Upfront Shows TV Still Pays

After big haul, will there still be dollars for scatter?

By Jon Lafayette -- Broadcasting & Cable, 6/14/2010 12:01:00 AM

For at least one more year, television and the upfront appear alive and well. While far from a perfect measure of the health of the industry, this year’s fast-moving market shows that large marketers are still willing to shell out billions of dollars to reach consumers en masse, and that despite the popularity of digital media, TV is not yet extinct.

The broadcasters concluded their negotiations with the major media- buying agencies last week, and cable executives indicated they were about 60% done with their negotiations. Syndicators are beginning talks with agencies as well.

Across the board, broadcast networks saw 15%- 20% more dollars in this year’s market than a year ago, when the Great Recession put a clamp on ad spending. Commitments for the 2010-11 TV season are just under the $9 billion mark reached in 2008 for broadcast despite the dwindling supply of gross ratings points (GRPs).

Analyst David Joyce sees this year’s outcome as a positive sign. “You definitely draw the general conclusion that the broad-based impression is something advertisers need,” Joyce says. “They want to have that reach, and this is the way to go about it.”

The market quickly determined that price increases would mostly be in the 5%-9% range on a cost-per-thousand viewers (CPM) basis, in contrast to the 2009 upfront, when the broadcasters took 2%-3% price rollbacks (NBC took a bigger hit).

Upfront dollars return
A lot of this year’s spending increase is believed to be the result of ad dollars returning to the upfront, where marketers commit early to buy spots in return for ratings guarantees. This came after economic uncertainly and the networks’ determination to limit price cuts pushed money into the scatter market, where commercials are sold closer to air. Scatter prices turned out to be 20%-30% higher than in the upfront, teaching advertisers a costly lesson in supply and demand. With prices higher, networks resumed selling 75%-80% of their commercial inventory in the upfront.

Some buyers told the networks there is little money left for scatter this time around; the networks need a healthy scatter market to sell the rest of the inventory to meet their year-end revenue goals. But making sales in the upfront, rather than waiting for scatter, has its advantages, according to Joyce. “When the networks sell more in the upfront, there’s a little more visibility and less worry if we do head into the double-dip recession, although one could argue that the advertisers would then exercise their options [not to buy some of the commercials they reserved during the upfront],” he says.

NBC, trying to bounce back from a difficult season, was the last broadcaster to finish its upfront. But NBC Universal’s cable networks, including USA Network, Syfy, Bravo and Oxygen, were the first in cable to the finish line, with USA commanding price increases in the 9% range, according to market sources.

“This was a great upfront for the industry and our results reflect that,” says Mike Pilot, president of sales and marketing for NBC Universal. “We saw market-leading growth for our market-leading properties, including Cable Entertainment, NBC News and late-night programming, and our primetime results saw above-average growth as the market responded to our investment in new programming.”

The other major cable players, including Turner Broadcasting, Discovery Communications, MTV Networks and Fox Cable Networks, also completed negotiations with most of the major buying agencies. “It’s been very orderly. We’ve got people offering us 5% and 6% out of the gate,” one sales exec says.

Discovery was nearly done and getting prices increases north of 8% last week, sources say. And the success of MTV’s new programming, including Jersey Shore, was helping the network secure higher rates for its primetime block.

Indeed, with the market this strong, buyers and sellers are looking forward to being able to enjoy a good part of the summer at the beach, instead of in an office haggling over upfront deals like last year.