Upfront Prices Easy as A-B-C

May 15, 2006  •  Post A Comment

All eyes will be on Mike Shaw when he takes the stage Tuesday for ABC’s upfront presentation to advertisers at Lincoln Center’s Avery Fisher Hall in New York. As sales chief for the network-which is hot for the second year in a row-he’ll be the man in position to dictate how the market will unfold.

Many buyers and sellers think Mr. Shaw will get first crack at deciding how big an increase to seek from advertisers, setting the top end of a measuring stick for all of the other channels.

Mr. Shaw, president of sales and marketing for ABC, enters the upfront with momentum, thanks to another year of high ratings from shows including “Desperate Housewives,” “Grey’s Anatomy” and “Lost.” Last year ABC capitalized on a 17 percent increase in ratings to secure ad price increases between 4 percent and 6 percent. This year Mr. Shaw will again balance the price he seeks against the volume of advertising he wants to sell.

“He’s a level-headed guy. He needs to do right things for his company,” said Larry Novenstern, executive VP and director of national electronic media at Optimedia. “But being the overall politician that he is, he realizes that he’s got a few hundred clients he’s got to do the right thing for as well.”

Mr. Shaw made an accurate assessment last year, given ABC’s goal of securing sales early, Mr. Novenstern said. By May 31 in the last upfront ABC had received advertising commitments of about $2.7 billion, a 30 percent increase from the year before.

“I think they could have gone out a little higher last year, and they didn’t,” Mr. Novenstern said. “They wanted to write some business, and I think they needed to write business because of the success of those shows, and I think they’re in relatively the same position this year. It’s not like the success of any of those shows has waned much.”

Continued ratings success at ABC, which as of May 7 was tied with Fox for first place for the season among viewers 18 to 49, again gives Mr. Shaw bargaining power going into the upfronts, where 75 percent to 80 percent of network advertising time is sold each year.

“The in-demand guy takes the biggest risk, but he also has the most information and the most demand, so you can dial it up or dial it down,” said Ray Warren, president of Carat North America.

Mr. Shaw declined to comment.

Sales at the upfront will probably continue their slow, steady decline this year, Mr. Warren said. Last year Mr. Shaw said “a flat market at best” kept him from pushing for bigger increases in ad cost per thousand viewers.

“I’d be thinking about share of the pie,” Mr. Warren said of Mr. Shaw. “I’d be making a grab by trying to find the exact right mix of CPM increase and value for the high-rated shows and make sure I don’t sell too much of the good inventory and move a lot of the less valuable stuff.”

Mr. Shaw’s leadership position in this year’s upfront will also put him at the center of the debate over what standard should be used to measure audiences. Mr. Shaw has bluntly asserted that he will only do business based on Nielsen Media Research’s live-plus-seven-day ratings, which include viewing on DVRs. Media agencies want to buy based on Nielsen ratings that track only live viewing

“He’s very straightforward, not afraid to offer a point of view,” Steve Grubbs, CEO of ad buyer PHD, said of Mr. Shaw. “He doesn’t dance around anything, just goes at it full-bore. I would rather deal with people who take that approach.”

Networks are working to figure out which system is fair for themselves and advertisers, said Charlie Collier, executive VP and general manager for ad sales at Court TV. Time Warner Inc. on Friday bought the half of Court TV that it didn’t already own.

“There’s value in the impressions and we’ve got to figure out what that is,” Mr. Collier said.

Mr. Shaw, a sales veteran who sold syndication before moving to ABC in 1999, will have more to think about this year than pricing and ratings systems when it comes to cutting deals.

Advertisers are increasingly lured by the promise of Internet ads that engage customers and product placements that can’t be zipped past with the flick of a button. Broadcast and cable networks are rushing to provide digital opportunities before client dollars go elsewhere.

Unlike past years, in which the upfront “ultimately gets down to a fairly focused negotiation on price and program mix, this seems to be a year where there seems to be a paradigm shift toward a larger, more layered negotiation that encompasses a lot more pieces,” said Mike Rosen, chief investment officer for GM Planworks.

That could temper the ability of Mr. Shaw and his rivals at the other networks to rush the market with an attractive price.

“We don’t buy just old-fashioned television anymore,” said Jon Mandel, chief negotiating officer of MediaCom. “To sit there and say ‘let’s do an early deal’ is just doing a disservice to yourself, your clients and the industry.”

Advertisers are demanding that media agencies do more than ensure ads get in front of viewers’ eyeballs, Mr. Mandel said. “Marketing takes longer than just sitting around a cocktail and doing a deal based on CPMs,” he said.

Those changes in the television ad market are still overshadowed by the value of the commercial slots being sold.

“At the end of the day, no matter what, price is still a primary concern,” said Bruce Lefkowitz, executive VP of ad sales for Fox Cable Entertainment. “If you have the greatest broadband and nonlinear pan in the world, there’s not an advertiser who’s going to give you a 25 percent increase in cost per thousand when the market is single digits.”

Mr. Lefkowitz said he doesn’t expect the market to start rolling right away.

“I’d be shocked if there was anything but small deals before Memorial Day,” he said. “I don’t see cable going before broadcast this year.”

Cable executives are expecting business to continue to flow their way from broadcast.

“I think the long-term trend of money moving to cable doesn’t stop. So I think we do fine on that basis,” said Mel Burning, executive VP of ad sales for A&E Networks.

Not every cable network will share in the bounty.

“It’s the midlevel guys who don’t have a strong brand or must-have status that might have to wait a bit,” said Lynn Picard, executive VP and general manager of Lifetime Entertainment Services.

“I think some of the lesser networks are going to be challenged in this upfront, because if there’s not a lot of money and [clients] have got to get a bigger bang for their buck, they’re going to have to consolidate,” said David Levy, president of ad sales for Turner Entertainment. “They’re going to have to go to places that have big reach, and so that’s going to play a key role in this upfront.”