A telephone survey of the advertising agencies that represent the top 150 clients conducted last month by Fairfield Research Inc. indicates the big webs will suffer a net loss in upfront business this year, with cable and syndication gaining at the expense of CBS, ABC, NBC and Fox. Based on the responses to the survey, Fairfield predicts that advertising committed to the broadcast primetime upfront will decline from $3.6 billion last year to about $3.5 billion this year. That's the disappointing news. On the other hand, television spending overall should get a decent bump. Fairfield projects a 7.7 percent increase in total 1994 TV spending, including network, spot, cable, syndication and unwired networks. Nearly all of the new spending will be directed away from broadcast.
The survey results mirror the current buzz in the advertising business, which has it that there will be little or no growth in the advertising marketplace this year. The posturing that normally precedes the opening of the upfront is decidedly less blustery, with both buyers and sellers forecasting a relatively flat market.
"I don't think any of us are predicting robust growth," says Marvin Goldsmith, president of sales and marketing at ABC, the leading network in the most sought-after demographic, women aged 18 to 49. Goldsmith expects growth nonetheless, with upfront dollars for primetime to increase by 3-5%.
"Flat," says Paul Shulman, president of the Paul Shulman Co., a media buying service owned by WRG's Advanswers Inc. that buys for such clients as Ralston Purina and The Gap. "I don't see any increase in budgets at all."
"I think upfront will be fiat," chimes in Steve Auerbach, exec vp at DeWitt Media, which handles MasterCard, BMW and Reebok. "Any increases will be minimal at best, especially in prime."
This low-key chorus is unwelcome news for the media and for the agency business. The upfront is the biggest, most important media marketplace; it affects to some extent nearly every media transaction that will follow though the next 12 months. It thus serves as a bellwether for the entire advertising economy.
Over the past two years, however, the importance of the upfront marketplace has been diminished by a confluence of events and changes in the way clients do business. The upfront still sets the pace, but it no longer reigns over agency psychology the way it has for some 30 years. It used to resemble a feeding frenzy, with the entire market sometimes moving in as few as 24 hours. The upfront is now a civilized affair, with deals getting built over days and weeks instead of minutes and hours.
The chief reason for the change in the psychology of the upfront is the change in the competitive position of the big broadcast networks. When the Big Three controlled more than 90 percent of the television audience, advertisers risked getting shut out of network, for which there was no suitable replacement media. The big nets now hold about a 60 percent share of the audience; advertisers can now reach TV audiences with cable, syndication, spot and unwired networks.
Still, there should be room for growth in the overall marketplace. The last reasonably robust upfront happened in 1990 for the '90-'91 TV season. The '91 and '92 upfronts were anemic, and the 1993-'94 upfront looks to be the same. The culprit, the nets say, has been the weak state of the economy. It is more likely, however, that advertisers have changed the way they look at advertising, and thus the way they use television. The 30-second TV spot is no longer the only way to build an effective national marketing campaign, and TV is built around the 30-second spot.
There are other factors that will affect this year's upfront. One is clients' continued desire to hold back budgets until the last possible minute. By holding back money, the client can react more tactically in the marketplace. The client can also choose to put unspent marketing dollars toward the bottom line or heavy up against an unexpected competitive blitz.
Working in tandem with clients' desire to hold money back is the scatter guarantee, which networks have been offering to advertisers with increasing regularity. The scatter market--the rough equivalent of the spot market for oil used to be a volatile place to do business. Pricing is determined by what the market will bear, which in good times meant clients could pay far more for time in scatter than what it would cost them in the upfront.
In recent years, however, scatter pricing has remained roughly even with upfront, sometimes falling below. As an incentive to draw advertisers into the depressed scatter market, the networks began guaranteeing scatter audiences. Nowadays, almost two-thirds of the network and cable scatter buys come with guarantees, according to Fairfield Research. (See chart, bottom of this page.) "When scatter is guaranteed, it takes away the biggest advantage of doing an upfront deal," says Shulman.
The bottom line on the network upfront, then, is that so long as clients hold money, networks offer guarantees for scatter and quality scatter inventory remains available, sales executives lack the leverage needed to push buyers into an old-fashioned stampede to market. The diminished marketplace leverage of the broadcast nets has not, however, taken any of the steam out of an evolving cable upfront, although there are some buyers who argue there really is no bona fide cable upfront yet. "You're not dealing with the same marketplace dynamics in cable as you are in broadcast," says Rino Scanzoni, senior vp/director of national broadcast at DMB&B. "Most deals (in cable) do happen during the spring and summer, but more and more of them take place all year round. Upfront is just too strong a word for cable."
While there's talk that an evolving cable upfront will unfold as it has for years, breaking in early- to mid-June and fizzling out through July into August, the buying community seems to want to move away from being constricted by the summer months. It's not that advertisers don't want to make large-scale commitments to cable networks anymore--they just don't want to make them under these time constraints. "It will last all summer long," predicts Bill McGowan, senior vp/ad sales for Discovery Networks.
The heavy hitters in cable are expected to fare as well as ever this year, particularly the multi-network players like MTV Networks, Turner Networks, Discovery Networks and USA Networks. (ESPN on its own carries as much clout.) As the chart on this page indicates, these networks are on the buying schedules of a majority of advertisers.
What's interesting is that some cable nets have reached the point where they are an immediate incumbent, even though their performance isn't what it used to be. MTV is probably the best illustration. Its average household ratings have slid over the last two years, yet it's associated itself so much with youth that any marketer looking to buy the 12-18 demo in cable has to incorporate MTV into its plan. And they will have to pay handsomely to play; CPMs in the MTV stable could be up as much as 20 percent this year.
The second tier of cable networks have begun to make their mark on the upfront as well. There's the example of Comedy Central, which lined up Pepsi to a 52-week commitment. The deal made it only the third cable network to lure upfront dollars from the soda giant. Also, multi-network sales forces have been trying to carve out chunks for smaller services in their fold--like USA's new Sci-Fi Channel, Discovery's The Learning Channel and Turner's Cartoon Network. At the same time, they're careful not to let that cannibalize deals with the big-sister nets.
All in all, cable execs are expecting only single-digit growth in the '93 upfront. Part of that is a reflection of the double-digit increases many networks got in years past. Buyers definitely keep previous years' negotiations in mind when inking new deals.
Still, some buyers say cable will prosper. "Cable is winning by default," says Bob Peristein, executive vp at SFM Media. "As I say often, cable is a license to steal." Indeed, the Fairfield study shows cable netting 16 percent increases in the 1993 upfront. Part of the reason is that cable has come of age. Cable network schedules now routinely feature series, made-for-cable movies and major sporting events. And the new cable channels are adding one-of-a-kind inventory that offers variety and distinctiveness to clients. Moreover, clients are also now far more educated about niche marketing, and cable fits more neatly into their plans.
The syndication marketplace also is set for a 16% boost in upfront spending, according to the Fairfield survey. Syndicated TV has been surprisingly robust while the network marketplace has been deflating. This year, producers are adding several new daytime talk shows and a full season of expanded one-hour primetime first-run shows. Most notably, this will be the second year for Paramount's Star Trek: Deep Space Nine, one of TV's hottest shows.
Finally, a word about how the survey was conducted. In May 1993, Fairfield Research, Inc. surveyed a list of the top 15(} advertising agencies (ranked by billings) and the agencies of record (AOR) for the top 150 advertisers to profile the 1994 upfront television market. The individuals surveyed were the people most knowledgeable about the agencies' television buying on behalf of their clients.
The data collected represents television buying for approximately 482 advertisers. Among the top 50 advertisers, 47 are represented in the data and among the top 100 advertisers, 84 are represented. Overall, approximately 63 percent of all U.S. television buying is accounted for by the agencies surveyed.
Copyright Adweek L.P. (1993)