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Magna Seeks Price Breaks

Nov 24, 2003  •  Post A Comment

The fourth-quarter television ad market is ending on a whimper, and one major ad buyer is looking to take advantage of the weak market by asking cable networks to roll back rate increases gained at this year’s upfront.
At the same time, ad sellers are seeing signs that the market will rebound in the first quarter of next year.
Magna Global, the media negotiating arm of the Interpublic Group of Advertising Agencies, has been seeking below-upfront costs per thousand from cable networks as it looks to buy for clients that buy media on a calendar-year basis. (Most clients buy at the May upfronts for the TV year, which begins in September.)
Bill Cella, chairman of Magna Global USA, declined to comment on his strategy. But network executives said networks with strong ratings and young, upscale demographics are resisting Magna’s attempts at price cutting.
Media executives had been hoping that relatively strong corporate earnings would result in last-minute ad spending during the fourth quarter. But so far, little of that spending has materialized.
“Unfortunately, as we get closer to Thanksgiving, it’s looking more like turkey than plum pudding,” said Bruce Lefkowitz, executive VP, ad sales, Fox Cable Networks.
“It is whimpering,” said Mel Berning, president of national broadcast at MediaVest Worldwide. “There is nothing big going on out there in fourth-quarter scatter except for deficiencies,” he said, referring to the ratings shortfalls at the networks and the make-good spots that advertisers are receiving.
“The scatter market [the networks were counting on] hasn’t really developed. Their last hope would be that some year-end money shows up.”
Mr. Berning said that NBC and CBS still have inventory to sell and that pricing hasn’t yet dropped below upfront levels.
So far this year spending by traditional scatter buyers is off 10 percent to 15 percent, he said. On top of that, many advertisers shifted spending from scatter to the upfront, Mr. Lefkowitz said. “Those [networks] who had great upfronts are eking out to try to cross the finish line, whereas others are in worse shape.”
Hallmark Channel Executive VP of National Advertising Sales Bill Abbott said, “We’ve had a bunch of activity in the last couple of weeks. I wouldn’t say it’s robust.” Mr. Abbott said he’s gotten business from DVD marketers, telecommunications companies and some retailers.
Other networks were more positive. “We met our numbers. We have been virtually sold out,” said Neil Baker, executive VP of advertising sales for E! Entertainment. But if 2003 is ending quietly, 2004 may be different.
“If there’s a positive sign on the horizon, it’s that we are writing first-quarter scatters and calendars very actively,” Mr. Lefkowitz said. “It’s six weeks before the first quarter starts. I hate to say it, but six weeks before fourth quarter we were still trying to firm up people’s upfronts. So if you look at that as an indicator, that’s a very positive sign.”
First-quarter business is coming from one of the wireless phone companies, a pharmaceutical company, movie studios and alcoholic beverage makers.
Sellers also noted that advertisers are retaining the spots they agreed to buy in the upfront. For the first quarter 2004, media buyers say, advertisers canceled about 3 percent of their network inventory in the period. This was at the same level a year ago when the scatter market was strong. Typically, advertisers cancel about 10 percent in the period.
“What it says to me is that there is no big problem in the marketplace,” Mr. Berning said. “It’s not like advertisers overbought or are projecting their businesses to be down. Now we have to see if scatter develops.”
“Options are low single digits-very minimal options have been taken,” Mr. Baker Said. “That is a strong indication of a healthy advertising marketplace.”
Wayne Friedman contributed to this story.