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Nets, Buyers Prepare to Play Hardball at Upfront

Jan 19, 2004  •  Post A Comment

Seeking to pacify advertisers who are angry over weak overall broadcast ratings and high spot prices, NBC executives are giving a buildup to big-event programming scheduled for later this season-the Summer Olympics and the series finales of the sitcoms “Friends” and “Frasier”-and predicting the network will make up for much of the early-season ratings erosion.
NBC also is looking to set the stage for a less combative upfront advertising market come June. “We feel positive about the upfront,” said Jeff Zucker, president of the NBC entertainment, news and cable group, at the Winter Press Tour in Los Angeles last week. “There is nothing like network television.” With these events, he said, overall network ratings “are going to be flat to up.”
This would be a marked improvement over what media agency executives said has been a 9 percent decline this season so far among the four major networks in viewership of nonsports prime-time programming. Mr. Zucker said the audience decline is actually smaller-5 percent vs. a year ago-when all programming for adults 18 to 49 is analyzed.
Advertiser anguish over lost viewership this season came on top of what buyers considered to be onerous price increases during last year’s upfront advertising market. Those increases of 15 percent to 19 percent have led clients to threaten that if similar increases are requested this year, significant amounts of advertising budgets will move out of network TV.
Some sources estimate that almost $1 billion in broadcast network advertising-about 10 percent of the broadcast upfront advertising take-could end up going to cable if the increases recur. During the last upfront period, network television got the highest program increases, amassing $9.3 billion in revenue collectively for six networks. Cable television posted $5.1 billion, according to estimates, and national syndication grabbed $2.3 billion.
NBC isn’t alone in defending the network ground. Two weeks ago, ABC, in trying to blunt this groundswell, made a presentation to advertisers touting the benefit of broadcast network advertising over cable and other media.
Media executives are mostly taking a wait-and-see attitude. “Will money move to cable? Maybe,” said Larry Blasius, senior VP of national broadcast for Magna Global USA. “There was a lot of sticker shock last year. Clients are going to have a real hard look this year.”
For one agency, Carat North America, the price is already too high, and it will be shifting money out of network to cable or other media for some clients.
“I told ABC not to come see me [about the presentation],” said Andrew Donchin, senior VP and director of national broadcast for Carat North America. “They are wasting their breath. That’s because I believe in network television. The reason we are going out of network television is because we can’t afford to be there. It’s not that we don’t like it. It’s not a quality issue. I like a Mercedes, but I just can’t afford it.”
In the past, clients merely whined about the network price increases. This year, advertising executives believe the noise has reached deafening levels. “It’s getting louder and louder,” said Lyle Schwartz, senior VP and director of media research at Mediaedge:cia. “And when it’s going to hit a crescendo, it’s going to hit hard.”
Massive swings of money to cable will not occur, said other media agency executives, some of whom contend that broadcast network sellers will be more realistic about pricing this year.
“I don’t think anything that was given to networks last year is going to suddenly go to cable,” said Aaron Cohen, senior VP and director of national broadcast for Horizon Media. “Network will be smart enough not to go for double-digit increases. In an election and Olympics year, the CPM increases have been historically smaller.”
Virtually every season for at least a decade now, cable advertising executives have been expecting a windfall of advertising dollars from sponsors fed up with broadcast network price increases. Cable executives believe the time has arrived.
“This is kind of a breakthrough year,” said David Levy, president of Turner Entertainment Ad Sales and Marketing. “This was the year of the dramatic thing happening. You saw a huge amount of [network] shows that became unsuccessful very quickly; you saw ratings declines larger than in the past; you saw [young male] demographics almost disappear. At the same time, you saw growth in the cable business.”
So far the current marketplace offers a mixed picture. The scatter market-the short-term buying of network advertising-has been weak, according to media buying executives. But the Summer Olympics on NBC could have an effect on the marketplace, taking additional advertising revenue away from other networks.