alec Gerster, CEO, Initiative Media Worldwide: Buy microwave ovens, he deadpanned, to keep the pizza warm.