Pay Up or Lose Out, Says Karmazin

Viacom COO Mel Karmazin has a warning for media buyers regarding the May upfront buying period for the 2001-02 TV season. Pay the prices CBS asks for, he says, or the network will hold back as much as 45 percent of its ad inventory to sell later in the scattermarket.

And the buyers have a response for Mel: That strategy could be a very dangerous one.

Karmazin, who made his remarks during a phone call last week with analysts and the media to discuss Viacom’s 2000 results, said he would like CBS to sell the same 80 percent of its ad inventory in the upfront that it sold last year. But he is not going to allow the network to undervalue its ad time.

Karmazin was not available for further comment, but Gil Schwartz, executive vp of communications for CBS, said, “Whatever Mel said goes. We’re certainly not going to accept less value than our ad time is worth … If we can get good value, we’ll sell it. If not, we’ll hold onto it.”

Dan Rank, director of national broadcast for Optimum Media Direction, called Karmazin’s statement, “a very bold, gutsy move. But he added, “He’s counting on a lot of things to come together. If they don’t it could be very dangerous. I wouldn’t recommend it.”

Jon Mandel, co-managing director of MediaCom, said, “He’s trying to panic buyers into doing something they might not be prepared to do—buy more TV in the upfront in a soft economy. And if they don’t, he believes they will store this money away until fourth quarter. He’s wrong. Upfront money not spent by advertisers on television will go into print, and since Mel has no print products, he will lose out.”

Several buyers, who chose not to speak for attribution, were more cutting in their criticism of Karmazin and his strategy.

“There’s no one network that must be bought,” said one buyer, who controls more than $1 billion in ad spending.

“Buyers won’t sit on the money,” added another buyer. “They will spend it on other networks.”

One network sales exec said that while Karmazin might be posturing a bit, “I don’t think any network is going to start out upfront negotiations selling cheaply because the economy is soft right now. I think we all believe the fourth quarter will be stronger than it is right now and nobody is going to give inventory away.”

Season-to-date, CBS is almost in a dead heat for the household ratings lead with ABC, 8.7/14 to 8.6/14, per Nielsen Media Research. And while CBS is fourth in the advertiser- desired 18-49 demo, it is up 5 percent over last season to a 4.0/10.