Broadcasters Beware, Media Buyers Warn

Four months before they place their clients’ money in the 2004-05 television season, media buyers are again threatening to shift a significant amount—as much as $1 billion in upfront marketplace ad dollars—out of broadcast network TV and into cable. Broadcast sales chiefs are concerned that this time buyers will follow through, having paid through the nose to get on broadcast last year only to watch network ratings drop again this season.

“We’re all a little worried about the next upfront,” said one network sales executive.

ABC has even assembled a sales presentation to remind buyers of the power of broadcast TV, although the network insists the timing is coincidental.

Some networks acknowledge that next season will be difficult, with much lower cost-per-thousand rate increases—between 5 and 9 percent—than advertisers paid at last year’s upfront. In 2003, the broadcast nets averaged increases of 15-18 percent.

The year begins in marked contrast to the start of 2003, when broadcasters were brimming with confidence, predicting the high double-digit CPM increases they eventually realized. But that was before last fall’s significant falloff in ratings, especially in the key adults 18-49 demo. Not helping matters is that buyers are still smarting from the high CPM gains they paid last year.

“I think [broadcasters are] a little worried about money moving to cable,” said one major media buyer. “The cost differential [between broadcast and cable] keeps increasing. In broadcast, CPMs keep going up and ratings keep going down. I’m not sure we can spend 30 percent less in broadcast, but we probably can spend 10 percent less.”

If all media agencies were to lower spending by 10 percent, that could mean close to $1 billion less for broadcast in this year’s upfront. Last year the Big Six nets raked in $9.45 billion during the upfront.

“Media inflation can’t keep outpacing advertisers’ bottom line,” said another buyer, who also talked of shifting dollars to cable. “The broadcast networks are not at the edge of the cliff yet, but they are getting close. I know we threaten to move money out every year, but I’d say they should be more worried this year than last year.”

One broadcast sales exec admitted that since scatter time has suffered compared with past years, “there is reason to be somewhat concerned based on how the fourth quarter played out.” But he added a point that networks are intent on driving home: “A broadcast rating point at even the smallest network is still much more powerful than a cable rating point.”

ABC’s presentation, which its sales force will begin showing to media agencies this month, will emphasize broadcast’s advantages over cable, sources said. ABC sales president Mike Shaw was not available for comment, but an ABC representative said the material is not a response to buyers’ new threats. “This presentation has been in development since before the current TV season began, before the marketplace softened,” said the rep.

Jon Nesvig, Fox’s sales chief, believes the fact that advertisers cumulatively exercised only about 3 percent of their broadcast-network cancellation options for the first quarter indicates their continuing faith in the medium. “Most advertisers still want reach, and broadcast is still the reach vehicle,” he said. “The highest-rated shows on commercial cable continue to be sports. Their series programming doesn’t come close to the broadcast networks’ ratings.”

One media buyer countered that while cable has clear disadvantages compared with broadcast, it is an increasingly appealing option. “Trading Spaces [on TLC], Nip/Tuck [on FX] and Queer Eye [for the Straight Guy on Bravo] may not have the same reach as broadcast shows,” the buyer said, “but because of their lower relative cost, packaging them with other shows on those networks can make a real attractive alternative.”

Another buyer predicts further weakening at the nets, notably NBC. “I think Friends being off millions of viewers this year and going off after this season is going to have a huge impact on the next upfront,” the buyer said. “Thursday will no longer be the same appointment night for NBC. That can hurt their ad packages for every other night.” NBC sales executives were not available for comment.

“At some point, things are going to hit the wall,” said Larry Novenstern, who heads national broadcast buying at Interpublic Group’s Deutsch, “and this next upfront could be it. Is it better to buy a broadcast network show where you get a 2 rating in 18-49, or a cable show where you get a 1 but pay a third of the cost? That’s a decision we’re going to have to make.”

Steve Sternberg, evp and director of audience analysis at IPG’s Magna Global USA, observes that “the buzz in the press about how well cable is doing is certainly overblown and limited to a handful of new shows.” But he also points out that 10 years ago, the average adults 18-49 rating among broadcasters was about 12 times greater than for the dominant cable networks, and now it is only about six times greater. “The gap is narrowing,” Sternberg said.