Business As Usual

D espite widespread complaining by advertisers and media agencies that broadcast network television ratings continue to decline while ad rates continue to rise, the networks took in $9.3 billion in 2004-05 upfront ad dollars, matching the record total of the previous year. Once again, the immediate mass reach that broadcast television offers generated the upfront ad market. Movie studios, desperate to get their ad spots in Thursday night shows in order to assure reaching the weekend moviegoer, set the tone of the market by paying inflated rates. Other advertisers followed.

Mike Shaw, president of ABC’s sales and marketing, says, “This upfront was a reaffirmation of what the broadcast networks can offer to a marketer: the most powerful platform and the widest possible exposure.”

Not everyone agrees. One despondent media buyer, who asked not to be identified, says advertisers will continue to pay more for less on the broadcast networks until one major advertiser “has the courage to move significant broadcast ad dollars to other media and is able to sustain high levels of sales.”

That seems unlikely to happen anytime soon. Zenith Media reports that the Top 10 U.S. advertisers increased their broadcast ad spending by 11 percent in the first quarter of 2004 versus the same period last year. The increase was fueled by General Motors and foreign automakers Toyota and Nissan.

Zenith projects that broadcast network ad revenue for 2004 will reach $17.4 billion, up 7 percent from the $16.2 billion in 2003. Veronis Suhler Stevenson projects broadcast TV expenditures to hit $17 billion in 2004, up from $15.5 billion in 2003, a 9 percent increase.

A good portion of that growth will result from the $1 billion in ad revenue that NBC took in for its telecast of the Summer Olympics. Therefore, projections for 2005 increases are more modest. In 2005, without the Olympics and the presidential election, Zenith projects that broadcast network ad revenue will grow only 2 percent to $17.9 billion while Veronis predicts broadcast revenue will also rise 2 percent, from $17 billion to $17.4 billion in 2005. So, even though ratings steadily decline, ad revenue increases.

In fact, by 2008, Veronis projects broadcast network ad revenue will grow to $20.7 billion while PricewaterhouseCoopers predicts for the entire 2004 to 2008 period that broadcast network advertising will increase at a 6.5 percent compound annual rate, rising to $22.7 billion.

Thursday nights continue to be vital to broadcast networks. This is prime advertising time for film companies and national retail chain stores, both of whom seek to reach mass audiences before weekend premieres and sales.

Earlier this year when NBC aired the final episode of its 10-year hit sitcom Friends, the network lost one of its key Thursday night shows. It’s hoping that the spinoff replacement, Joey, will draw a large enough audience to satisfy advertisers. NBC is also counting on the hour-long reality hit The Apprentice to garner high ratings for its Thursday night advertisers. The network will air 32 original episodes of the series. And in the final prime-time hour, the veteran drama ER returns for another season.

Not to be outdone, CBS has scheduled last season’s most watched drama series, CSI, on Thursday night where it will battle The Apprentice head-to-head. CBS also pits heavily watched reality show Survivor against Joey and continues to air the drama Without a Trace opposite ER.

Fox is trying to take advantage of advertiser demand for the night by moving its second-year drama hit The O.C. to Thursday at 8 p.m. Also in that time slot is ABC’s reality show Extreme Makeover that draws a solid rating in the advertiser-desired adults 18-49 demographic.

“The premium value shows that drive the broadcast networks are still doing solid numbers,” says Dave Poltrack, CBS executive vp of research and planning. “The Top 10-rated broadcast network programs in 2004 produced the same average number of viewers per show as they did in 2003—more than 20 million.” In contrast, he notes, the Top 10 cable programs average only 2.5 million viewers per show. He says, “The gap between cable and broadcast has not changed.”

Poltrack predicts the broadcast networks will finish up 2004 with 10 percent more ad revenue than last year. “For the first half of the year, ad revenue was up 7.5 percent,” he says. “But that will grow in the second half because of the Olympics on NBC and fairly good sellout rates through the end of the year.”

Poltrack is upbeat about the future. The increase in ad revenue in 2005 will be more modest, he says, but notes, “There is a strong first- and second-quarter ad base that was placed during the upfront.”

John Consoli writes about network television for Mediaweek.