Broadcasters Calmly Await Q2 Options Outcome

Feb 3, 2009  •  Post A Comment

Ad sales executives at two major television broadcasters said they’re not alarmed over second-quarter options that advertisers have to return commercials they agreed to buy during the upfront last year.
Advertisers can return as much as 50% of the ad buys they commit to during the upfront. Normally they opt to return about 10%-15%. Given the state of the economy there has been speculation that advertisers might use the options process as a way to slash their marketing spending.
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Many clients have been asking for—and receiving—extensions to wait longer before making decisions about options. One media agency said many of its clients still had not made their call on options. But with just over seven weeks left before the start of the second quarter, most decisions are likely to be made this week or next week.
On its earnings conference call with analysts Tuesday, Disney said clients were sticking with less of their upfront buys than normal.
“That’s coming in slightly lower than what you otherwise might have expected, but not to the extent that we’re alarmed about that,” said Tom Staggs, Disney’s CFO. “We’re seeing a little more holdback in consumer goods and to a lesser extent pharmaceuticals with some strength in some other categories.”
“There’s no question it’s a soft ad market,” he added. “The strongest properties are selling pretty well.”
Jon Nesvig, president of sales for Fox Broadcasting, said he didn’t think the amount of commercial time returned by clients using options would be as high as the network’s early planning had anticipated.
“It’s obviously tough times. Ours will probably be a little higher than normal, but not all that much, when all is said and done,” he said.
Network executives and buyers said that Procter & Gamble has been talking about returning a big chunk of its upfront buys. While P&G is the biggest upfront buyer, accounting for about 6% of TV spending, the network executive and media buyers said that it didn’t seem that many other major advertisers would be making similar cuts.
When clients use options to cut their upfront purchases, some of that money leaves the television business. But other money is reallocated. Some money cut from the broadcast network is expected to be spent in cable, where the cost to reach viewers is lower.
(Editor: Baumann)

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