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Nets Resort to Ad Guarantees

Oct 6, 2003  •  Post A Comment

With their new-season shows failing to live up to the ratings guarantees promised to advertisers in last spring’s $9.3 billion upfront market, the broadcast networks appear to be offering new guarantees to sell fourth-quarter commercial time in the scatter market, according to ad buyers.
Viacom President Mel Karmazin was the first to accuse a rival-NBC-of stooping to such desperate measures. But two major ad buyers, who asked to remain anonymous rather than risk Mr. Karmazin’s wrath, said all the broadcast networks are offering guarantees in return for significant scatter budgets, including Viacom’s own CBS.
Traditionally, advertisers get commercial time at lower prices and receive audience guarantees when they buy schedules before the start of the season during the upfront ad market. Once the season starts the networks usually sell the rest of their commercial inventory on the scatter market without offering guarantees. Over the past several quarters, prices have been significantly higher on the scatter market. But after this year’s booming upfront, buyers said they are taking a wait-and-see approach to scatter, at least until ratings for the new season’s shows come in.
Speaking at the Goldman Sachs Communicopia investment conference last week, Mr. Karmazin said NBC is selling scatter at prices that are flat compared with upfront and that NBC is offering ratings guarantees, according to a report in MediaPost.
In no uncertain terms, NBC disagreed with Mr. Karmazin. “CBS should focus on its own pricing strategy and ratings performance rather than creating a smoke screen with inaccurate comments about the competition,” said Randy Falco, group president, NBC Television Network. “Scatter is pacing according to plan, with high-single-digit increases above the incredibly strong upfront prices. While CBS is stumbling in local ad sales and network key demos, NBC won premiere week by the biggest margin for any network in four years. CBS shouldn’t be giving guidance to anyone on sales matters.”
“I don’t know why everyone believes Mel about everything,” added Jon Nesvig, president of ad sales for Fox Broadcasting Co. “I think Mel needs to tend to his own business.”
At the conference, Mr. Karmazin claimed CBS is offering fourth-quarter deals at higher-than-upfront rates and is not offering guarantees, a stance the media buyers disputed.
“You can get scatter guaranteed from all the networks,” said one top media buyer. He said his agency did some deals. “It was leading up to the premieres. There was some inventory available in the fourth quarter and the networks were willing to guarantee it. But it shouldn’t just be NBC, because CBS was there too.”
A CBS spokesman declined to comment on the buyers’ assertion that CBS offered scatter guarantees.
The buyer said the guarantees don’t necessarily mean the networks see weak demand. “This isn’t a softer market, but I think they felt they needed the money that badly and that advertisers wanted a guarantee, and they were willing to guarantee it to get the money.”
But another buyer insisted that demand for advertising in the fourth quarter is being stalled until companies see what their own bottom lines look like. “Fourth quarter has been soft for quite some time. It’s the last fiscal quarter of most clients, so people don’t spend the money until they know they’re going to make their profit numbers,” he said.
He added that the guarantees are one way to sell commercial time in shows advertisers know won’t reach the viewership levels being projected by the networks. “The problem is they always think their ratings are going to be 10 [percent] to 12 percent higher than we do. They might think the CPM is a dollar. We think it’s $1.12. One of the ways around that is to guarantee the number. The guarantee takes the ratings dispute out of it.”
Guaranteeing scatter buys has been done from time to time in the past, according to one ad sales veteran. “Sometimes the networks do do guarantees in scatter,” he said. “It depends on how much money it is and how good the client is.”
Clients looking to make substantial buys may get guarantees, while those looking to cherry-pick top-rated programs will not. “Most people are waiting to see how the new season will sort itself out,” the ad salesman s aid. “I don’t think you’re going to be too willing to lay down $150,000 on a show that may or may not work.”