Upfront Ad Sales Hit Speed Bump

May 22, 2006  •  Post A Comment

TiVo, which allows viewers to fast-forward through commercials, has left the TV industry’s upfront advertising market moving in slow motion.

After the networks completed their presentations of next season’s schedules on Thursday, there was no rush to the negotiating table to set prices and ad placement.

Instead, buyers involved in the talks said, networks and ad executives tried to agree on a standard to measure audience size and whether that number would include viewers who shuffle TV schedules using digital video recorders.

Those disagreements, along with more complex negotiations required to strike advertising deals for both regular TV shows and new media such as Internet episodes, are slowing down talks. Upfront sales are expected to be flat to down as companies shift advertising money to the Web, putting time on the buyers’ side in the TV market.

“The budgets are not in a good place for the networks,” said Donna Speciale, president of U.S. broadcast and programming for MediaVest.

The debate over how to measure audiences in an era of TiVos was spurred by Nielsen Media Research, which has begun offering three standards. The ratings service counts live viewers, live viewers plus people who record shows on a DVR and watch them the same day and live viewers plus people who play back a show within a week.

Mike Shaw, ABC’s president of ad sales and marketing, has taken a hard line, saying he won’t do business on any basis other than “live-plus-seven,” an ad buyer said.

That measure would add viewers to network audience totals, giving them leverage to argue that more people are sticking with TV for entertainment as the Web, video games and other media compete for attention.

Most agencies have declared they would buy based only on “live” ratings.

One ad buyer who is holding out for live said the networks, including ABC, are broaching a compromise, offering to use the live-plus-same-day count.

ABC would probably love a repeat of last year, when smaller-than-expected price increases persuaded buyers to move quickly, increasing ABC’s upfront take by 30 percent. And NBC, which waited too long to cut prices last year and took an $800 million beating, would probably not choose to repeat that strategy.

Most buyers have been anticipating the market will sort itself out in an orderly manner once the audience measurement question is settled.

“No one’s in a rush,” said John Muszynski, CEO of Starcom USA, who doesn’t expect the market to get down to business until after Memorial Day.

Fox has already received bids on some of its commercial time, an ad buyer said.

Jon Nesvig, president of sales for Fox, wouldn’t confirm receiving budgets.

“God bless them all, he said. “No matter when they want to come, we’ll be ready to do business. We’re open 365.”

That kind of patience may be tested by advertisers emboldened to test their bargaining strength against the networks.

Advertisers have also been trying to defer spending decisions rather than be stampeded into early spending. The trend has been supported by a weak scatter market that for the past two years has allowed advertisers to buy commercials during the season for about the same price as during the upfront.

Johnson & Johnson came to exemplify the trend last week when it said it plans to defer upfront spending until August, in line with its annual budget. That announcement by one of the biggest U.S. consumer-goods companies renewed questions about whether the structure of the TV ad sales market needs to change.

Ad sales executives said J&J’s move did not indicate that advertisers will spurn the upfront.

“They’re going to do it later, Mr. Nesvig said of J&J. “They want to be kept abreast, and if they have to move forward they will. They are going to participate in the upfront and timing is the question.”

J&J’s strategy has potential to backfire if it emboldens other advertisers to hold back on spending, which may create higher demand-and higher prices-in the scatter market.

Other companies, including Burger King, are taking a flexible approach.

“We’re going to buy when I can get the best programming for the best price,” said Debbie Myers, the fast-food chain’s VP for media services. The chain, which tries to reach viewers in the 18 to 34 age group, will spend more at Fox this upfront, she said.

Mr. Nesvig downplayed the importance of keeping track of how much business networks write during the upfront because advertisers can back out of some commitments to buy time if they change their mind.

“The upfront is a figment of someone’s imagination,” Mr. Nesvig said. “It all comes down to how much you have in the till when you get paid for it. Maybe in September or October we’ll be done.”

Some Wall Street analysts are predicting the networks may fare well in the upfronts.

William Drewry of Credit Suisse forecast that the market could be up as much as 2 percent to $9.4 billion, with broadcast networks getting a 2 percent price increase on average. Cable networks could see their sales rise 7 percent to 9 percent, Mr. Drewry said.

Part of the networks’ take will include ads linked to distribution over the Web, cellphones and other gadgets.

NBC, whose ratings dive from first to fourth place last year led to an $800 million decline in upfront sales, spent a larger part of its presentation talking about digital projects than its rivals.

The network presented a slate of 30 Internet episodes from “The Office” and showed off a Web game that lets viewers be a member of the “Law & Order: Criminal Intent” detective team. The network is using the Web to promote its new show “Studio 60 on the Sunset Strip” by offering some clips exclusively on the Internet.

NBC’s digital push, dubbed TV 360, includes new Web sites DotComedy.com and NBCFirstLook.com, where some shows will be previewed.

CBS has joined the race to exploit new distribution channels. One of its new shows, “Jericho,” will have a story line that would play out exclusively on CBS digital properties.

Infant network The CW tied together its traditional TV and new media efforts by introducing Yoanna House, an “America’s Next Top Model” winner as a cross-platform spokeswoman for the network on-air or on the Internet and wireless devices.

The CW also unveiled a new on-air ad concept called content wraps, which blend programming and advertising. The initiative turns three commercial breaks in an hour into a miniprogram with a beginning, a middle and an end. In one example, the wrap would be a dating show in which the participants use the sponsor’s product.