Buyers Stick to TV Ads

Oct 26, 2008  •  Post A Comment

The stock market drop and general economic chaos so far haven’t led marketers to make big cuts in the first-quarter upfront advertising buys they made on broadcast and cable networks.
Media buyers and advertising sales executives say that with about 60% of advertisers accounted for, the amount of upfront buys canceled at this point is only a little above normal.
“The economy is on people’s minds, but it hasn’t seemed to really affect first-quarter,” said Jackie Kulesza, VP and broadcast activation director at Starcom.
Most marketers who buy broadcast in the upfront have an option to return 25% of the commercial time they bought in the first quarter 90 days before the start of the quarter. Some big advertisers have 60-day options. And some cable advertisers can exercise options closer to the beginning of the quarter. In most years, advertisers take the option to return 3% to 5% of their upfront commitments.
David Levy, president of ad sales for Turner Broadcasting, said options are coming in about normal so far.
“What I have seen is there are no more options being taken than last year at this time. I don’t see a larger percentage,” Mr. Levy said.
But many marketers have asked for extensions and some are still putting off making a call.
“The bottom line is the networks aren’t pushing to get an answer and the clients aren’t pushing to give them an answer,” said Steve Lanzano, chief operating officer at media buyer MPG. “Everyone is kind of feeling their way through and nobody’s in a hurry right now. But we’re shortly getting to that point.”
The economy is having a bigger effect on the scatter market, where advertisers buy commercials closer to air time.
The fourth-quarter market is very quiet. And the early conversations about first-quarter scatter that normally coincide with options are almost nonexistent.
“In the past couple of years when the scatter marketplace has been more aggressive, clients have understood that they needed to approve any potential buying plans and would have done so around now,” one buyer said. “This sort of behavior hasn’t made any sort of overt appearance in the market as of yet.”
Mr. Levy said scatter has been a little lighter than last year. But he added that some scatter dollars were spent during the upfront, as buyers looked to lock in prices earlier.
While he’s concerned about the economy, Mr. Levy seemed confident Turner would continue to do well.
“No media company is really going to be recession-proof,” he said. “But with our leading portfolio of brands, we can be more resilient than the rest.”
Ad spending on national television has been standing up so far because marketers still need to try to convince consumers to buy their products.
“I think TV is something that advertisers are going to want to hold on to as best they can because it is the most efficient and effective way to reach people,” said Andy Donchin, head of broadcast at media agency Carat.
Michael Nathanson, analyst at Sanford C. Bernstein, said it appeared counterintuitive that, in these tough economic times, marketers wouldn’t be looking to cut back on their upfront purchases.
“The fact is that you’ve got minimal cancellations,” Mr. Nathanson said. “Broadcast is a place where the dollars hold. It’s still a medium where people think it can drive demand.”
National television is faring much better than local television, which is being hammered because such a large portion of its business is with automakers, retailers and financial services companies, all sectors struggling with the economy.
On the national front, Mr. Nathanson said he is more concerned with the scatter market because it generates incremental dollars for the media.
“So far, I’m just not hearing fourth-quarter is that strong,” he said. “We’re just really worried about national cable scatter, given how big it is as a proportion to revenues.”
While he’s not as worried about scatter for the broadcasters, he did note that lower ratings may put some networks in “make-good hell,” meaning they’re going to have to provide free ads to marketers to compensate for low ratings.
“NBC can’t have a good story to tell right now. Or ABC at this point,” he said.
The fourth-quarter scatter market often is driven by retailers buying ads to move inventory out of their stores at Christmastime. But this year could be different, Mr. Nathanson said, because retailers have kept inventory low.
“I’d be surprised if anyone went into this Christmas with a huge overstocking,” Mr. Nathanson said.
Even if the media business makes it past the holidays in good shape, Mr. Nathanson said he expects things to get even worst during the first half of 2009.
“It’s my assumption that things will get worse before they get better,” he said. “I’m not sure how you weather the storm.”


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