As ad buyers balk at paying more for television advertising in the upfront market than they did last year, networks are looking for ways to pump up the value of their commercial time.
NBC, coming off two years of ratings declines, last week was pitching ad agencies with data that showed not only how many viewers were watching its shows but also how many people were paying attention to the commercials it airs, buyers said.
That strategy is meant to address advertisers’ increasing concerns about how to calculate the returns on their marketing investments. Many are shifting money to alternative media like the Internet, where consumers’ reactions to ads can be measured more easily by tracking their clicks.
The relative difficulty of measuring TV spots’ effectiveness is one reason buyers said they expect this year’s upfront sales numbers to decline from last year’s $9 billion. Sales began to move last week after ABC, the expected market leader, dropped its insistence that deals include viewers who watch shows on digital video recorders up to seven days after the show is televised. ABC’s reversal led to an early flurry of sales, then the market slowed to a crawl.
Buyers said they’re feeling little urgency to rush into deals and that networks aren’t pushing them hard to begin buying.
ABC, which buyers expected to seek increases of around 5 percent to 6 percent, had not formally made price proposals and had not done any deals by week’s end, the buyers said. Fox and CBS registered price increases of 2 percent to 4 percent in the few deals that were done, people familiar with the transactions said. NBC and new network The CW also made a few deals, sources said.
The slower pace gave buyers and networks time to discusst issues other than pricing, including audience engagement with ads and other measures of commercial effectiveness. Those factors are entering the negotiations and being considered alongside issues such as DVR use, setting this year’s upfront as a watermark for ad buyers and television networks adapting to a changing industry.
“There’s a lot of different things getting shopped that can help get around the networks’ concern that everything’s just being done on live ratings,” said Peter Gardiner, partner and chief media officer for Deutsch. “It’s new ways of looking at things and new deals that have deeper value equations.”
In last year’s market, cable networks such as Court TV struck deals with several big agencies that made guarantees on audience size and other metrics that attempt to measure engagement.
Already this year, MTV Networks struck a $300 million deal with ad buyer OMD that includes TV and Internet elements. Part of that package was a research project involving audience engagement with ads and whether consumers’ positive feelings for a media brand transfers to advertisers that run spots within that media.
Networks aren’t sharing how far they’re willing to go in adopting advertising agencies’ mantra on the importance of audience engagement.
NBC declined to comment on its engagement initiatives, making it difficult to gauge whether it should be seen as an attempt to better serve clients or a ploy by a fourth-place network to avoid the ad-price rollbacks it suffered last year.
Rino Scanzoni, chief investment officer for Mediaedge:cia, said NBC was proposing to factor data from research company IAG, which measures viewer response to commercials, into its ad sales deals.
Mr. Scanzoni has made engagement deals with some cable networks based partly on minute-by-minute ratings data from Nielsen Media Research and didn’t see the value of adding a stream from another research company into the mix.
“I think the data is interesting. We have used it, but we’re not necessarily looking to change the way we do business,” he said. “We can manage this kind of thing without necessarily putting it on a guarantee basis at this stage of the game. When you peruse things on guarantees, you ultimately wind up paying for it.”
Another media buyer said his agencies’ clients subscribe to IAG and wanted to set up tests with all of the networks to study some engagement indices.
Reaching higher-quality audiences with more spending power may, however, justify paying a higher price for ads, Mr. Gardiner said.
“If there is value in something being added to any kind of plan you do with the network that can give you proof that there’s better eyeballs on your advertising and it might mean more to your sales-or awareness, or what have you-to me that’s worth paying more for,” he said.
Toward the end of the week, NBC reportedly completed a deal with OMD. Neither OMD nor NBC would comment, so it couldn’t be determined whether any engagement metrics were involved. Buyers said NBC was being realistic in terms of pricing.
After years as the No. 1 network, NBC charges the highest price per thousand viewers among the broadcast networks. Those prices need to fall by about 5 percent for NBC to be competitive in the ad market, ad buyers said.
At current rates, Thursday night advertisers on NBC are basically paying a “Friends” cost per thousand for “The Office,” and that doesn’t make a lot of sense, one buyer said.
The slow pace of deals last week left networks and buyers trying to calculate who holds the advantage.
“I think everybody’s counting the house, and my guess is [the networks] are seeing that the house isn’t as sold as they’d like it to be,” said Mr. Gardiner. “So if the house isn’t as full as you think it is, that means the leverage might be on the buying side, which we all believe it is.”
Fox, the leader last season among viewers aged 18 to 49, completed some deals last week. The network, which does many of its deals based on the difficult-to-reach 18 to 34 demographic, got CPM increases in the 2 percent to 4 percent range, depending on whether “American Idol” was included in the package.
Early in the week, CBS said it had also finished some deals. Several buyers said they were trying to figure out how much inventory CBS sold before being convinced that any increase was warranted.
Infant network The CW, formed from the combination of The WB and UPN, last week said it had done its first upfront deal. Buyers said The CW’s pricing was closer to the premiums The WB used to command for delivering 18- to 34-year-old viewers, rather than the UPN’s old prices.
Other than MTV Networks’ deal with OMD and another between Turner Broadcasting and Starcom, there was little activity among the cable networks.
Cable sales executives were hopeful that if buyers remained deadlocked with broadcasters, they might turn their attention to cable.