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Upfront Reformers Pin Hopes on 2005

Feb 23, 2004  •  Post A Comment

Get ready for more cold pizza this May.
Despite bold predictions that the network upfront buying process could be tamed, David Verklin, CEO of Carat North America, conceded that it will be business as usual this year.
Mr. Verklin has called for the upfront, during which the bulk of prime-time network television ad time is purchased, to be moved from May to September to better accommodate marketers’ budgeting and planning cycles. He also proposed that the buying and selling take place between 8 a.m. and 8 p.m. to prevent mistakes in orders worth million of dollars that are taken in the middle of the night by tired executives fueled by stale coffee and takeout food.
While it won’t happen this year, Mr. Verklin said he thinks the major buying agencies are basically in “philosophical” agreement that the changes would help, and he’s hopeful that other leading media buyers will help convince the networks and marketers to implement them in time for the 2005 upfront.
The networks have benefited from the current system, which encourages buyers to stampede late at night in fear that prices will rise and commercial time in important shows will disappear if they wait until morning. In return for giving up such a tactical advantage, the networks would get firm orders in two quarters. Under the current practice, buys made in the upfront are firm only in the fourth quarter. In the following three quarters, buyers can return up to 50 percent of the commercials that they buy.
Because of his reputation as something of a maverick, Mr. Verklin said, he’s hoping that a more venerable media executive-MindShare CEO Irwin Gotlieb-taking a leading role on the issue will make it more palatable to the industry.
Mr. Gotlieb was traveling last week and could not be reached.
But another senior media executive had only faint praise for the effort. “I hope David makes progress,” said Ray Warren, managing director, OMD. “We are not so focused on the cold pizza aspect as we are driving more value out of the investing of our client’s dollars in national television aspect. … If driving value results in some of the things Verklin is talking about, so be it, but it’s not our strategy to work on clock and calendar.”
To be sure, Mr. Verklin agreed that moving the date of the upfront and establishing some rules about timing were less significant to clients than being able to pay reasonable prices for television commercial time.
Mr. Verklin said that after two years of paying double-digit increases to the broadcast networks in the last two upfronts, clients are angry-angry enough to seriously consider alternatives to broadcast networks. Those alternatives include cable TV, local TV, syndicated TV and no TV, he said.
Given that anger, Mr. Verklin said he expects the networks to seek pricing that is flat to up in the low single digits during this year’s upfront. They will moderate their asking prices because seeking more risks is killing the “golden goose” the broadcasters have been feasting on for years.
In most years, media buyers begin their posturing months in advance of the upfront. They cite low demand from their clients and tepid interest in the new programming being developed for the networks as reasons why prices won’t skyrocket once the selling begins in earnest.
This year, predictions that the upfront will be moderate at best seem to ring true, especially considering that the 2004-05 broadcast season will occur post-Olympics and mostly post-election.
At a recent media conference in New York, Tim Spengler, director of national broadcast at Initiative Media, said he expected the upfront to be “moderate.” In a follow-up interview, Mr. Spengler said it was too early to be more specific. “There are no indications yet that it will be excessively strong or excessively weak.”

At the same conference, MindShare’s Mr. Gotlieb reportedly predicted that the broadcasters would take in $9 billion during the upfront, down from $9.6 billion last year.
Even the networks are saying that the big cost-per-thousand increases of the past couple of years won’t be repeated this year. In public statements, CBS Executive VP for Research and Planning David Poltrack acknowledged the “frustration” felt by advertisers. But he said he expected the upfront market to be strong and that broadcasters will end 2004 with a 10 percent increase in revenues, compared with a 3 percent increase in 2003.