Fewer Ad Orders Seen Pulled in Q3

May 3, 2009  •  Post A Comment

Network executives are bracing for third-quarter advertising cancellations, but some ad buyers say they won’t be as extensive as feared.
Those more optimistic buyers believe the percentage of ad sales made during last year’s upfront market that are canceled in the July-through-September quarter might be closer to first-quarter levels—which were only slightly higher than the normal 3% to 5%—than to second-quarter levels, which hit 12% to 15%.
However, they warn that some of the largest advertisers haven’t made their decision on options yet.
Many advertisers and media buying agencies have been seeking extensions from the networks, who usually want decisions made 60 to 75 days before the beginning of the affected quarter on whether clients will purchase the commercial time they reserved in the upfront. Upfront buyers are allowed to option, or cancel, up to 50% of their buys, but they have been making their purchase decisions closer and closer to air dates as they seek flexibility to react to economic conditions.
And the networks, by and large, have been granting extensions.
“I think there’s still a lot of advertisers thinking about what they’re doing in the scatter market in the second quarter, so I don’t think it’s on anybody’s radar screen,” said Steve Lanzano, chief operating officer of media buyer MPG.
In years when the market was stronger, Mr. Lanzano said, the networks would be champing at the bit to re-sell canceled inventory on the scatter market, where prices are usually higher than at the upfront. Right now, however, “No one’s pushing anything.”
Indeed, some of the biggest advertisers who canceled a large chunk of their advertising in the second quarter, including Procter & Gamble and the companies in the distressed auto industry, hadn’t made their options decisions.
Ad sellers are hoping for the best but braced for higher-than-normal cancellations.
“There’s always concern it won’t be any different once the trend goes in this direction, but we’re cautiously optimistic,” said Bill Abbott, executive VP of sales for the Hallmark Channel.
When advertisers canceled their upfront buys in the second quarter, networks found that the scatter market was relatively steady.
Mike Shaw, president for sales at ABC, said he was able to sell out his second-quarter inventory while keeping prices at upfront levels.
Other sales executives had similar experiences.
“The fact that we’re writing business week-to-week gives us more confidence,” Mr. Abbott said. “While [those taking] options were very significant and much higher than typical, we’ve resold that inventory and more, so we’re feeling OK about the second quarter.”
Philippe Dauman, CEO of Viacom, said that while domestic ad sales at the company’s cable networks, which include MTV, Nickelodeon and Comedy Central, were down 9% in the first quarter, he was seeing signs that the advertising market was stabilizing.
“Our customers are starting to feel more confident about a recovery emerging later in the year,” Mr. Dauman said. “Our kids upfront started several weeks ago, and we have been getting strong commitments.”
He said the upfront for the grown-up entertainment networks is just starting to get under way, but noted, “We are seeing more robustness as we head into the next few months and the upfront season.”
Viacom’s MTV has held upfront presentations in New York and Chicago. In addition to presenting new programming designed to appeal to the next young MTV generation, in this case the Millennials, MTV executives told buyers that they were working on plans that would provide upfront clients with the flexibility they’re asking for and protection from snags in the market.
MTV executives declined to provide details of those plans.
This week, NBC will again present its programming plans early to advertisers in what it calls its “infront” presentation. The network believes the earlier meeting gives advertisers more time to come up with ideas for the kinds of integrated campaigns that have to be agreed to long before they run.
In two weeks, the other broadcasters will present their schedules in the traditional upfront week. At that point, negotiations will begin in earnest, with buyers seeking lower ad rates from the networks, the networks looking to maintain pricing and cable networks hoping to cash in on the conflict.
Mr. Lanzano said there’s little urgency on the part of most clients to do upfront deals in May or June.
“Obviously if you’re a movie studio, or if you’re a retailer interested in the hard eight [the weeks leading up to Christmas], or if you’ve got a new product or something, clearly you need to protect inventory at a specific time of year,” he said. “But if not, why rush into it? .. Let it play out.”
But Mr. Lanzano said he sees suggestions that business is improving. “Are we seeing some glimmers of hope? Yes,” he said. “But I still think people have in the back of their head there’s going to be something else down the road that’s going to squash whatever type of small recovery we’ve had.”

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