Buyers Left Smarting After $9.3 Bil. Upfront

Networks happy with their haul as CPM increases average 7%

Broadcast-network sales executives were quietly patting themselves on the back last week, while media buyers were scratching their heads in frustration.

Despite all their complaints about ratings declines and threats not to overpay for next season’s ad time, buyers wound up plunking down about the same amount of prime-time upfront money as last year—$9.3 billion— at cost-per-thousand increases that averaged 7 percent across all the networks.

What helped the networks is that little money appears to have shifted away from broadcast, a scenario that had been threatened before the upfront.

Interpublic Group’s Deutsch did move about $40 million of several clients’ upfront ad dollars out of broadcast and went public with its move. But if others moved dollars off the upfront table, they weren’t admitting it.

“The system is not working,” said Larry Novenstern, Deutsch svp, director of national buying. “When you had 15 or 16 agencies, it was a different story. Now, most of the money is concentrated with four or five major shops. They all have so much client money to spend, they can’t afford to shut out any one network. They’ve lost their ability to walk away. They’re like a bunch of lemmings.”

Buyers say they had no choice, considering the way the upfront market played out. A few media agencies with movie advertisers, which must get as much money down as possible in Thursday shows, in younger-skewing shows and in key quarters, made some early deals with Fox and the WB. That sparked concern among other agencies that they could get shut out of those networks if they didn’t move. The strong demand assured the networks of getting their asking price of 7-8 percent CPM increases, and the market was off and running.

“The studios screwed up the marketplace,” complained one buyer. “Their early deals set the tone.”

John Muszynski, managing director of investment and operations at Publicis’ Starcom USA, which handles Disney, agreed. “We were only the fourth or fifth studio to do our deals,” he said. “If we didn’t move, we risked being shut out of the studio avails.”

CBS completed its upfront last week, taking in $2.4 billion at CPM hikes that averaged 9.5 percent. UPN, traditionally an upfront afterthought, registered a huge revenue gain of 40 percent, boosting its upfront take to $350 million, largely based on the success of its reality hit, America’s Next Top Model, and two new dramas that are generating buzz, Kevin Hill and Veronica Mars. ABC, which suffered hefty ratings declines this season, still managed to sell about $1.5 billion at 5 percent CPM increases.

Rate increases for broadcast were not restricted to prime time. Inventory in the white-hot evening-news daypart sold at mid-double-digit increases at NBC, CBS and ABC, helped by the finite amount of inventory and strong demand among pharmaceutical and auto companies for 25-54-year-old viewers.

Even with ABC adding more rating points with its new weekend edition of Good Morning America, which starts in September, the morning daypart across all three networks averaged 5-7 percent CPM increases. Daytime on the Big Three was strong, too, bringing in cumulative CPM increases of 7 percent. Late night was the softest daypart, averaging 2-3 percent rate hikes, due to the networks’ increasing the amount of commercial inventory. Ultimately, that translated to more revenue.

Once Fox and the WB began filling up with movie-studio dollars, the rest of their inventory began to move at similar prices. When NBC agreed to do deals at lower CPM increases than Fox and the WB, it sold out fairly quickly, too.

“A lot of buyers seemed to lose their focus at that point,” one buyer said. “CBS, even with a 9 or 10 percent CPM increase, was still cheaper than NBC, but everyone did business quickly with NBC. Then reality set in. They still had to do business with CBS, and when CBS refused to budge from CPM demands, buyers had no choice but to pay it. Then they also wound up paying ABC the 5 percent it was demanding, even though ABC was overpriced, because ABC was still the lowest CPM increase and this helped lower the agencies’ package rates across all the networks.”