How High Is Too High?
Ad buyers are wary of a pricey West Wing renewal
By Steve McClellan -- Broadcasting & Cable, 1/19/2003 7:00:00 PM
The broadcast networks have a harder time generating big hits these days and ad-agency execs say that's a problem. That's because the networks feel desperately that they have to hang on to the hits they do have and are therefore willing to pay almost anything for them.
| Big Hits Attract Big Ad Bucks | |
|---|---|
| Program | Expenditure |
| Source: Nielsen Media Research Monitor-Plus (Jan.-Nov. 2002) |
|
| ER | $271,339,812 |
| The West Wing | $216,379,547 |
| CSI: Crime Scene Investigation | $195,368,797 |
| Friends | $193,745,219 |
| Everybody Loves Raymond | $137,914,297 |
| Frasier | $100,947,047 |
Of course, the networks pass that increase in cost to advertisers.
They hope it doesn't happen, but some media buyers even wonder whether the networks are headed for a pricing model like syndication's, in which a handful of shows rake in 75%-80% of the available ad dollars and the majority of shows, with barely sellable demographics, fight over what's left.
On the network side, the latest show set to get a hefty license-fee increase is The West Wing. Although it is less must-see than it was last season, at least in terms of the number of target viewers showing up each week, NBC and Warner Bros. last week were nearing a renewal pact for the critically acclaimed show.
Sources say the new license fee will be between $6 million and $7 million per episode, five times what the network has paid for the first four years of the program.
Word of the pending West Wing deal follows NBC's recent renewal of Friends for about $10 million per episode, which is the costliest entertainment show on broadcast-network TV.
NBC gets only some of that back. The money, at least in theory, keeps NBC's entire Thursday lineup stronger at a time when CBS has made serious inroads.
According to Monitor-Plus, Nielsen Media Research's ad-tracking service, the cost of a 30-second unit in Friends averaged $466,000 last October. That was up an estimated 30% from the previous year, buyers say.
The price for a 30-second spot in West Wing now averages $293,000. That's up 10%, or roughly $30,000, from the 2001-02 season. "The question is, how much do they think they can jack up the rates next season to cover the higher license fees?" asks one worried media buyer.
Meanwhile, Friends' ratings are down slightly in the key adult demographics this season, and West Wing's are down double digits.
Of course, ABC and CBS have shelled out big bucks to renew huge hits on their networks too, such as Everybody Loves Raymond on CBS and The Practice and NYPD Blue at ABC. And advertisers are paying the freight. Raymond, for example, fetches $343,000 per 30-second unit, according to Monitor-Plus, up an estimated 15% over last year.
Andy Donchin, director of national broadcast for Carat, says escalating license fees are a "troubling trend because the only way they can make it up is through advertising."
But the increased cost of spots is just part of the problem, he says. Another way networks can—and do—make up the difference is by increasing the commercial load, adding to an already cluttered environment. Perhaps the biggest worry, though, is that the best network shows ultimately become unaffordable.
That would be a shame, Donchin says, because Carat and its clients believe in the power of broadcast-network TV to move product off the shelves.
Indeed, lots of advertisers believe that and put tremendous pressure on their ad agencies to get their ads into the cream of the networks' crop of shows. Jon Mandel, chief negotiating officer for Mediacom, told a group of media investors recently that "I'll get yelled at if I overpay for Friends. But I'll get fired if I don't get [certain advertisers] into Friends."
And therein lies the Catch-22, says Donchin. Mandel is not the only media buyer with that problem. "He's absolutely right," says Donchin, suggesting he has been in the same situation.
Tom Decabia, executive vice president, PHD, can relate as well. "I understand what Jon is saying. We all have that." But there has to be some rationality in the relationship with the client, he adds, "and both agency and client have to be able to sit down and decide at what point the cost is too much and find something else."
Buyers shouldn't look to NBC Entertainment President Jeff Zucker for much sympathy, or any near-term rate cuts. "I think network television is more valuable than ever in this current environment with 200 channels," he says.
Sure, ratings have declined, he acknowledges, "but, in a world cluttered with many channels with minuscule ratings, the importance of network television has only gone up." The more channels there are, the more a hit stands out.
Zucker, thought by some to be the heir apparent to 59-year-old NBC Chairman Bob Wright's spot, gets some criticism for the network's inability to generate hits. Zucker might disagree. He categorizes Friends and ER as "mega-hits, which come along once in a decade." And the network continues to search for them.
But, he says, second-year shows like Crossing Jordan, Ed and Scrubs are solid successes, if not hits on the order of Friends.
Zucker won't say much on West Wing because, as of press time, there was no deal. "But we wouldn't be making any of these deals, Friends included, if they didn't make economic sense to us."
Going forward, he says, his goal is to ensure that NBC's schedule continues to be well stocked with upscale, sophisticated comedies and dramas, with a dash of Fear Factor or Meet the Folks for spice and variety. That's why NBC got out of big-league–sports coverage: to invest in expensive but profitable entertainment fare.
As long as Mandel and others have clients who say, "Get me in Friends or else," count on both rising program and advertising costs. But Decabia warns that every advertiser has a tolerance for rate hikes up to a certain threshold.
The threshold is different for each advertiser. You never see Procter & Gamble in Friends or any super-high-priced shows, and it hasn't hurt the package-goods giant's marketing strategy, Decabia says. "But, if the costs keep escalating like this, every client will have to address it soon or later."
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