Upfront Jells; Gap Confounds Sellers

Jun 19, 2006  •  Post A Comment

With the broadcast television networks about halfway done in the upfront advertising market, some big questions remain.

The first involves how much money will be spent overall at the upfront, where about 70 percent of TV spots are sold. Some network executives estimate that this year’s take will fall at least $300 million short of the $9 billion that was committed last year.

The next question is how much of that $300 million advertisers will spend on TV later in the year, and how much has really moved to other media-or out of advertising altogether.

Ad buyers and network executives, perhaps predictably, differ on where that money will go. A cable network sales executive said last week his clients told him any shortfall from last year’s upfront will be made up later. A buyer said television ad budgets are down and that advertisers are either not spending or are switching to other media.

Most upfront business with broadcast networks is likely to be concluded this week, ad buyers said. Cable sales executives said they are beginning to see budgets from buyers and expect to get busy over the next two weeks. Some buyers said the bulk of cable buying may not be done until after the Independence Day holiday.

Both sides are navigating upfront sales in a television world that’s been altered by changes in how audiences are measured, new technologies like Apple Computer’s iPod and a shift of advertising money to the Web. The final upfront take, and the structure of those deals, will signal how networks may cope with changes in coming years.

With less money being put forward, it’s a buyers’ market in the current upfront. That has made life especially tough for ABC, which was expected to lead the networks for a second consecutive year and gun for the highest price increases as well as significant increases in volume.

Instead, Mike Shaw, ABC’s president of sales and marketing, got bogged down in a dispute over including viewers who watch shows on a delayed basis using digital video recorders. Mr. Shaw lost that battle, then appeared to take his time putting together packages for clients and negotiating prices. Late last week, ABC appeared to have done fewer deals than its rivals but was getting bigger price increases, securing jumps of 3 percent to 4 percent on a cost-per-thousand viewers basis.

Buyers were divided over whether Mr. Shaw’s strategy of waiting would ultimately cost ABC money in the upfront, with some saying ad agencies are frustrated by ABC’s stance and are doing as many deals as possible without the network. Others said ABC will eventually secure the money that agencies have earmarked for the network.

Mr. Shaw declined to comment.

While ABC moved slowly, Fox and CBS were satisfied to make deals that gave them relatively small increases in CPMs, or cost per thousand viewers delivered.

Peter Chernin, president of News Corp., told an investor conference June 13 that Fox was about 70 percent done with its upfront sales and was getting CPM increases in the 2 percent to 3 percent range.

“Our strategic view was not to go for huge increases in CPMs because we’re already at the top of the range,” he said.

CBS had also done some early deals, getting CPM increases in the range of 2 percent to 4 percent. Buyers said they were pushing for smaller increases, and by the end of the week CBS had done nearly as much business as Fox, market sources estimated. NBC was about half done with its upfront sales last week. To get its deals, the network was agreeing to cut its CPMs by 5 percent to 7 percent, buyers said. NBC is hoping to bring in the same amount it collected last year. The CW had a number of deals under its belt, with prices falling closer to those secured by one of its predecessor networks, the old WB, which used to get a premium for its young-skewing audience.

MyNetworkTV also had some deals done in its first upfront, said Bob Cesa, executive VP of advertising sales for Twentieth Television, which is handling sales for the News Corp.-owned network.

“We are talking to several agencies,” Mr. Cesa said.

Amy Carney, executive VP of advertiser sales for Sony Pictures Television, said some advertisers were registering budgets with syndicators.