Upfront: Nets See Buyers As First to Blink

NEW YORK — Just three weeks before the broadcast networks unveil their new programming schedules for the 2002-2003 season, the pre-upfront marketplace is beginning to boil. Stirring it up are sales executives for the broadcast networks, who are expressing confidence they can win mid-to-high-single-digit cost-per-thousand commercial rate increases for next season, based on their current conversations with media buyers.

Network sales executives, none of whom would speak for attribution, say their confidence stems from the fact that buyers are approaching them with pre-upfront conceptual deals, in which a buyer will guarantee to spend a certain amount of client dollars with a network if that network will agree to a tentative CPM range that would get finalized at a later date. Such a negotiation enables the buyer to go to the other networks during the upfront with less money available, ideally putting pressure on those networks to offer better CPM pricing to get a portion of those remaining dollars. The networks reason that this kind of strategy would not be on the table if this was a definitive buyers’ market like last year, when few advertisers attempted to do business early.

“The buyers are starting to realize that ad spending is increasing and we will not be looking at decreases for next season,” said one Big Four network sales executive.

“The agencies are a lot more nervous than they would ever want to publicly admit,” added another network sales executive.

But Rino Scanzoni, president of broadcast for media buyer Mediaedge:cia, said nothing should be read into the discussions currently taking place. “There are always conversations that go on before the upfront,” said Scanzoni. “This is all part of the process … the dance always goes on, the feeling-out process.”

However, the networks say when advertisers ask about the possibility of doing conceptual deals in April, they are tipping their hand. “It’s one thing to posture — it’s another to inquire about actual deals,” a network executive said.

Network sales executives believe one reason some buying agencies are trying to do early deals is to gain an edge on the other agencies once the upfront begins. “With all the consolidation among the agencies, all of their clients are expecting this new buying clout to produce results,” said one sales executive. “The advertisers don’t want to hear about a competitor getting a better rate through another agency. They need to show their clients why clout is better at their shop.”

Clearly, the number of major players buying in the TV upfront marketplace has shrunk considerably through consolidation. Giants such as Mindshare; OMD; Magna Global (which negotiates for Universal McCann and Initiative Media North America); Carat; Mediacom; and Publicis units Starcom, MediaVest, Zenith and Optimedia, each have clients that total well over $1 billion to spend in the broadcast TV advertising upfront. Publicis just last month acquired Bcom3, the umbrella under which Starcom and MediaVest operate.

The networks say the same categories that are heavy players in the scatter market right now are the ones in which clients are inquiring about pre-upfront conceptual deals. They include automotive, movies, fast food, pharmaceuticals, credit card companies and soft drinks.

The network sales executives say what’s preventing conceptual deals from getting done right now is that neither side can agree on a CPM range that might hold up several months down the road. “In order to cut any type of deal, even conceptual, both sides have to be fairly comfortable about what the range will be,” said one of the executives. “Right now, nobody is that comfortable.”

And Scanzoni stresses that doing early deals “doesn’t necessarily translate into better deals. It only works if the two sides can agree on a similar perspective.”

The networks believe CPM increases will average between 6-8 percent over last year’s upfront when the market is wrapped. If that happens, it would push this year’s prime-time upfront total up by about $500 million over last year to about $7.4 billion. Buyers counter that most of their client budgets are still not finalized, which makes it impossible to say whether spending will be up or not.

Both sides agree that no matter how many pre-upfront deals are done, the upfront will most likely move in a slower and more deliberate way (as happened last year), with actual deals being closed over several weeks following the network presentations the week of May 13, rather than in a matter of days.

“The agencies can no longer move and finish too quickly without being accused by their clients of possibly overpaying,” said a sales exec.

The one thing that could jumpstart the upfront marketplace quicker, networks and agencies agree, is if one particular network wows the buyers with its new programming presentation, which could cause a more immediate run on that network’s inventory. That said, no one expects that to happen.

Buyers say the longer they can delay the bulk of their deals, the better chance they have of putting marketplace doubt into the minds of the network sales teams.

“NBC is in the best bargaining position because of its strong, young, upscale audience,” said one network sales executive, analyzing the pattern the upfront could follow. “NBC should be the pricing leader. CBS, even with all of its top-20 shows, is still older-skewing overall and will not get as much as it should because of that. Fox is a situation player and will grab what it can. And ABC has no strength at all.”

NBC was the first to do deals at negative CPMs in last year’s upfront, but even some of its network competitors do not believe it will be anxious to move so early again, even with more inventory to sell in February since it does not have the Olympics this year.