Buyers, Sellers Brace for an Unruly Upfront

NEW YORK This year’s television upfront buying negotiations could turn into the most confusing, difficult and drawn out ever, said media buyers and network sales executives. Just one week before the broadcast networks make their presentations for the 2007-08 season, virtually everything is in a state of flux, including negotiating currency and how much money each client plans to spend across all television.

“This is the most fluid things have ever been this close to the start of the upfront,” said one top-level broadcast network sales executive. “There is so much confusion over how things will play out. We are all going to have to negotiate slower and harder to make sure our interests are met.”

Both the buyers and sellers, at least on the broadcast side, seem to agree that if the networks are given credit for time-shifted DVR viewing, they will then have to base ratings guarantees on commercial viewing, not program viewing.

But with Nielsen Media Research only scheduled to release its commercial ratings data on tape for inclusion into the networks’ and agencies’ systems at the end of May—two weeks after the broadcast networks make their presentations to advertisers—each agency and network is going to have to negotiate with commercial ratings on a piecemeal basis.

“Different media agencies appear to have different levels of sophistication regarding their commercial ratings data,” one network sales executive said. “And without an industry consensus, we are going to have to apply this data client by client and show by show. It is going to be more difficult than everybody seems to think.”

Some media agencies have been trying to talk with the networks ahead of the presentations in an attempt to head-start negotiations. But with networks making substantial changes to their schedules, share estimates on which to base talks will be hard to come by. And, of course, the replacement of program ratings with commercial ratings will be a major hurdle during talks.

“Some agencies are definitely talking with some networks,” said a media buyer, who did not want to speak for attribution. “But these talks are more about showing each other the data they have so each side will be comfortable once actual, hardline negotiations begin.”

But while some media agencies are raring to go, they may be held back by some of their clients who have not yet submitted budgets for next season. “Every year it gets later and later,” said one media buyer, “and this makes it harder for us to project what type of marketplace it will be.”

The broadcast and cable nets firmly believe they can secure higher cost-per-thousand viewer rate increases in this year’s upfront. Why? Because advertising avails are tight, and current scatter ad pricing is double-digits higher than it was in the upfront last year.

But Donna Speciale, president of investment and activation for MediaVest, one of the few media agency executives to speak on the record, said scatter prices are higher mainly because the networks are underdelivering their ratings guarantees. “Audience erosion is still going on in prime time and it is because most shows are underdelivering and the networks have had to give out a lot of make-goods,” she said. “Ad supply is down, but not totally because of demand. Yes, the pharmaceutical and wireless categories are spending more in scatter, but a lot of scatter is being filled by makegoods.”

Broadcast and cable network sales executives remain bullish. “This is going to be a strong upfront for both broadcast and cable,” said one multi-network sales executive. “It doesn’t matter why scatter pricing is way up over upfront pricing. No advertiser is going to want to take a chance that they will have to again spend 10-15 percent more on scatter advertising next season. It doesn’t matter what their agency recommends. They are going to want to buy more in the upfront.”

Leslie Moonves, CBS president and CEO, affirmed that’s the thinking at his network. “The scatter market we are seeing right now has been extremely healthy,” he said during a CBS earnings conference call last week. “This demand for our inventory not only bodes very well for CBS’ second quarter but for our performance in the upfront marketplace as well.”

Moonves, while predicting upfront dollars and CPMs would be up, would not offer a number. “We’re very bullish and looking for the upfront as being up, but I’m not going to make predictions this early in the ball game.”

One cable sales executive said the strong sellout levels this season on broadcast resulted in many advertisers putting more dollars into cable, particularly in the daytime and early morning dayparts, but also in prime time.

“TNT, TBS, E!, A&E, Comedy Central, VH1, Lifetime, USA are all cleaning up in the scatter market,” the executive said. “There’s no advertiser who paid less for scatter than they paid in the upfront. And upfronts are cyclical. If advertisers pay more for scatter, the following year they tend to spend more in the upfront.”

MediaVest’s Speciale said whatever strategy each agency takes, it will be based solely on individual client needs, and not one deal template to fit all. “There will be no industry standard this year,” she said. “Each agency is going to do different deals for each client. It will be a more labor-intensive negotiation and process.”

Harry Keeshan, director of national broadcast at PHD, added, “Last year was a slower upfront, and maybe that was the benchmark of years to come. Nobody says the upfront has to be done in two to four weeks. The only road map is, do smart deals for clients.”

—with Anthony Crupi and Katy Bachman