The $300 million advertising deal that Viacom Plus cemented last week with Procter & Gamble generated considerable buzz and anticipation on Madison Avenue, but the agreement is not expected to spur any of the major media buying agencies to begin making their upfront ad purchases for the 2001-2002 TV season. Buyers noted that while the deal is significant for Viacom's TV networks and for P&G, the $300 million represents just 2 percent of the combined broadcast, cable and syndication upfront marketplace, which topped out at about $15 billion last year.
According to sources familiar with the deal, during the upcoming TV season P&G has agreed to spend about $150 million on CBS; $72 million on the Viacom cable networks, including MTV, VH1, Nick at Nite, Comedy Central and BET; $30 million on UPN; and $45 million on syndicated programming from Viacom's King World Productions and Paramount Domestic Television units.
Sources said P&G was able to buy additional inventory for some of its female-oriented products on Viacom's younger-skewing cable networks by agreeing to also spend more on CBS. And in exchange for its increased total spending, P&G received favorable CPM rates for the entire deal, sources said.
While not commenting on specifics of the pact, Bob Wehling, P&G global director of marketing, noted that the consumer-products giant "gains greater access to desired programming." Early this year, Wehling had hinted that P&G might shift some dollars out of broadcast TV and into teen magazines to promote its female-targeted product lines like Covergirl cosmetics, shampoo and skin-care brands.
"You can be sure Procter & Gamble is not paying any premium rates for what they bought," said one industry observer. "But [Viacom president] Mel Karmazin is a brilliant businessman. He lifted the cap on the cable time usually offered to packaged-goods advertisers to get more money into the Viacom coffers. It was his way of starting the [upfront] ball rolling for Viacom. But this is only a small facet of the marketplace. It doesn't affect the balance of the market."
"Karmazin put antlers on a pig and called it a reindeer," quipped a senior sales executive for a competing cable network. "Everyone knows that P&G is the lowest-paying company on CPMs."
While P&G's buying agency, MediaVest, was negotiating the deal with Viacom Plus, other media agencies were finalizing budgets with their clients, completing new-show share estimates (see story on page 10), and conducting initial talks with broadcast and cable networks, and syndicators. As last week came to an end, however, no negotiations had begun in earnest because buyers were adamant that they would not pay CPM increases for next season, and the networks were equally firm that they would not sell ad time at CPMs lower than this past season.
Advertisers' upfront posturing last week was highlighted by reports that Chrysler intends to move a large chunk of its advertising budget out of television. But privately, insiders familiar with Chrysler's strategy said the automaker?which spent more than $1 billion on TV advertising this past season?will not risk losing market share to its competitors by abandoning the medium to any significant degree. Were Chrysler to make a major reduction in TV spending, General Motors, Ford and foreign automakers could spend the same amount as last season and, in effect, boost their exposure in Chrysler's absence. Industry observers believe this scenario would ultimately be unacceptable to Chrysler, even in a down economy.
Most media buyers expect that upfront buying on the broadcast-network side will not begin until next week. And most project that ABC -- while it has some promising new shows for this fall -- will take the biggest dollar hit, since its ad rate base is high and because its ratings were down by double digits this past season. NBC too has a high rate base and also will have to lower its rates or face lost business, buyers claimed.
CBS, Fox and the WB showed the most ratings improvement last season and are expected to do better in the upfront than ABC and NBC. Yet as one buyer pointed out, "CBS still only does a 4.0 rating in 18-49, and Fox, which did a 4.5 last season, has charged a high premium for that audience -- some advertisers may balk this time."
At the WB -- which traditionally has been the first network to move, wins the highest CPM increases and sells out its upfront inventory fastest -- business remained unusually quiet last week. Buyers project that the network, whose 18-34 ratings were up 19 percent this season, will win CPM increases between 3 and 10 percent, much lower than the 25 percent CPM hikes it earned in last year's upfront. The WB is in a different situation than the Big Three networks because it has eight less hours of prime-time inventory to sell each week and because it targets a more specific demo for each of its shows. As a result, certain advertisers regard the network as a must-buy.
Adding to the delay in the start of this year's upfront market has been a fear among buyers of making a mistake. "The last thing you want to do in this marketplace is to pay too much," one buyer said last week. "In previous markets, there was a concern of possibly getting shut out. In this market, it's about paying too much. No one wants to go early and show any signs of acquiescence."
Just as the broadcast upfront has been lingering at the starting line, so has cable, which in many years past has moved before network. In cable, as a long roster of networks chase fewer dollars during this upfront, sellers are aggressively trying to steal their competitors' shares by offering discounts in exchange for greater dollar volume. "There are some problems moving in cable, because there is an oversupply of ratings points, and the demand just isn't growing," said one major cable buyer, who requested anonymity.
"The truth of the matter is we will never sell out, so if we can make a deal for less [CPMs] and more money, we will," conceded one cable network sales executive. "Everyone is looking to cut better deals [with higher-paying advertisers] in prime time at the expense of the [other] guy."
The cable marketplace is still as sober as a church, with buyers and vendors largely unwilling to compromise on rates. Fox Cable Networks' FX has cut a direct-to-advertiser deal with Paramount Pictures at CPMs lower than last season, in exchange for a greater share of dollars than last year. Fox Cable sources said FX has cut a handful of similar deals with other agencies; media buyers claimed that the network has been offering CPM rollbacks of 10 percent or more on those deals.
FX is playing with a considerably stronger hand in this year's upfront poker match. The News Corp. property enjoyed a year of rapid subscriber growth, adding 17.7 million subs to reach 66.5 million. But the network now has double the amount of ratings points to satisfy this year, so high dollar-volume in the upfront is vital. FX this fall will add three younger-skewing off-network shows to its schedule that buyers find attractive -- Ally McBeal, The Practice and Buffy, the Vampire Slayer -- all from sibling studio Twentieth Television. In May, FX's household ratings increased 30 percent over May 2000, to an average 0.83, delivering 538,000 homes. The network's male 18-49 viewership was up 84 percent, to a 0.7. "It is a whole different network," one buyer said.
"FX is looking for revenue, so anyone who is willing to double their spending will get a spectacular deal," said another media buyer.
CPM decreases are expected to be offered across the cable landscape, but agency execs agree that even those favorable terms will not move the cable upfront market before broadcast, unless the broadcasters absolutely refuse to budge on their rate increases. "There is going to be such a scramble for dollars once this thing gets started that any buyer who is willing to take a discount in exchange for spending a bigger dollar share will make a mistake," one buyer said.
While tightened advertiser budgets are expected to chill upfront pricing for the broadcast and cable networks, conditions are even worse for syndicators, whose exceptionally poor ratings performance this past season has resulted in buyers delaying by more than a month the start of the syndication upfront.
"Certain top-tier syndicated programs have really fallen below where they were estimated they would be," noted Angela Miller, vp and associate director of national broadcast for GSD&M. "There will be a lot of discussion about that during the negotiations. This past season is the straw that broke the camel's back."
For the week ended May 20, the last full week of the sweeps, all of the top five syndie programs suffered year-to-year ratings declines. According to Nielsen Media Research data, King World Productions' Wheel of Fortune was down 8 percent, to a 9.2, in households; KWP's Jeopardy! fell 8 percent, to a 7.9; and KWP's The Oprah Winfrey Show dipped 10 percent, to 5.7. Paramount Domestic TV's Judge Judy tumbled 11 percent, to 5.7, and the distributor's Entertainment Tonight was off 3 percent, to 5.6.
Buyers said that in a syndication market where hardly any programs have shown year- to-year ratings increases, there is no compelling reason to rush to put down upfront dollars. Syndication executives counter that their business is still healthy. "People get hung up about these [ratings decrease] percentages," said Mike Weiden, president of ad sales for Pearson Television, distributor of Family Feud. "But a household rating in the 5's is still better than most programs on television."
--with Daniel Frankel and Megan Larson