Making Good on Ad Time

Sep 30, 2007  •  Post A Comment

As the broadcast networks unveil their new shows this fall, they owe an unusually large amount of commercial time to advertisers who were shortchanged by low ratings last season.
Network executive and ad buyers said the number of make-good spots owed from the 2006-07 season is up significantly from past years. One executive said the Big Four networks — ABC, CBS, NBC and Fox — collectively owe advertisers about $150 million worth of commercials. That figure is between 50 percent and 60 percent higher than last year.
The slow ratings erosion for network shows is part of the problem. Networks guarantee advertisers that their commercials will reach a certain number of viewers. If the shows fall short of those guarantees, the advertisers get additional spots to make up the shortfall. Most of the time, networks try to provide these make-goods in the same quarter in which the rating shortfall occurs.
Sources point to NBC as having the biggest pile of make-goods. All of the Big Four networks declined to comment for this story.
Some network executives, who didn’t want their names used, said that while the volume of make-goods this year is higher, it’s still small compared to the $12 billion in ads the networks sell each year.
The greater need to provide make-goods is tightening up the inventory of advertising spots available for purchase closer to air time. That contributes to a scatter market in which buyers are willing to pay unusually high prices if they need to be on the air in the fourth quarter.
The fourth-quarter scatter market opened earlier than usual this year, as buyers feared the supply of spots could dry up. Buyers said that at this point in the season, most of the networks are being very selective about the fourth-quarter spots they’re selling.
Sources in the advertising market said the pileup of make-goods was mainly caused by two factors.
First, ratings over the summer were lower than the broadcasters expected, as cable networks again nabbed a larger share of summer viewing by offering more original programming. Second, ratings suffered because last year’s commercials were sold based on “live” viewing, so audience counts dropped when more viewers than expected used digital video recorders to delay watching shows.
At the same time, prices have been strong in the scatter market since the second quarter, which gave the networks strong incentives to sell ads that might otherwise have been used for make-goods. When third-quarter ratings tanked, the networks had to move make-goods to the fourth quarter.
None of this is a problem until advertisers say it is, according to ad buyers and network executives. Most advertisers are more concerned about the initial under-delivery of their ad buys than they are about when those shortfalls can be made up.
Marketers don’t want make-good spots if they don’t have a campaign on the air at the time; they may be willing to wait until a new flight starts. Others prefer to be in the new season environment, rather than in the low-rated rerun and reality shows on the network schedules.
The backlog of make-goods makes the start of the new season even more complicated. The networks and the buyers are awaiting the first commercial ratings for the new shows and are hoping that the estimates used to set this year’s guarantees are accurate. If the new shows under-deliver, a new round of make-goods will kick off.


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