NBC Takes $15M Off Ad Shelf

Oct 16, 2005  •  Post A Comment

The good news is that “My Name Is Earl” is a hit and the broadcast network fourth-quarter scatter market is stronger than last year. For NBC, if the news gets any better the network might really be in deep trouble.

Despite “Earl’s” success, NBC’s ratings are down 13 percent in prime time and the network has taken more than $15 million worth of its fourth-quarter commercial inventory off the scatter market, ad buyers said. NBC will use the time for make-goods owed to advertisers who made commitments in the upfront.

The time represents about 15 percent of the inventory NBC was expected to sell in the scatter market, which buyers and network ad sellers say appears stronger than last year’s despite troubling economic issues, including exploding energy costs.

During the upfront, NBC’s sales plunged by $800 million to $2 billion and the network was forced to drop its cost per thousand viewers by 2 percent. It was banking that it would be able to extract better terms once the season started, and that money that wasn’t spent in the upfront would help contribute to a stronger scatter market.

Inability to take advantage of the scatter market will continue to put a squeeze on NBC, which during its years as No. 1 would rack up profits in the $500 million range while its rival networks were breaking even at best.

An NBC spokesperson said, “We continue to do business in the fourth quarter.” The network declined to discuss how much inventory it is dedicating to make-goods.

“If they’re off their estimates, they obviously have to give more back,” said Andy Donchin, director of national broadcast at media agency Carat USA.

The network might still have to cut prices to attract ad dollars. “In many cases they’re still a premium network in terms of base pricing,” said Rino Scanzoni, chief investment officer at media agency Mediaedge:cia. “I’m sure they have to make some adjustment to be competitive with ABC and CBS.”

NBC has lost its longstanding dominance on Thursday night, a key night for automobile, movie and retail advertisers, but has had some success on Monday and Tuesday, particularly with its new Tuesday sitcom “Earl.”

In addition to making up those viewers with make-good spots in the fourth quarter, buyers expect NBC to try to compensate sponsors with time in the first quarter, when CPMs are generally lower than in the fourth quarter, and when NBC has its usually high-rated Olympics coverage. “I’d try to bring in every dollar I can during the fourth quarter rather than go out of sale,” said one veteran TV ad sales executive.

Overall the broadcast networks’ upfront ad sales dropped to $11.2 billion from $11.9 million, which leaves them all eager to sell time on the scatter market.

“There’s a little more activity than last year at this time,” Mr. Donchin said. “I don’t think it’s anything gangbusters, but there’s definitely money working and people need to write business.”

Other buyers noted that the advertisers have only recently finalized their upfronts, in many cases adding to their commitments at upfront prices with money that otherwise might have been earmarked for scatter.

With its ratings up 10 percent, ABC’s position is opposite that of NBC. Mike Shaw, president of sales and marketing for the ABC Television Network, said the broadcaster is close to putting on the market some of the ad time it had set aside for make-goods.

Mr. Shaw said the network is getting price increases of just below double digits in prime and higher than that in some other dayparts.

Mr. Donchin agreed that ABC is in a strong position. “If you do have scatter money, nine times out of ten they’re getting the first look. When every dollar counts, when you get the first phone call, I think that’s a win right there,” he said.

“It’s a pretty steady scatter market,” said Bill Morningstar, executive VP of media sales for The WB. “We’re encouraged by the response we’ve had to ‘Supernatural’ and ‘Smallville.'” People are calling for units in those shows.”

With NBC selling less inventory and ABC raising its prices, some scatter money may be flowing to cable. Overall, prices appeared to be flat to up mid-single digits above upfront levels, but inventory was getting tight at some networks, including those owned by Turner Broadcasting. Cable nets reaching young male viewers in particular were looking for high single-digit and, in some cases, double-digit increases.

“Last week was an enormous week for us,” said Bruce Lefkowitz, executive VP of ad sales for Fox Cable Entertainment Networks. Fox’s National Geographic was getting double-digit price increases over upfront, he said.

“We are, knock wood, doing just fine,” said Mel Berning, executive VP of ad sales at A&E Television Networks. “When we came out of the upfront, a lot of people believed there was some money being held back for scatter for flexibility. I think we’re seeing that money is coming into the market now.”

He said buying decisions are still being made at the last minute. “We have been in a week-to-week mode for some time, but there are some big weeks. Last week we had a huge week on both A&E and History, so there is money that’s being put down.”

Charlie Collier, executive VP of ad sales for Court TV, said, “I’ve been getting a lot of budgets and we’ve had a lot of people calling to ask about pricing. I’ve heard it’s tight at some networks, and buyers are saying that if pricing is aggressive, I’m not coming.”

“If we see any demonstrable cuts from the automakers or packaged goods makers in the first quarter, it’s probably a sign of skittishness for the overall economy and virtually guarantees a soft scatter market for 2006,” said Jason Maltby, co-executive director of national TV at MindShare.