Bargain Hunters Seek Concessions

Jun 20, 2005  •  Post A Comment

The upfront market continued to move very slowly last week, giving buyers an opportunity to negotiate not only for lower prices but also for improved schedules and added value from the networks.

Most of the activity involved cable networks, but some buyers said they were beginning to negotiate with syndicators ahead of some of the smaller cable networks. Cable news sales also appeared to begin last week.

“We have more time to evaluate, more time to compare, more time to make networks compete with one another,” a major buyer said.

Buyers feel they can take more time because there is less money in the market. “I can’t see the market up or even,” the senior buyer said, predicting total TV upfront spending off 4 percent to 5 percent. The last time total upfront spending was down compared with the previous year was in 2001, when upfront ad buys were made for the 2001-02 TV season. The buyer’s expectation for this year was that broadcast would be down, cable up a tick and syndication possibly down as well.

The buyer said spending is down partly due to the economy and partly because advertisers are spending on other media, particularly the Internet. They’re also holding money out of the upfront to spend later on integrated advertising projects.

“Everyone says they want to be less dependent on television, and maybe this is the year they really do it,” the buyer said.

Cable networks have largely accepted that the market will bear increases of no more than low single digits, and in some cases, buyers are looking to do negative deals, but those networks are resisting going that low. The networks the buyers are looking to cut costs on are those that have commanded premium pricing versus their competitors during past years, such as Discovery, TLC and A&E.

Ad sellers have noticed the difference too.

“More buyers are asking for plans where in the past they haven’t,” one seller said. The plans spell out the specific shows and dates spots will run in for each client.

Armed with those plans, buyers are going through them line by line, looking to upgrade their mix. Because the market is lower than expected, buyers can afford to pay for upgrades and still come in under the costs they had estimated for their clients, the ad sales executive said.

“In a year like this, when there is no rush, they can do this,” said the ad sales executives. In busier years, buyers and sellers negotiate a price, then work out details later.

One network group ringing up big sales is Scripps Networks. Jon Steinlauf, senior VP of sales, said he expected Food Network and HGTV to post volume increases threefold to fourfold higher than the market growth for cable overall, or between 10 percent and 20 percent.

Despite the added demand, CPMs are not also sky-high. “The market expects prices to be reasonable, so we’re being reasonable,” Mr. Steinlauf said.

He said Scripps is doing well because “there’s a limited amount of competition within our sector,” which he defined as a quality upscale branded environment. He also said money seems to be shifting from some Discovery networks, A&E and Bravo to Scripps.

Last week UPN said it was mostly done with its upfront sales. It had commitments of about $375 million, up from $350 million reported last year. Pricing was in the same low-single-digit range as other broadcast networks.

A spokesman said that the UPN had an increase in spending by movie studios because it moved World Wrestling Entertainment wrestling from Thursday-a big night for movie advertising-to Friday. UPN’s new Thursday lineup is anchored by Chris Rock’s new show “Everybody Hates Chris,” which was popular with buyers.

No Word From NBC

NBC has still not announced that it is done with its upfront, and estimates are growing about how much its upfront revenues will drop. (Magna Global, one of the biggest buyers, has not done a deal with NBC, according to sources, and Magna may have done only one cable deal at this point.)

Some ad industry observers said NBC’s sales could be down almost $1 billion to $1.9 billion from $2.9 billion last year. Some agencies were said to be looking for deeper cost-per-thousand cuts than the 2 percent reduction NBC agreed to in its early deals.

With NBC’s prime-time ratings down, executives expected revenues to be down as much as $500 million, but “they really didn’t see this coming,” one rival sales executive said. NBC pushed its rates higher and higher in the years when it was the top-rated network. “There’s no one who wouldn’t tell you payback’s a bitch,” the sales rep said.

NBC executives are expected to discuss the network’s upfront performance this week.

As far as cable news sales, “It looks like we’re starting to gain headway this week, and I think we’ll have a pretty good dent in it by the middle of next week,” said Greg D’Alba, chief operating officer for CNN.

While prices for the news networks are likely to fall in the same low-single-digit ranges as other networks, Mr. D’Alba said price wasn’t the biggest issue in CNN’s negotiations. “It’s more about getting all the elements in place and finalizing a lot of the integration deals we have out there,” he said.