Fast and furious, network advertisers spend record $9.4B
By Steve McClellan -- Broadcasting & Cable, 5/25/2003 8:00:00 PM
How in the world did this happen? The broadcast networks upfront broke quickly and lucratively last week, with advertisers bringing $1.1 billion more to the table and committing $9.41 billion to the six networks' 2003-04 lineups. That's up a stunning 13% from a year ago, with NBC leading the way.
|Net||2003 ($B)||2002 ($B)||CPM chng. '03 v. '02||Inventory sold '03/'02|
Note: Figures do not include prime time sports inventory sold by ABC and NBC
Sources: Network and agency executives
No doubt about it, this year's market sizzled, with quickie transactions that sounded like a trip to the dry cleaner. The market started last Tuesday. It was done by Friday.
"The overwhelming response to the network upfront is just a complete reaffirmation from national advertisers as to the value and power of network television," says Mike Shaw, president, sales and marketing, ABC-TV. Others said advertisers opted to buy upfront rather than risk a later scatter market that could cost them even more money.
"The strength of this market is extraordinary," NBC Network Group President Randy Falco said. The network's CPM gains this year are the third-highest in its record books. He is optimistic that the market's strength "is sort of a lead indicator for the economy in general."
(That's hard to figure, though, given that, in the midst of the upfront frenzy, Federal Reserve Bank Chairman Alan Greenspan was telling Congress that, while he believed that deflation won't occur, the nation's economic signs are still weak.)
Numerous agency executives predicted prior to the upfront, at most, an increase of $200 million or $300 million in total volume flowing into this year's pool of upfront money. Instead, the pool expanded by about $1.1 billion. In the ad business, it's called "hiding the money," and Joe Abruzzese, now president of ad sales for Discovery Networks and former ad chief at CBS, noted last year that advertising agencies got good at it then. This year, they were even better.
But why? It's not like network ratings in the aggregate shot through the roof this season. Quite the opposite: The combined adults 18-49 audience for the six networks was down about 10% in the just-ended season, according to Nielsen data.
No major ad category was holding back in upfront, although automotive appeared to be flat or down slightly for some networks. But sales executives said the auto advertisers spent record sums last year so maintaining status quo, networks sales execs thought, is pretty darn good.
Other big drivers in this market were pharmaceuticals, fast foods, movie studios and package goods.
And there seemed to be strength across most non-prime dayparts as well—particularly daytime, which was up sharply after several years of decline, both sellers and buyers said.
Here's the network-by-network breakdown:
NBC went first and led the market, with $2.9 billion in commitments for the new prime time season, at price hikes in the 15%-16% range.
It also sold another $100 million in prime time Olympics inventory for the 2004 Summer Games in Athens. Other dayparts (news, daytime and late night) added another $1 billion, for a grand total of $4 billion.
ABC, despite a 2003-04 that hasn't impressed buyers, sold between $1.7 billion and $1.8 billion for the entertainment piece of its new prime time schedule, with rate hikes in the 14%-16% range. In addition, it sold another $600 million to $700 million in prime time sports (Monday Night Football, National Basketball Association and other properties) for a prime time total of between $2.3 billion and $2.4 billion.
Fox, which like ABC started selling after NBC last week, sold $1.6 billion in ads for the new season, up $300 million over last year. Fox commanded price increases in the 15%-16% range.
The WB had another record upfront, reaching $710 million at price hikes in the 22%-23% range.
CBS opted to go last and was still writing business at deadline, but both network and buyer sources estimated that its take would be $2.2 billion, up from $1.95 billion last year, with rate hikes in the 18%-19% range.
UPN was being sold in tandem with co-owned CBS and had just begun making deals at deadline. Best guess was, the network would rake in $250 million with price hikes of 10%-12%.
Just about everybody seemed to be surprised at the strength of this year's upfront. The one exception was Viacom President Mel "No Excuses" Karmazin, who for months had been predicting ad rate hikes for CBS of 15%-20%. (Even CBS Television Chairman Leslie Moonves tried to hedge bets a little bit two weeks ago, telling reporters that "Mel exaggerates once in a while.")
Most network executives were predicting rate hikes in the high single digits, maybe 10% or 11%. Agency executives were predicting mid-single-digit gains. Wall Street analysts predicted a 4%-5% increase in total upfront sales—less than half of what actually occurred.
But, as Sanford C. Bernstein analyst Tom Wolzien noted, upfront commitments are "handshakes" that don't get sealed until August. Some of that money could disappear between now and then, he observed, not to mention the options to cancel up to 25% of the buys for quarters one through three of next year.
Asked whether the strength of the market surprised him, ad buyer Bob Riordan, senior vice president, MPG, replied, "Very much so.
"A lot of money came out of scatter" budgets, he said, because the upfront prices are a bargain compared with the 30%-plus premiums that scatter ads have cost over the past two years. How much is not clear. Some say two-thirds of the gain could be new spending while some said that amount may be shifting scatter.
For now, it doesn't matter. The fact is, the TV market is as strong as it has ever been.
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