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Nets to Buyers: Less is More

May 18, 2008  •  Post A Comment

As upfront negotiations begin to heat up, the broadcast television networks are trying to convince advertising buyers that less is more.
In a strike-ravaged season, ratings are down sharply, shrinking the supply of the ratings points that networks sell. The networks hope that lower supply translates into higher demand for the remaining points, and thus upward pressure on prices.
Fox, the No. 1 network among 18- to 49-year-old viewers, made a pitch to advertisers at the upfront that embodies the less-is-more character of this year’s ad market. The network will put half the normal amount of commercials in two of its new dramas, “Fringe” in the fall and “Dollhouse” in January.
With just five minutes of commercials in very short pods, they offer “more entertainment for viewers and more impact for advertisers,” said Jon Nesvig, Fox ad sales president. “We’ll have to see if the proposition is economically viable.”
Presumably Fox would have to charge more for the spots in these shows to avoid losing money, but not as much more as it might seem. Cutting spots from these shows lowers the network’s overall inventory, which could create pressure for higher prices over its whole schedule. Mr. Nesvig said Fox had no plans to raise commercial loads in its other programs.
In the larger TV ad market, economic worries could means less ad spending by marketers. As a defensive measure, networks are reminding advertisers that TV spots produce more sales than other forms of advertising and urging them to cut spending elsewhere.
It’s an argument they’re pushing after an upfront week of presentations that offered less frills and glitz than in past years. The lower-key approach didn’t seem out of step with the situation to some buyers.
“They were much more sensible,” Irwin Gotlieb, CEO of ad buyer GroupM, said of the network presentations. “ABC, CBS and Fox did great.”
The 100-day writers strike that ended in February led to less program development than in past years. That dearth of fully fleshed-out material might create more demand for shows that have gone through a full testing process.
At Fox, “Fringe” and “Dollhouse” will be heavily promoted replacements for low-rated washouts, which should lead to expectations of more ratings points.
On top of that, the shortened commercial pods should translate into even bigger gains in C3 commercial ratings, the standard adopted last year that measures live viewing of shows plus three days of playback on digital video recorders.
Mr. Nesvig said the new C3 ratings and improved research techniques made possible Fox’s plan to cut commercials in “Fringe” and “Dollhouse”—an initiative dubbed “Remote-Free TV.” He noted that while watching the Masters golf tournament, he noticed what a difference a lower commercial load could have on his own decision to stay tuned during breaks.
Ad buyers and clients seemed to like the idea.
“I’m glad someone is trying something different,” said Mr. Gotlieb, adding that Remote-Free TV needed a full battery of testing to measure whether the shorter pods are delivering more impact.
“I have clients who have always asked about a less cluttered environment,” said Andy Donchin, director of broadcast at Carat.
How much more will clients be willing to pay? “We’ll have to find a way to work that out,” Mr. Donchin said.
“If I get better value, it’s better,” said Andy Jung, senior director of advertising and media at Kellogg.
Spending Downturn
With the economy weak, buyers seemed fairly certain that spending in the upfront would be down.
“We’re going to look at every dollar we spend very carefully to make sure they’re driving people to showrooms,” said Mark Kaline, global media manager for Ford Motor Co. “Until we see what happens with the elections and the economy, we’re going to be erring on the side of maintaining flexibility in the marketplace.”
In that environment, buyers expect the market to take time to develop. As one buyer put it, it can take months for the networks to admit the market is down.
“The days of rushing to markets are over,” said John Swift, managing director of PHD. “The market won’t tolerate that pace of ridiculous inflation.”
While most buyers believe the upfront market will be smaller this year, few wanted to venture guesses on where it will end up or what level pricing would take.
In a highly publicized report, Merrill Lynch analyst Jessica Reif Cohen forecast that the market for prime-time network television could be down 2% to $8.79 million, with price increases on a cost-per-thousand basis of 4% in a best-case scenario. More likely, the upfront will finish down 14% to $7.13 million with prices flat, Ms. Cohen said.
Mr. Nesvig observed that whether the upfront is up or down, the number that really counts is actual revenue over the full year. That’s because money not spent in the upfront often returns in the scatter market, where buyers buy ad time closer to when it airs.
“I like our hand,” Mr. Nesvig said.
This year’s upfront was marked by cable powerhouse Turner Broadcasting staging a star-studded presentation during a week traditionally dedicated to the broadcast networks.
Turner is promising buyers it will aggressively increase its original programming in prime time, with three nights of originals on TNT by 2010.
For a second straight year, ESPN also held an upfront week presentation.
The growing ratings of cable networks give buyers an alternative to broadcast, where viewership is eroding.
“With ratings down [on broadcast] and so many cable networks, we want to be fluid and flexible adjusting to the marketplace,” said Mr. Donchin. “While I recognize the value of network TV, we have options.”
Buyers said Turner was trying to get top dollar for that programming with a tiered strategy of seeking network replacement rates for its prime-time originals, with smaller increases for its acquired series and programming in other dayparts. Commercials on most cable networks cost half of those on broadcast on a cost-per-thousand viewers basis.
Buyers said that this was not the right year for a cable network to be trying to push for big gains in price, especially if buyers are successful at purchasing time on the broadcast networks with smaller price increases.
“I feel for the cable guys. There’s not going to be enough money for them in this market,” said Jason Kanefsky, senior VP/director of national broadcast at MPG.
Turner declined to comment on its marketplace strategy.
While the presentations by Turner and ESPN were well received, most of the focus remained on the broadcasters.
“This year will go down as a very unique year,” said Mr. Swift of PHD. In designing their presentations, none of the networks were “working off the same briefs, which is not a bad thing.”
Some networks, like top-rated Fox, had a presentation very much like last year’s.
ABC, on the other hand, treated the upfront more like the development meetings of years past.
CBS touted its syndication, radio and out-of-home division, prompting a quip from Fox’s Mr. Nesvig that if they want billboards in South America, buyers should go to CBS.
And then there was the “NBC Experience.” Having unveiled its schedule weeks earlier, NBC Universal used its evening during upfront week to tout all of its assets, from theme parks to advertising at gas pumps. Buyers were sent on a trail through flashing lights, American Gladiators jousting, Top Chefs cooking and “Deal or No Deal” models offering big prizes. At the end of the path was a cocktail party much like last year, with stars of NBC shows waiting to take pictures with buyers.
Most buyers called it either “interesting” or at least a “good try” at an on-demand presentation.
“The network is trying to evolve. NBC is so much more than a television network now,” Mr. Donchin said. That message is already out to buyers, “but they wanted to hammer it home.”
But NBC’s plan to try to get through the upfront without creating pilots drew more flak.
ABC entertainment boss Steve McPherson said his network believes in a full development process, including pilots, as a vital part of its research and development process to find hit shows.
Fox Entertainment President Kevin Reilly, an NBC refugee, said that after considering other ways of ordering shows, the network “came to its senses.”
Mr. Swift said that while pilots may or may not be evidence that a show will or won’t be successful, he’s glad ABC, CBS and Fox are still making them and, more important, testing them.
“I want my clients to invest in a finished product and know that the networks have done everything they can,” he said.

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