Maybe it’s a good thing the broadcast networks scaled back their once-lavish upfront presentations: Media buyers say that when the upfront deals are done, the networks will be looking at less ad revenue this year.
“I don’t think anyone’s in a position to really push the price of television right now,” said John Swift, managing director at media buyer PHD.
With ratings down, uncertainty over the economy and even a possible actors strike on the horizon, “I don’t think television as a medium is in a position of strength,” Mr. Swift said.
Beginning with NBC Monday, the broadcast networks will put on upfront presentations that will be more business-like and sober than in years past. After the presentations, negotiations begin over ad time for next season. The networks usually sell more than 80% of their commercial inventory during the upfront.
In an indication of the growing ratings of cable, Turner Broadcast and ESPN also will be hosting presentations this week.
The ad outlook this year is indeed sobering for broadcasters in particular.
Merrill Lynch projects that, in a best-case scenario, prime-time ad commitments in the upfront will be down 2% to $8.79 billion. Including other dayparts, the broadcasters’ upfront take will be down 2% to $11.05 billion, the brokerage forecasts. Ad prices, on a cost-per-thousand-viewers basis, will rise just 4%.
But Merrill Lynch analyst Jessica Reif Cohen says a “bear” case is more plausible, calling for a 14% decrease in broadcast upfront commitments to $7.14 billion in prime time, with prices flat.
In either case, Fox is likely to fare best, while The CW is looking at a 15% drop.
The networks retain some optimism, however.
“I don’t think the sky is falling,” said Jo Ann Ross, ad sales president at CBS. Noting it once appeared the writers strike could kill the upfront, Ms. Ross said, “We’ve come a long way since the fall when everybody was saying the upfront is dead. It certainly is not dead, nor is network television.”
While some advertisers may be putting less money in their TV budgets, “They’re putting it somewhere else, and we certainly have enough places at CBS for them to put it.”
Like all networks, CBS will be touting its other platforms, from online to outdoors, and offering to help advertisers construct multimedia packages designed to make them stand out.
“It has become much more collaborative. They’re not just buying just a regular schedule. Most clients are looking to do cross-platform and extend the message,” said Ms. Ross, noting she had more than 40 requests for multimedia proposals on her desk.
Buyers agree there will be more collaboration on multiplatform and integrated marketing deals.
“I think there will be an attempt to do much more packaging. It’s going to vary network by network because they all have different resources available to them,” said Aaron Cohen, executive VP and media negotiation chief at Horizon Media.
“We’re seeing that the combination of TV with other media works,” said Charlie Rutman, CEO of media buyer MPG North America. “Does it work as well as it used to? I don’t think so. Is it dead? No way.”
Mr. Rutman said he believes marketing budgets overall will be down, but the broadcast networks’ share may go up, particularly compared to spot TV, magazines and newspapers.
But, he cautioned, pricing of the broadcast portion of those packages will have to be reasonable.
“When ratings are down you pay a higher CPM, but this year ratings are down substantially, and the question truly will be how many people are willing to pay how much of a higher CPM for that privilege of being associated with programs,” Mr. Cohen said.
“We definitely surpassed the tipping point, which on one side you’ve got must-have upfront TV deals that people have to have,” Mr. Swift said. “On the other side, you’ve got this plethora of media options out there … I don’t think the marketplace is going to tolerate anything more than minimal inflation going forward.”
Mr. Swift expects overall volume in the upfront to be down because of the way the economy is impacting big-spending categories such as domestic autos, retail and financial services.
Categories such as packaged goods and entertainment may be recession-proof, but the market would need big gains from other categories to stay out of the red, and that’s unlikely, he said.
Merrill Lynch calls for cable to see a 5% rise to $8.06 billion in upfront commitments in the best-case scenario, and a 3% decline in the bearish case.
“I don’t know if the money coming out of networks is necessarily going to go to cable,” Mr. Cohen said. “We’ve seen a surge in network radio, we’ve seen money go to digital, so there’s not a one-to-one relationship anymore.”