As the record 2003-04 upfront buying season winds down, questions are beginning to emerge over just how firm those advance ad commitments are and what they may portend for the rest of the broadcast advertising year.
If they remain firm and demand keeps stable or builds, the 2003-04 scatter marketplace will be a repeat of last year’s ultra-tight ad market. Or as some ad agency executives suggest, advertisers may have bought more than they necessarily intend to use and the 2003-04 scatter marketplace may deteriorate as they cancel portions of their upfront ad buys and dump that inventory into the scatter marketplace.
Even if upfront advertisers should hold firm, the record upfront ad commitments may not necessarily be the harbinger of a rosy 2003-04 TV advertising marketplace that many in the industry would like to believe. If history is the rule, big upfronts don’t necessarily boost the overall TV advertising marketplace. Just consider last year, when the 2002-03 prime-time upfront marketplace expanded 17 percent while total U.S. ad spending is projected to rise only 5 percent in 2003.
In fact, looking back at the modern history of the network upfront marketplace, one finds hardly any correlation to the rest of the media world, including the full-year network marketplace itself. Over the past 16 years for which securities firm Merrill Lynch has published estimates, the network prime-time upfront has grown an average of 10.7 percent. That’s more than twice the average annual rate of 4.2 percent that the total network ad marketplace has expanded during that same period. (See accompanying table.)
This data shows that way too many things occur before upfront ad growth can be realized on a full-year basis. Aside from cancellations, a sizable portion of network upfront ad buys may become diluted by ratings shortfalls that force the networks to give potentially valuable scatter inventory to upfront advertisers as make-goods. With prime-time upfront sellout levels of 80 percent to 85 percent, that would leave precious little inventory available for sale in the scatter marketplace.
Driving Up Cable Rates
Should upfront ad deals remain firm and audience shortfalls eat up the remnants of network prime-time inventory, it would likely cause a repeat of 2002-03, when demand for cable scatter inventory outpaced supply for the first time, driving cable ad prices up over upfront rates.
Meanwhile, rising cable upfront sellout levels may also put increased pressure on the scatter marketplace. While basic cable networks historically have sold only a fraction of their total ad inventory during the upfront marketplace, that percentage has begun rising in recent years, even as the total supply of cable ad inventory has been expanding.
During the early 1990s, upfront ad deals represented only about 25 percent of annualized cable advertising sales. In the past few years, that figure has begun to approach 40 percent. Depending on how cable’s 2003-04 upfront finalizes, it could rise to as much as 45 percent of cable’s projected 2003-04 ad total.
Joe Mandese is a longtime editor and writer following the advertising business. He is a former media editor of Advertising Age and a former senior editor of Marketing and Media Decisions.