TV Ads Hang In Balance

Oct 12, 2008  •  Post A Comment

While banks have collapsed and Wall Street has crashed, the destiny of the television advertising market may not be known for a few weeks, when advertisers will decide whether to give back some of the commercial time they ordered during the May upfront.
Economic concerns have already put a chill on the fourth-quarter market for scatter advertising, but the key signpost comes later this month when options on upfront buys are due. For broadcasters, options to give back some of the time reserved in the upfront ad market officially expire 90 days before the beginning of the quarter.
Good clients get more like 60 to 75 days. Clients can take options as little as 30 days before the beginning of the quarter on some cable networks.
So far, network sales executives and ad buyers say that there are few signs that companies are making big cuts in their TV spending.
“I would say we’re two weeks away from all of it being tallied up. But we pretty much know what shape our clients are in and I can’t tell you we’ve got an awful lot of them exercising options at this point,” said Chris Geraci, managing director of national broadcast investment at OMD.
National television is a relatively long-lead media, with most spending decisions made far ahead of when ads actually run, unlike digital and newspapers, where same-day decisions can be made, Mr. Geraci said.
But at some point, a weak economy is certain to have an impact on advertising budgets.
“If holiday sales are what they expect them to be, which is not good, this is going to affect the advertising market, which will affect the television market,” said Steve Lanzano, COO of MPG U.S.
A year ago, prices for scatter, the ad time purchased closer to air dates, were up 20% from upfront levels. This year, scatter prices range between plus 1% and minus 4% for money that was committed before the economic crisis worsened, he said.
What will happen to first-quarter options?
“All I can tell you is clients are talking,” Mr. Lanzano said. “A lot of vendors are being very flexible about options and when people are going to give up options. I think they’re giving people a lot of space to figure this thing out.”
In years when demand for scatter is strong, networks push clients to use their options and give spots back so that the networks can resell them at higher prices. That doesn’t look like the case this year. In fact, if marketers take money out, prices should fall.
“Let’s face it, if the marketplace plunges, people are going to take their options and they’ll look to use those dollars where they’ll buy more GRPs [gross ratings points] than they could get at their upfront pricing,” Mr. Lanzano said.
Last week Nielsen came out with figures that showed that financial advertisers, including credit card issuers, mutual funds and mortgage companies, had cut back on the number of commercials they ran on television during September by 24% to 50%. And ZenithOptimedia, one of the big media buying companies, sharply cut its forecast for U.S. ad spending.
The forecasts haven’t become actuality yet.
“You might see some of the financial companies cutting back in the fourth quarter, but I think a lot of companies are hoping against hope that things will turn around,” Mr. Lanzano said. But if things are going to tank, “I thing you’re going to see it in the first, second and third quarter next year” as advertisers exercise their options and get out of their television commitments.
Broadcast network executives didn’t want to talk about options yet, but indicated they hadn’t seen a rush of advertisers returning spots reserved in the upfront.
“We’re not all that concerned with first [quarter]. We’re more concerned with fourth quarter, quite frankly,” said Bill Abbott, executive VP for ad sales at Hallmark Channel.
He said the scatter market is pacing significantly behind last year and that clients are trying to buy spots as close to air as possible.
“There’s no question the impact of the financial crisis is starting to filter into our business,” he said.
While the economy will affect demand for TV commercials, the supply of ratings points will be determined largely by how well the broadcast network schedules perform.
“Comparatively speaking, you’ve got a strong story from CBS, you’ve got a pretty strong story from Fox, but NBC is disappointing,” said Mr. Geraci of OMD. “I don’t understand why some of those numbers are just so low for returning shows even.”
NBC’s ratings are likely to force the network to provide advertisers with make-good ads, limiting the number of spots NBC can sell in scatter.
“I don’t run the show over there, but I know what it’s going to take to get my deals paid, so yeah, they’re going to have to [provide make-goods],” Mr. Geraci said.
NBC’s executive VP for program scheduling, Mitch Metcalf, said it is too early to judge the fall schedules.
“We’re only two and a half weeks in,” he said. “We just barely have the L7 [live plus seven days ratings] and we don’t have the C3 [commercial] ratings in yet, which is what it’s really all about. I think we all collectively have to take a beat.”
This season the networks were fairly conservative in estimating how many viewers their shows would attract, according to Sam Armando, senior VP and director of research, analysis and activation at Starcom.
“This was one of the first years I can remember that we were close, and in a couple of instances the networks actually projected a little lower than us,” he said.
Nevertheless, he’s troubled by the performance of ABC on Wednesday night and NBC overall.
“Other networks said what they have in development. NBC didn’t give us a lot of pilots. And the only thing you see now are ratings that are subpar and trouble on the set of shows that were planned as replacements,” he said.
Mr. Armando added that while ABC can fix a make-good situation with spots on “Dancing with the Stars” or “Grey’s Anatomy,” NBC doesn’t have a big make-good property.
Buyers have yet to see the first commercial ratings—which take into account DVR viewing—for the new season. But Mr. Geraci doesn’t expect those numbers to be much different.
“There’s been a fairly narrow band. For most of broadcast prime time it’s been flat or slightly up,” he said.


  1. With scatter prices trending downward for two quarters, the upfront advertising market is weakening. Early indicators show that scatter volumes for Q4 are below forecast, which portends further declines in scatter prices. This will depress upfront prices in the coming season.
    Is everyone’s oxen gored equally?
    What will this mean for new episodic series?
    read more of the spin at http://richreader.blogspot.com/2008/10/upfront-tv-advertising-at-craters-edge.html

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