Why the Upfront Won’t Be Over Anytime Soon

NEW YORK In past years, it wasn’t unusual for buyers and sellers to be huddled in offices till the wee hours—budgets, cold pizza and antacid tablets at the ready—to close deals and complete the upfront market by the end of May or early June. This year, buyers and sellers are bracing for prolonged talks that may not conclude until closer to Labor Day.

“It’s going to be a long, hot summer,” said Jason Maltby, president, co-executive director, national broadcast, WPP’s MindShare, referring to the pace of this year’s negotiations. “The days of plopping down $20 billion in two weeks are gone. It just isn’t going to happen anymore because the process has become too complex.”

Maltby and counterparts at other shops and networks cite several factors for the change. Increased demand for a growing array of digital components and other cross-platform opportunities such as branded content, for instance, are expected to slow down talks as both sides try to gauge the value of such extras.

Budgets from clients are also delayed this year as they assess new media options, such as mobile and video-on-demand, and how much they should spend on those media versus traditional outlets. “Some money will come out of TV to support other media as has been happening over the last few years,” said Andy Donchin, evp, national broadcast, Aegis Group’s Carat.

Underlying all that is a general sense that, despite a fairly robust scatter market this year, upfront spending on prime-time broadcast will be essentially flat compared with last year’s estimated $9 billion. Buyers also say the new schedules lack any significant “must buy,” so that clients don’t feel the need to get their money down fast or risk missing out on hot new shows.

“No one is under any immediate pressure to beat a marketplace,” said Bill McOwen, director of media investment at Havas’ MPG. “The bigger issue is to spend wisely within that marketplace and know all the facts.”

A new ratings system debuting later this month that for the first time will measure commercial audiences is the biggest change expected to slow down negotiations. Until now, the ratings have measured audiences for programs, not ads. Nielsen custom studies estimate that viewing commercials in prime time on the broadcast networks falls by an average 6 percent and drops an average 10 percent on cable. But those are just averages that vary by program and network, which will prompt numerous discussions about how to adjust rates to account for those differences, as commercial ratings become the new currency.

Some agencies and clients want to start evaluating the new data, which will become available from Nielsen Media Research later this week. They say they hope to see several weeks’ worth before beginning negotiations.

“We want to know how all the myriad options perform,” before starting discussions, said McOwen. He was referring to the six new streams of commercial ratings data that agencies will be receiving on May 31 that need to be processed and interpreted and compared to program ratings.

In addition to so-called “live” ratings that will measure commercial audiences at the time that programs actually air, five additional streams of data will measure the live audiences plus some portion of the viewers tuning in via DVR playback, ranging from live plus same-day DVR viewing to live plus seven days of playback.

DVR usage is growing rapidly and has become a key issue in the buying and selling of TV ad time. Currently, Nielsen estimates that 17 percent of U.S. homes have a DVR, while Forrester Research predicts that penetration could reach 50 percent by 2010. As more viewers use DVRs, more commercial skipping is expected. Commercial ratings measure the audiences that both tune in to and skip the spots.

Networks of course are interested in a measurement that captures as many viewers as possible, and ideally they prefer live plus seven days. But buyers argue that many commercial messages are time sensitive, such as movie ads drumming up business for the weekend or retailers promoting special sales. And the likelihood is, sources on both sides of the bargaining table say, that the middle-ground metric of live plus three days of DVR viewing will be the ratings benchmark for many deals. On average, three days of playback incorporates about 75 percent of all DVR viewing, according to Nielsen Media Research.

That said, Maltby at MindShare believes multiple benchmarks will come into play. “People are still evaluating,” he said, adding there’s a “broad consensus” that most deals will be based on live plus one, two or three days of DVR viewing. “But there will be some people using a different currency because they’re promoting a special sale,” or event, he said.

While there is general agreement that broadcast network deals will be based on commercial ratings, it’s less clear whether cable will follow suit or use program ratings for another year before making the switch. It’s possible that both measurements will be used. “We have serious questions about the accuracy and stability of the data,” for commercial audiences in cable, said a senior executive at a major cable network. “We just keep finding discrepancies in the data that we feel are too big,” and that prevent cable networks from providing accurate commercial ratings guarantees for the new season.

However, the executive did say that talks continue with Nielsen and agencies about possible ways to work around those issues for this season.

A senior cable sales executive at another network group said his teams are discussing with clients the possibility of basing some deals on program ratings and others on commercial ratings. But whether that happens and how such deals would get done will depend on how much money is in the market. “I haven’t seen a budget yet, and so I really can’t tell you what I want until I see what is out there,” he said. Still with all the confusion remaining about cable ratings, he said, “a big win for cable would be to stick with program ratings for another year.”

There’s a certain irony to the confusion in that buyers see the new system as an interim step that may be replaced in a year or two. “It’s one step closer to accountability,” said McOwen, “but not quite there. It could change every 12 months. Ultimately second-by-second data is where we need to get to.”