UPFRONT 1997: A Record-Breaking Year?: Their shares are sliding, but network upfront sales may top $6 billion, anyway

By Richard Katz

Ratings and shares continue to drop, but are the broadcast networks worried? Not when it comes to advertising revenue. Media buyers and network salespeople both agree that this year’s upfront season will break all records by surpassing the $6 billion mark. (The previous high of $5.6 billion was set last year.)

Businesses around the world should envy the networks. In what other industry can you consistently lose market share and still be able to jack up prices? “In a time of no inflation, with businesses going crazy to cut their costs, if the networks can increase their prices, that’s truly a phenomenon,” says Gene Dewitt, president of Dewitt Media.

And the economic laws of supply and demand indicate that the networks will indeed be able to raise their ad rates. Marketers believe they need the national reach of networks to sell their brands. The pre-upfront discussion has centered on how much the networks can increase their CPMs. “The networks have the only big-reach game in town, even though their reach is getting smaller each year,” Dewitt explains.

In recent weeks, two other pieces of evidence emerged to back up predictions that the networks will command record CPMs. First, fearful that the networks will ask for CPM increases in the 10-15 percent range, media buyers last week triggered the syndication upfront as a hedge against the networks. Second, third-quarter scatter CPM increases average more than 20 percent, so the networks sail into the upfront commanding big mark-ups.

While syndication and some cable deals have gone down, buyers and network execs said the upfront won’t kick in until the end of May-after all the networks have presented their fall schedules. And both sides also agree that No. 1-ranked NBC will set the market.

“NBC’s in the dominant position, so I’m going to wait and see what they do,” says an exec at a competing network. “If NBC gets 12-15 percent, then I’ll get 12 percent and below. It would be suicidal for me to do upfront business now.”

Despite strong advertiser demand, buyers warn that if the networks get too greedy, they will lose business to cable and syndication. “More than ever, the ratings points are down,” says Jerry Solomon, president of national broadcast for SFM Media. “There’s nothing that says that network TV is a must buy.”

Because ratings are down, networks can do two things to ensure their revenues will top last year: raise their prices and jam more commercials into their programs. Buyers and their clients dislike both tactics. “Adding more commercials to what is already a fair load is a disservice to their clients,” says Solomon. “It will come back to haunt a network or two.”

ABC has been the most aggressive in pumping up its commercials load. In 1996, the network sold 23,888 commercials, more than CBS (23,014) and NBC (22,208), according to Competitive Media Reporting. Under pressure to increase revenue despite a ratings drop-off from new corporate parent Walt Disney Corp., buyers said ABC was taking the most aggressive pre-upfront pricing posture. “With a network in ABC’s position and with management looking over his shoulder, if [ABC sales head] Marvin Goldsmith was not to do that, he’d be out of a job,” says Aaron Cohen, senior vice president/director of national broadcast and programming for The Media Edge, about ABC’s aggressive pricing stance.

But Goldsmith, president of sales and marketing, hotly denied ABC was asking for CPM increases as high as 10-15 percent. “It’s absolutely untrue that we’re out there being aggressive on CPMs,” he says, adding that he hasn’t even whispered the prices ABC will seek in the upfront.

Of the four big networks, buyers said NBC was in the strongest position going into the upfront, followed by Fox and CBS and ABC, depending on who one talks to, bringing up the rear. Buyers said that the networks’ upfront presentations-which begin with NBC on May 12-will play a sizeable role in how many dollars they earmark for each network.

“Even though they lost audience this season, NBC is not in much danger of slipping below No. 1,” says Betsy Frank, executive vice president/director of strategic media resources for Zenith Media Services. Frank said that NBC will stick to its strategy of moving its hit shows around in the schedule in an effort to build other prime-time evenings as strong as its Thursday “Must See TV” lineup, which features Seinfeld and E.R.

“Some years this strategy works better than other years,” adds Frank, who described 1996 as a “mixed year” for NBC. “I don’t think the new shows they premiered were anywhere near as successful as the old ones.” Frank said the network faces another challenge: If NBC cancels a borderline show, it could be picked up by a competing network and come back to haunt NBC.

NBC will continue to target urban, sophisticated viewers, while bringing back to series programming a few sitcom veterans (Kirstie Alley and Tony Danza among them.)

At a pre-upfront presentation to advertisers, CBS Entertainment president Les Moonves said the network will concentrate on its core 25-54 audience while trying to draw in more younger viewers. The network recently snatched the sitcom Family Matters from ABC and will try to build a Friday night family-targeted block.

The network performed OK as the number two network in household ratings, but buyers said CBS’ core demo remained too old for their clients’ tastes. However, buyers gave the network points for approachability in the weeks leading up to the upfront.

“CBS, especially since their [disappointing] financial statement came out, have been much more reasonable,” says Cohen. “They understand that their audience is the not the core audience advertisers are going after.”

Agency execs said that Fox will continue to target the 18-34 demo. Fox introduced the only legitimate hit this past winter, King of the Hill, and successfully moved its hit from last year, The X-Files, to Sunday nights. “Their challenge is to retain their distinctiveness and not try to reinvent themselves,” says Frank. “In a cluttered TV landscape, having a strong identity is very important.”

Fox executives are planning a Wednesday night of original programming throughout the season, testing new dramas instead of running repeats of regular series. “NBC is No. 1 and Fox is nipping at their heels,” says Bill Croasdale, president of national broadcast for Western International Media.

The network goes into the upfront with a 1996 schedule that was a failure overall and also amid speculation that ABC Entertainment president Jamie Tarses may get a boss-possibly Geraldine Laybourne, who currently oversees Disney’s cable assets. “Since Jamie is new to the network, I don’t know whether she has the independence and vision to create a winning prime-time schedule,” says Dewitt.

ABC’s strengths include Home Improvement and its new spinoff Soul Man, Spin City, The Drew Carey Show and Sabrina, The Teenage Witch. But the network had many more misses than hits this past season, the most notable flop being Arsenio Hall’s return to television. After hanging on with a 9.6 rating/16 share, Ellen scored big with its “coming out” episode, but observers are unsure if the show can build momentun from the hype bonanza.

“ABC has the biggest uphill battle to get back on track,” says Croasdale. °

Copyright ASM Communications, Inc. (1997) ALL RIGHTS RESERVED