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Success May Not Translate to Gold

Oct 11, 2004  •  Post A Comment

ABC is hot so far this season, but because the ad market is cool it may be a while before the network can cash in on its success.

Despite having jumped out of the gate with surprisingly strong ratings for such new shows as “Desperate Housewives,” “Lost” and “Wife Swap,” buyers say that as ABC tries to sell fourth-quarter spots in scatter, it won’t be able to get significantly higher prices.

“The scatter market is not that strong that they can take complete advantage of that currently,” said Harry Keeshan, executive VP, director of national broadcast, at PHD U.S.

How much ABC can charge “really depends on the market, and right now I think they’re going to have a difficult time in the fourth quarter. I don’t know their sellout levels, but they’re going to have a difficult time in a pretty competitive marketplace,” Mr. Keeshan said.

Of course, ABC’s position has improved since last season, when its ratings in the 18 to 49 demographic fell more than 10 percent year to year, leaving the network in fourth place. “Things are looking much better,” said Mike Shaw, president, sales and marketing, for ABC.

Indeed, Mr. Shaw said, already this season ABC is one of the first networks the agencies call with whatever money they do have to spend. “I don’t need to have a huge market if I’m the first or second call everyone’s making,” he said last Wednesday. “We’ve gotten many, many calls in just the last two working days. All of a sudden we’re not only in the mix, we’re at the top of what they want from their mix.”

The turnaround is stunning to some ad buyers.

“Literally, in two weeks, it’s sort of changed everybody’s view of them as a network,” said Peter Gardiner, partner and chief media officer at Deutsch. “They were a fourth-place network, struggling in fourth. All of a sudden they’re battling it out for No. 1.”

After chalking up that fourth-place finish last season, ABC took a stand in the upfront. Rather than cave in to buyers, Mr. Shaw held out for cost-per-thousand price increases of 5 percent. ABC sold $1.5 billion worth of ads but was left with 5 percent more inventory than usual that has to be sold during this season in the scatter market. Despite that, ABC’s new hits were relative bargains: spots in “Lost” sold for an average of $133,514; “Desperate Housewives” drew $156,542. Last season’s highest-rated new drama series, CBS’s “CSI: Miami,” was drawing an average $256,760 per spot in the upfront for this season, according to a survey conducted by TelevisionWeek’s sister publication Advertising Age (TelevisionWeek, Oct. 4).

The performance of ABC’s programming so far makes it appear Mr. Shaw’s gamble will pay off. And on top of that, ABC’s strong ratings means it can sell spots it had reserved as make-goods had audience delivery fallen short of guaranteed levels.

“If you look at it, Shaw was pretty doggone smart,” said John Muszynski, chief operating officer at Starcom. “He basically said, `I’m going to take a chance. You’re either going to pay me what I think I deserve in the upfront or we can talk in the scatter marketplace, but I’m not dropping my price in the upfront.’ He kept saying, `I’m going to have a good schedule.’ Well, now he does. He has proof of that.”

Starcom recommended that its clients buy ABC during the upfront. “We believed in their schedule and we invested in that schedule. I went on record saying I liked their pilots,” Mr. Muszynski said. “We felt pretty good about ABC.”

“We believed in our product and we stuck to our guns,” Mr. Shaw said. “I think that if somebody placed a bet on ABC in the upfront, they’re feeling pretty good about what they did now. And those that put a heavier bet on a couple of the other players aren’t feeling as good.”

Mr. Shaw said buyers are calling asking to be in shows such as “Desperate Housewives,” “Lost” and “Extreme Makeover,” all of which have been drawing demo ratings far above projections.

That should leave him in a position to demand higher prices. Or he can use those new popular shows to see “how much other inventory can I ask them to purchase along with what they do want. It works both ways,” he said.

A Spring in Their Steps

Buyers say ABC’s sales force is out crowing about the start of the season. “They certainly have a spring in their step, and rightfully so,” Mr. Keeshan said. His clients are talking about ABC’s shows as well.

“`Extreme Makeover’ is a program that everyone would like to be a part of. It’s just a feel-good program,” Mr. Keeshan said. “And the other ones just new to the schedule are leading the water-cooler talk about broadcast television. It’s nice that someone who’s been having a tough time is right now leading that conversation.”

But right now Mr. Shaw is constrained by the market, the buyers said.

“One week of premieres is not going to give you a premium. Let’s not go there,” Mr. Muszynski said. “It gives them more ratings points, so it’s actually the opposite of looking for a premium. [Even if] their shows continue to do that well, if the demand doesn’t come and chew up all that inventory, they’re going to have to price competitively to be bought.”

Buyers noted that CBS has also opened the season very strong and is trying to sell inventory in the scatter market. But NBC is underdelivering and is likely to have to provide advertisers with make-goods. Fox’s ratings are down too, but the network is hard to evaluate until the baseball playoffs, which air on Fox, are over.

Mr. Gardiner agreed ABC won’t be able to push for big CPM increases right now. They’re definitely going to get higher unit costs [because the shows’ ratings are up]. Whether they relate to higher CPM, that’s a little tricky. That takes more time. They’re after revenue, so just the simple fact that they have higher ratings is going to give them more revenue.”

But Mr. Shaw noted, “The same guys [talking about slow demand] are calling us” to buy ads. He said it was too early to project how big the scatter market will be in the fourth quarter.

“I think everybody wishes the market was slightly better, including the agencies. But given what we’re writing relative to the dollars working, I feel good about our position,” he said.

Mr. Gardiner said ABC’s payoffs will grow if its ratings stay high throughout the season.

“ABC having significant ratings success just makes everybody think of them in a different light,” he said. “When you start thinking about laying down last-minute scatter opportunities in the first-, second- or third-quarter scatter, when a lot of people expect a lot of activity, that’s probably where they’re going to see their money.”