ABC Gets Market Moving

Like last year, media agency executives initially talked tough about there being no must-buy shows on the broadcast nets’ prime-time schedules, and balked at paying ambitious price hikes in the wake of double-digit ratings falloffs this past season. “Hefty price increases will not happen this year,” one agency exec had vowed prior to the ABC deals being completed. “The market is not as strong as the broadcasters would like us to think it is.”

But contrary to last year, when all of the media agencies refused to do early business with ABC because its sales president Mike Shaw was holding fast for higher cost-per-thousand rate increases than his competitors, this year at least two agencies opted to take a different tack — doing deals at seemingly seller-friendly rates.

According to sources familiar with the negotiations, ABC first sought low double-digit price increases, but ended up with a compromise, agreeing to 8-10 percent CPM hikes. But the deal had executives at other agencies scratching their heads, perplexed at what they perceived to be overly high CPM increases, even if ABC is at the high end.

Several agency executives pointed out that key ABC shows like Grey’s Anatomy and Dancing with the Stars had lost 20 percent of their viewers over the past season.

Apparently, a lot of money held back in last year’s upfront for scatter buys was put back into upfront budgets this year, which may have helped keep the prices high, according to some TV network executives.

And while media agencies are well aware that the huge prices for scatter charged by the networks throughout this past TV season were artificially created by the broadcasters’ decision to carry over audience deficiencies into the 2007-08 season rather than pay them off last summer, many advertisers were insistent that they would rather pay 8-10 percent increases in this upfront than take another hit on huge scatter prices again.

Executives from Starcom and Zenith declined comment, as did ABC’s Shaw.

But clearly ABC had ratings on its side this season, at least early on. The network was the leader in delivering adults 18-49 in prime time prior to the start of the writers strike last fall, and that was one of its strongest selling points. Moreover, its once-hot drama Lost, since returning with fresh episodes following the end of the strike, has shown signs of renewed viewer interest, creating hope for next season. (The season finale on May 29 drew 10.4 million viewers and an impressive 4.0 18-49 rating.)

Going into the upfront negotiations, Shaw said one of his selling points would be that in a soft economy, it is still better to invest in advertising on an ongoing basis to maintain market share, rather than cutting back and trying to reinvest and reestablish awareness later.

Another motivating factor for Zenith and Starcom to do early deals was that both represent major movie companies — Twentieth Century Fox and Walt Disney, respectively. Movie studios need to secure valuable prime-time inventory on Thursday nights, a prime night to influence viewers’ movie choices before weekend theatrical premieres. ABC has been performing solidly in the ratings on Thursdays, where Grey’s Anatomy resides (despite the show’s ratings dips).

Other networks were also said to be close to doing deals. Sources late last week said Fox was in negotiations, while NBC and GroupM, which struck the first upfront deal last year, were said to be near an agreement.
“It seems like a sweet spot has been decided on,” said one network sales executive, indicating that deals will now most likely start happening in earnest with all networks this week. “Once those first deals go down, all the agencies will have that herd mentality.”

But some agency executives said they were still in no hurry. One executive at a major agency said, “We’re in no rush. We’re not worried about being shut out. We’re going to do deals on our terms.”