Among Buyers, The Signs Point To A Softer Upfront

With a still-recovering scatter market and turmoil in a number of big ad categories that could result in cutbacks, ad buyers expect the broadcast TV upfront marketplace to show little if any growth in spending versus a year ago, when advertisers plunked down roughly $9.3 billion in commitments. Broadcast sales executives see a somewhat rosier picture, with spending and pricing up. Cable executives say they hope to match last year's 15 percent spending bump, which helped the medium collect a $6.3 billion total during the upfront. But as the pre-upfront posturing begins, as it does every year around this time, buyers and sellers agree on one thing: More dollars will shift from broadcast to cable for the 2005-06 television season, as audience fragmentation continues. Whether this year's shift matches the $600-800 million that moved last year remains to be seen. "The market has been extremely quiet from the vendor side," said Donna Speciale, president of U.S. broadcast at Publicis Groupe's MediaVest. "To me, that means they realize the market is definitely going to be a lot softer than in previous years." Speciale said the lack of demand could even result in price rollbacks this year, which would be the first time that's happened since 2001-02. "Our business is driven by a supply-and-demand model, and the supply right now is there and the demand isn't," she said. Les Moonves, co-COO of Viacom, has so far been the exception to the mum-ness on the sell side. Three weeks ago, he said publicly that CBS would hold out for "very significant increases" during negotiations with advertisers, given the gains that the network has achieved in ratings this year. For the first time in a generation, CBS is expected to place first among adults 18-49, the demographic target that many advertisers covet the most. Some buyers interpret Moonves' remarks as a sign that CBS is seeking double-digit price increases again. The network may get a price hike, but buyers doubt it will be that high. "CBS will benefit this year, regardless of the strength of the marketplace, from being in a stronger position versus the competition," said Steve Grubbs, CEO of Omnicom's PHD North America. Grubbs said he doesn't see any signs yet of a stronger market overall this year versus last. But he also pointed out that in the past two years, many advertisers didn't finalize budgets until the last minute. Tim Spengler, evp and director of national broadcast at Interpublic Group's Initiative, agreed that the early signs, based on client discussions, point to soft budget growth for the coming year. "It is April, and in the next six weeks our clients or the marketplace could surprise us, but it kind of feels like there are two or three large categories that are definitely going to be off, and maybe three or four categories that we aren't sure about," he said. "But it doesn't feel like there is going to be a lot of increased money in the marketplace." The down categories are the ones that have had their problems or mergers well chronicled in the press—packaged goods, pharmaceuticals and retail. Speciale added that telecom is likely to be off, given the mergers taking place in that space. Others argue that the surviving companies will maintain spending levels to make consumers aware of the mergers and new product offerings. In addition to telecom, other iffy categories include entertainment, fast food and automotive, said Spengler. Overall, he said, the current industry consensus pegs total network spending for the 2005-06 season at somewhere between "5 percent less than last year and 5 percent more." Network audience erosion has continued this season, although at a slower pace than the last few years, when it averaged 6 percent annually, researchers said. This year, network prime-time viewing is down another 2-3 percent, according to Brad Adgate, svp and director of corporate research at independent Horizon Media. He said fragmentation will continue as the pay-TV industry expands. "If consumers are going to pay $80 a month to get all these movie networks, cable channels and sports packages, the less likely they're going to be to watch broadcast TV," he said. That trend will continue to drive ad dollars from broadcast to cable, buyers and cable executives say. With cable ratings up and broadcast ratings down, "all the signs and signals are pointing to a [cable] market that will look very similar to last year," when it posted solid mid-to-high-single-digit gains in price on a 15 percent gain in total dollar volume, said David Levy, president of ad sales at Turner Entertainment Group. Levy also said that Turner's scatter sales have picked up considerable steam in the second quarter—another sign that bodes well for a solid cable upfront. Levy said that last year was the first in which advertisers really shifted money from broadcast to cable budgets. Previously, he said, cable budgets were boosted by new dollars entering the market. Either way, cable budget growth has far outstripped broadcast budget growth over the past three years, according to Nielsen Monitor-Plus. During that time, cable spending climbed 38 percent, while network broadcast spending grew 14 percent. Spengler said the dollars will continue to shift cable's way as advertisers "take advantage of efficiencies, added value and targetability." As the pre-upfront mating dance between buyers and sellers gets into full swing, most agree that the upfront process, while not perfect, basically works and will continue in its current form. Last year there was a great deal of grumbling about the process from agencies and advertisers, which led the Association of National Advertisers to coordinate a series of meetings to facilitate possible changes. "There was a great deal of dissatisfaction with the process, until the clients actually got into a room and said, 'We don't have a problem with the process,' " said Grubbs. "I don't think the problem is with the process. It's the continuing inflation and the concept of paying more for less."

Brand Marketing

Among Buyers, The Signs Point To A Softer Upfront

Steve Mcclellan

About

Subscriptions

Events

Publications

WORK SMARTER - LEARN, GROW AND BE INSPIRED.

Subscribe today!

Steve Mcclellan