AT&T Hangs Up on $110 Mil

Aug 9, 2004  •  Post A Comment

TV network sales executives and programmers were shocked last week when AT&T abruptly dropped all of the upfront advertising commitments it made in June, to the tune of a massive $100 million to $110 million.

Media executives estimate each broadcast network lost between $5 million and $20 million. Overall an estimated $75 million to $85 million was lost by the broadcast networks; about $25 million was lost by cable networks and syndication.

“For the TV ad marketplace, it’s a big hit,” said one senior network executive. “But there has been no other breakage with other advertisers.” AT&T’s move comes during tough competitive times for the giant communications company once known as Ma Bell. Last week, under demands to increase profitability, the company said it would increase local phone rates for residential telephone subscribers in 40 states, including Florida, New York, Ohio and Texas. AT&T said in late July it would no longer try to attract new residential telephone users due to changes in federal rules governing competition among phone companies. Instead, AT&T plans to focus on business users. In February, Cingular Wireless agreed to buy AT&T Wireless for $41 billion, which would create the No. 1 wireless company with 46 million subscribers. That deal has yet to close.

Mark Siegel, VP of national brand and marketing media relations for AT&T Wireless, would say only that Cingular and AT&T Wireless will continue to operate as separate companies. Media agency Mediaedge:cia made upfront advertising promises for AT&T in June.

“I’m not going to speculate on what we are going to do in the future,” Mr. Siegel said. “We are vigorously advertising our products. But I’m not going to get more specific about the puts and takes of our advertising.”

One of the most visible AT&T commitments is with the Fox hit “American Idol.” The company is one of the three major sponsors of the show, along with Coca-Cola and Ford Motor Co. Estimates are that each company pays anywhere from $12 million to $14 million for a season sponsorship. Such sponsorship deals typically are made outside of the upfront. Fox executives declined to comment, but executives close to both companies anticipate that the Cingular Wireless brand will take over the AT&T Wireless commitment and that the “American Idol” deal won’t be affected.

Upfront advertising cancellations of this size are rare-and rarer still in July, well before the start of the traditional network season in September. Typically, virtually all upfront commitments-also called “holds”-are converted to orders by advertisers just before the start of the television season.

Advertisers who do pull commitments typically do it at the end of August. The only good coming from this, said one network advertising executive who was shocked by the AT&T decision, is that the move came early enough that the networks have time to adjust and possibly resell the inventory.

The AT&T move is significant because it comes from a major TV advertiser after a delicate upfront TV market in which the broadcast networks eked out slight overall gains, up to $9.4 billion from $9.2 billion in 2003, according to media buying executives.

The hike came as something of a surprise. At the beginning of the upfront sales period, projections were that broadcast networks would get fewer overall advertising dollars than the year before, a rare occurrence in network upfront advertising markets.

Those dollars had been expected to go to cable networks. Cable did witness a bigger rise than broadcast, up almost 12 percent to $6 billion for the 2004-05 upfront sales period.

Last year, AT&T spent $1.01 billion for all advertising and $272 million across national television-network, cable and syndication-according to TNS Media Intelligence/CMR.