Update for Upfront

Jun 17, 2007  •  Post A Comment

An upfront advertising market marked by firsts started rolling last week, with broadcast television networks getting some of what they wanted.
Breaking new ground, early deals were done on the basis of average commercial ratings that include viewing on a delayed basis using digital video recorders.
Fourth-rated NBC completed an upfront deal with major buyer GroupM valued at nearly $1 billion that calls for a new measuring stick: commercial ratings plus three days of playback.
Top-rated Fox also did some deals with the movie studios that sources said were based on live plus three.
“We’ve come to terms with many of our clients, and negotiations are under way with the rest,” a Fox representative said, declining to elaborate.
Getting credit for commercials seen on DVR playback is key for the networks, because the recorders contributed to a decline in live ratings last season as more consumers delayed viewing and skipped commercials. Counting delayed viewing also helps networks stomach the use of average commercial ratings, which tend to register lower audience counts.
Figuring out how the new ratings system will affect ad prices has slowed the pace of the upfront market this year. Last year, after a two-week deadlock over whether DVR viewing would be included, the upfront was about half done in mid-June.
“For the first time, advertisers will be paying for viewers that watch a commercial within the first three days of the broadcast of a show,” Jeff Zucker, president and CEO of NBC Universal, said at a presentation to investors last week. “We are going to get credit for viewing off the digital recorder.”
Mr. Zucker said in the GroupM deal, pricing was positive on the network and cable side, even with the conversion to commercial ratings.
Last year, NBC was forced to cut its industry-leading ad prices after its ratings dropped and lower spending overall created a buyer’s market. So any increase in prices would be an improvement.
NBC declined to discuss pricing, but industry buzz signaled that NBC got mid-single-digit increases for broadcast and somewhat larger in­creases for cable. The deal also in­clud­ed NBC’s Spanish-language pro­gram­ming, digital and product placement.
Those figures sounded high to other buyers.
Rino Scanzoni, chief investment officer at GroupM, called published reports about his company’s deal with NBC wrong, but declined to discuss details.
Rival buyers had questions about the deal, wondering why a media agency would commit dollars to a fourth-place network before negotiating with the top-rated networks.
“Somebody’s playing Bob Barker,” said one buyer who declined to be named.
Some media buyers noted NBC Universal may have a struggling broadcast property, but it can rely on other attractive properties such as top-rated cable network USA.
Other buyers said the GroupM deal was struck early because NBC needed good news to unveil at its investors meeting and GroupM wanted headlines.
The rest of the networks and media agencies will go more slowly as they work through the new ratings system and the increasing amount of digital advertising and product integration being included in upfront deals.
“Some of the networks are asking for double-digit increases. It’s insane,” said John Moore, director of ideas and innovation at Mullen Advertising, who expects negotiations to be long and arduous.
“This upfront is so important because it sets the tone for future years,” he added.
With everyone apparently agreeing to live plus three, this year’s upfront goal establishes a base for the next few years “until we get down to the individual commercial level, which is what everyone is clamoring for,” Mr. Moore said.
Mr. Scanzoni, a leading proponent of commercial ratings, said he was fully prepared to made deals and didn’t need to wait for the rest of the herd to move.
“I spent a lot of time analyzing this,” he said. “If I’m wrong, I will absorb whatever those consequences are. But I believe clients pay us to provide them with guidance, not to provide them with guidance that someone else is setting.”
Mr. Scanzoni said he was surprised at the amount of confusion he saw in the market.
“It’s the 15th of June and there’s a lot of agencies that are basically paralyzed, and there’s probably some sellers that are a bit paralyzed, too, not knowing exactly what to do.”
One misperception in the marketplace, he said, was the idea that increases in prices on a cost-per-thousand viewer basis were being driven by moving to commercial ratings, which would reduce the eyeballs the networks have to sell while the demand remained relatively constant.
“In fact, commercial conversion will actually increase ratings points, because the shows that are the drivers of the networks are the ones that are getting killed because we’re not counting DVRs,” Mr. Scanzoni said.
He added that at this point it’s difficult to peg whether the upfront will be up or down. He forecasts little growth in national television spending next year. There may be room for small price increases because ratings points were down, he said.
Mr. Scanzoni said he expects to be done negotiating with the broadcast networks by the end of the week. Cable’s upfront will stretch into July or August, as it did last year, he said.
Like other buyers, he discounted the 12 percent to 15 percent increases Fox and ABC were looking for when ad-buying plans were returned to the buyers.
“Opening prices are like the prices in the window of a car,” said one buyer. “They ask for double digits, we ask for minuses.”
The buyer said some money was moving from the scatter market, where commercials are bought closer to the date they air, to upfront, where about 70 percent of prime-time ad slots are spoken for. The shift to upfront from scatter is taking place in dayparts other than prime time, he said.
“The networks are saying there is a very strong market,” he said. “Maybe we don’t think it’s as strong as they think.”


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