The Upfront Budget Cuts That Weren’t

May 19, 2008  •  Post A Comment

Procter & Gamble Co. is “considering” some big cuts in TV spending, The Wall Street Journal has reported, which is remarkable considering the bloody stump that its TV budget should have become after its deep double-digit cuts in upfront budget reported in past years by Ad Age.
Unilever VP-Media for the Americas Laura Klauberg (now VP-global media) was doing some considering of her own last year. She was mulling the extent of Unilever’s participation in the upfront, she told Ad Age, but it appears that the company must have considered it a pretty good idea after all, since it actually increased TV spending 3% last year, according to TNS Media Intelligence.
Welcome to the silly season, otherwise known as the upfront, when rumors and hints of big marketers making dramatic cuts or media-mix shifts abound, even if similar reports never quite panned out in the past.
Take P&G. Ad Age cited a knowledgeable executive as basis for a June 2005 report that P&G cut its broadcast and cable budgets by 20% heading into the upfront. The following June, Ad Age reported P&G had cut its upfront budget by 10%.
But the tale of the tape, at least as measured by TNS, is considerably different. That data shows the brands P&G was negotiating over in 2005 (prior to the Gillette deal closing) reduced their TV budget only 3.9% (nowhere near the rumored 20%) in the company’s fiscal 2006 (which started the following July). The following fiscal year (with Gillette included in comparisons), P&G actually hiked TV spending 0.9%, per TNS data, rather than that year’s rumored 10% cut.
Confounding Chatter
Despite all the talk of slashing, P&G spent $2.4 billion on TV last calendar year, according to TNS, up from $2.3 billion in 2005 and 2006. Given that P&G almost never buys scatter — generally the game of scrappier, clout-challenged players — almost all of its buys occurred in the upfront.
P&G’s network-TV budget, at the epicenter of the rumored 2005-2006 cost-snipping spiral, actually rose from $876 million in 2005 to $937 million last year — a 7% increase as opposed to the total 28% decrease implied by the prior-year’s industry chatter.
So what to make of the Journal’s report last week that two people who know what’s up say P&G is “considering” a 10% cut in its ad budget for next year — and that it’s been “aggressively moving ad dollars to the web”? Is there any chance that P&G, or its media agency Starcom MediaVest Group, is peddling a tale of doom to networks to strengthen its bargaining position?
Absolutely not, said a P&G spokeswoman. “We never comment on upfront plans, and we would never spread a false rumor in order to influence an upfront negotiation or decision.”
No way, said SMG. “SMG does not ever talk about our clients’ investment activities or plans, on or off the record,” said a spokeswoman for the agency in an e-mail. “Spreading rumors, exaggerated or otherwise, would be in direct opposition of that policy.”
Last spring, P&G was in a bit of a rhetorical corner after Chairman-CEO A.G. Lafley told analysts the company planned to step up marketing spending this year. A P&G spokeswoman noted that the upfront process continues to work for the company.
Unilever’s Ms. Klauberg, on the other hand, was more pensive last spring. “We’re weighing all our options in the upfront,” she said. “The process has existed forever and may have been very appropriate for business as it was conducted 10 years ago. Clearly the market has changed a lot.” Media deals have become more complex, she said. “It’s difficult to know [by upfront time] what I’m going to want to do from a programming standpoint.”
Something made up her mind pretty quickly, though, because Unilever made some big upfront deals. Unilever’s TV spending rose 3% to $543.7 million last year, according to TNS.
Rob Master, North American media director for Unilever, said last week through a spokeswoman that following Ms. Klauberg’s remarks last year, “Each media company, to a varying degree, shared their plans and media approaches … and we were excited to see how their broader media approach connected with our brands and our consumers.”
Of course, media executives and agencies for big players with multiple brands and internal constituents sometimes have little leeway to change TV plans on the fly during the upfront. They’re expected to deliver the gross rating points and demographics their brands need (or predictably will need) at the lowest possible cost. And their needs may be too big for them to walk away from the table with a major network.
Playing Hard to Get
Media sellers who know this can take advantage of it. Hence a classic quote from Jon Mandel, now head of Nielsen Connections, but then CEO of WPP Group’s MediaCom: “You have to be big enough to get attention but small enough to walk. Your ability to make a deal is commensurate with your ability to walk away from it,” he told Ad Age in June 2002.
Amid all that, having a rumor on your side or playing hard to get might not hurt a marketer or an agency in negotiations.
Johnson & Johnson, which has stayed out of the upfront the past two years, said last month it will continue to do so this year. (Rumor had it J&J would be back in the upfront this year.)
J&J executives have said they fared fine with their year-round-deal strategy despite the writers strike drying up scatter inventory. Not even the threat of a Screen Actors Guild strike seems to have changed its plans.
Asked last week if J&J remains out of the upfront, a spokesman said in an e-mail: “I haven’t heard anything different.”


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