Haggling Through This Year’s Upfronts

Fictitious telephone conversations made in late June:

ABC: We’re writing business at -1 percent.
Me: NBC just closed with Agency X at -10 percent. How can you be at -1 percent?
ABC: No, the NBC deal was -7 percent.
Me: That’s what was in print, but we heard it was -10 percent.  
ABC: Well, they have so much Leno in there they had to write that number. We have all quality blah, blah, blah.

I hang up and call Fox.

Fox: We will tuck in behind ABC and we hear they’re writing at -1 percent, so we’re probably at -2 percent. The NBC number was -7 percent.
Me: No, the NBC number was -10 percent.
Fox: We’ve only got 15 hours per week to sell and we have great freshman hits coming, so we’ll hold back more inventory this year for scatter if we don’t get our numbers.
Me: Overall dollars are down over 20 percent, so aren’t you afraid of writing negatives in scatter?
Fox: We’ve got American Idol and 24 in 1Q and 2Q, so we’ll take our chances and we’re stronger in 4Q with House and Fringe doing so well. 

I hang up again and call CBS.

Me: So what’s the outlook?
CBS: Les [Moonves] feels the economy is in turnaround mode and we had a great year ratings-wise last year, so now we want to be paid for it.
Me: But the business does not work that way. It’s all about supply and demand — you have more supply and less demand.
CBS: That’s not what we’re thinking. We will write deals with a positive number.
Me: Good for you, we were planning to cut one network anyhow.

Click.

And so the network upfront games kick off, and as our national broadcast team reaches for a Domino’s delivery menu for yet another night in a row, the question remains, “Where is this all going?” 

I’m actually a fan of the upfront process. While it has many critics, having worked in several different countries I’m convinced there isn’t a better TV-buying model elsewhere. The upfronts provide a marketplace of sellers and buyers who trade access for advertising airtime, offering early commitments for a price. No advertiser is being forced to buy time upfront; in fact, a number of high-profile advertisers will no doubt decline to commit in this year’s proceedings. And no network is being forced to sell upfront at a price it doesn’t want. If a deal is attractive enough for both sides, then it will happen. 

But the focus on price and, perversely, CPMs as the currency to trade appears to be very dated. This made a lot of sense 30 years ago when the role that TV played was to ensure that advertisers “reached” as many people as possible to generate awareness for their products and services. But reaching people isn’t enough for brands competing for attention these days, a fact that underscores the value delivered not just by TV itself, but its content and various platforms that consumers increasingly use.

The growing importance of digital to consumers and the level of innovation that is feeding digital platforms are now very significant. Think about Hulu and its growing influence now that Disney has joined Fox and NBC in this venture. Consider the growing engagement with online Web sites and platform extensions for shows such as American Idol and The Office. We’re also seeing advancing cross-platforms initiatives. Earlier this year, CBS broadcast all 63 March Madness college basketball games to iPhone and iTouch devices, including the ads — a great example of progress. However, it seems that this significant investment is being excluded from consideration during “traditional” upfront negotiations, or included as nice added extras when CPM negotiations are being carried out.

Trading CPMs confines the industry to treating TV as a pure commodity. That’s not good for the media nor is it good for advertisers.  

As advertising clutter increases, the need to place more attention on viewer involvement and interest has become paramount. 

At Optimedia we initiated for a second year our Content Power Ratings survey. While not professing to provide all of the answers, it’s an attempt to value audiences beyond TV and appeal beyond ratings. It’s our call-out to the industry to consider a different model. Content Power Ratings quantifies a television show’s audience across TV, the Web and mobile. It also factors in a program’s advocacy and influence. For example, one of our top CPR picks last year was the CW’s Gossip Girl, which despite its lower showing in ratings, scored well online and through viewer advocacy, an early indicator of the show’s improved traditional ratings performance this year. NBC’s The Office was another show that Nielsen ranked only 69th, but was the fourth most-valuable show, according to Content Power Ratings. It’s data like this that to me starts to provide a fuller picture of a TV program’s proper commercial value, which makes it worth haggling over. 

Measuring TV’s advertising value via CPMs is the equivalent of measuring the quality of fish by its weight. If the quality of TV continues to be commoditized and limited to a CPM, then I fear the only response advertisers will want to know is how much less they are willing to pay for it in 2010.

Oh, I need to go, that’s CBS back on the phone.

Antony Young is CEO of Optimedia U.S. He can be reached at antony@optimedia-us.com.