Two major advertisers, General Motors and Coca-Cola, have been dropping commitments to buy ad time, in effect undoing part of last year’s upfront.
The moves come at a time when ad buyers are complaining that they overpaid for broadcast airtime last year. They are vowing to take a different tack this year.
Advertisers are given an option to drop a portion of their upfront buys each quarter, and General Motors has been taking advantage of that option with some broadcast and cable networks. Network executives, speaking anonymously, characterized the second-quarter drop by GM-amounting to millions-as anywhere from “significant” to minor. A General Motors spokesperson said the company does not comment on its media strategy. According to TNS Media Intelligence/CMR, GM spent $182 million on broadcast networks in last year’s second quarter and $9 million on cable networks.
Coke’s moves raised more eyebrows. While the soft-drink maker was dropping ad buys on broadcast it was looking to spend what network executives estimated at $30 million to $40 million on cable. In the first half of last year Coke spent $36 million on cable and $112 million on broadcast. However, it was unclear whether the soft-drink maker was looking to make a wholesale shift of ad dollars from broadcast to cable.
Coke hired Starcom MediaVest Group in December as its new media-buying agency. Last November Coke did not make its usual cable buys for the next year, and sources said Starcom was scrambling last week to buy for the rest of first quarter 2004 and planned to complete buys for the rest of the year.
Sales executives said Starcom was talking to networks from which Coke rarely made major buys and was seeking to make deals at extremely low prices.
“Coke was bought one way for 20 years, and whether it was right or wrong, a new agency comes in and they’re going to look to do it differently,” said one cable network sales chief.
Traditionally, the sales executive said, Coke has done business with networks that could guarantee audiences in the 12 to 24 and 12 to 34 demographics, such as MTV, E! and Comedy Central. But last week it was talking to a broader range of programmers, including some of the general entertainment cable networks, though it hadn’t concluded deals with many of them because of pricing issues.
“[Starcom wants] to show an impact,” said another cable network sales executive. “They want to assure the Coke people that they made the right choice.”
A Starcom spokesperson declined to say whether the agency was buying more cable for Coke, or even whether its current buying strategy was reflective of its long-term plans.
“We were given buying responsibilities for this client less than three months ago and we’re pursuing the smartest possible investment strategies on their behalf,” the spokesperson said.
Cost-Cutting Move?
But some broadcasters said it appeared that Starcom was simply looking to cut media costs for Coke. “When Starcom won the account they promised Coke all kinds of savings, and what they’re looking at doing is taking options in second quarter and then going in and buying cheap cable to show that, Hey, we got your GRPs, but we’re saving you money.”
Some media executives said that if Starcom was indeed dropping high-priced network media buys to replace them with lower-cost cable, the agency was pursuing a tactic usually frowned on in the relationship-driven marketplace.
However, cable executives said the move could be a harbinger that major advertisers, burned by the broadcasters in last year’s upfront, may finally be ready to shift a larger share of their marketing dollars to cable.
“Maybe the story is that Steve Heyer [a former Turner executive who is now president and chief operating officer of Coca-Cola] has always been a proponent of cable, and this is a situation where he is putting his money where his mouth is and saying, We’re not going to pay those increases to the broadcasters,” one cable executive said.
Some cable execs maintained money is already shifting to cable. “We see money moving from broadcast to cable every day,” said Joe Abruzzese, president of sales at Discovery Networks U.S.
Overall, most networks said second-quarter options were being picked up at a fairly normal rate. Usually between 5 percent and 10 percent of the cancelable ad time is dropped by upfront ad buyers.
“I heard that options came back pretty much where they expected,” said Andy Donchin, head of national broadcast at Carat. But he said second-quarter cancellations at Carat were a bit higher than usual.
Michael Sakin, senior VP, advertising sales, at GSN-formerly the Game Show Network-said his clients opted to drop somewhat more advertising than usual. But he added that the second-quarter scatter market was already looking relatively strong.
“We’ve got more money working now in second than we ever had in first. First was just so quiet. We have to make up for options,” Mr. Sakin said.
Network ad sales executives said categories that were in the market included beverages, wireless communications, pharmaceuticals, automakers and financial services companies.