Crunch Time Hits TV Marketers This Week

Oct 19, 2008  •  Post A Comment

With financial markets teeter-tottering, this week marks decision time for television advertisers who bought first-quarter advertising.
Some marketers have begun to reduce their first-quarter upfront television advertising buys. While up to 5% of quarterly upfront buys generally get returned to the market, the full extent of this season’s cutbacks remains to be seen.
Marketers who agree to buy time in the upfront advertising market are given an option to give back some of their spots. Most of the options have to be exercised 90 days before the start of the quarter, although some big advertisers are given additional time.
But with the stock market gyrating and a credit crunch causing economic uncertainty for both businesses and consumers, many marketers have been granted extensions this year, buyers and sellers say. Most will have to make their final decisions early this week.
“We’ve taken a couple of little hits here and there, but I’ve got just as many people firming up,” said Mike Shaw, president for ad sales and marketing at the ABC Television Network.
“It doesn’t feel like the sky is falling for us,” he said, adding that the cuts so far were “within the range of what we planned for.”
Mr. Shaw said two companies in the credit card business—an industry affected by the banking crisis—had decided to use all of the advertising they bought in the upfront. An automaker and a packaged goods company were among clients that opted “to take a slight haircut,” he said.
He added that other marketers have asked for extensions rather than firming up their buys or exercising their options.
Those extensions expired Friday, but the networks didn’t expect to get word from most clients until today. ABC wants to have a fairly complete picture by Wednesday.
It wasn’t clear whether the extensions portend good news or bad news for the network, Mr. Shaw said, noting that changes in advertising spending tend to lag the economy. “I just don’t know that we’ve felt the full brunt of what’s occurring yet.”
Buyers said they still weren’t sure what some of their clients would do about their options to buy first-quarter ads.
“I don’t think until the end of next week will anybody have a sense of the broad marketplace,” Jason Maltby, who oversees national media at Mindshare, said last week. “And I don’t think you’re really going to get a true sense until you hear from the bellwethers” like General Motors, Ford Motor and Procter & Gamble that have shorter deadlines to exercise options.
If clients are considering using their options, it’s better for the networks that it’s happening in the first quarter, when 25% of buys can be returned, rather than the 50% that can be sent back in the second and third quarter, said Aaron Cohen, chief negotiating officer at Horizon Media.
Mr. Cohen, who estimates that the majority of clients have asked to extend their options, says that in most quarters, 3% to 5% of upfront buys get returned to the market.
Predicting how big it will be this year is as difficult as forecasting the stock market, he said, adding that if options come in at twice the normal level, “It would create an openness in the market that might really begin to move pricing.”
Things are even more uncertain in cable, where some marketers can exercise options until 30 days before the start of the quarter.
“It could be the middle of November before they know what they’re taking in,” Mr. Cohen said.
This year’s upfront was stronger than expected given that back then the economy seemed to be slowing. Some of the strength of the market might have come from advertisers putting potential scatter dollars into the upfront to lock in lower prices, knowing they could use their options to take them out later.
Upfront spots that are optioned back to the networks would have to be resold on the scatter market, where demand and prices for fourth-quarter airtime is soft.
“I don’t think anyone is getting any premiums in this environment,” Mr. Maltby said.
Mr. Shaw said that after 18 months in which scatter prices were above upfront prices by double-digit percentages, the market was due to cool off.
“There was no way that was going to sustain,” Mr. Shaw said. “Then you had a fantastic upfront where we all went deeper-sold than we have in years. So you knew scatter was coming down, and you knew it wasn’t going to resemble anything like you had the last couple of years. But everybody planned for that.”
Some scatter budgets have been cut, and what money is gong into scatter is being approved at the very last minute, Mr. Cohen said.
“We have seen some scatter budgets for fourth quarter being approved for negotiation within six or seven days of the start date, which is very, very short lead time,” Mr. Cohen said. “This is reflective of people wanting to hold until the very last second to make sure that that’s the money that they want to spend.”


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