GM Dumps Upfront Buys

Automaker takes options for second quarter

By Jon Lafayette -- Broadcasting & Cable, 2/1/2012 6:40:38 PM

General Motors on Tuesday surprised broadcast and cable networks by exercising its option to cancel about half of the advertising time it bought in last year's upfront market.

Network sales executives estimated that the canceled advertising was worth at least $30 million, spread across the major broadcasters and top cable networks.

One sales executive speculated that General Motors found itself overbought after last year's upfront, with big commitments to advertise on this weekend's Super Bowl, where spots are going for more than $3 million for 30 seconds, and in the upcoming Summer Olympics from London on NBC.

General Motors has been looking to control its advertising expenses. It recently decided to move its media buying account from Starcom to Carat.

After last year's strong upfront, there was speculation that if the ad market were to turn, the first signs would appear when second quarter options were due. But as of last week, sales executives had not expected many advertisers to exercise a significant number of options and that the market would remain stable.  When the economy cratered in 2008, advertisers exercised options and canceled large portions of their upfront buys.

"This could just be a GM thing. GM is big and significant but we haven't heard from other big advertisers looking to cut their upfront buys," said one senior network sales executive.

It will be tough for the networks to resell the commercial time optioned by GM in the scatter market. Volume has been slow-down more than 10% from a year ago-and networks have been concentrating on maintaining prices as upfront sales for the 2012-13 season approach.

Advertisers who buy commercial time during the upfront have the ability to exercise options to cancel some of their purchases. For the fourth quarter, orders are firm. In the first quarter, they are generally allowed to cancel up to 25% of what they've bought. And in the second and third quarter, they have options to cancel as much as 50%.

Normally, networks expect the option rate to be about 5%.

Adweek was first to report on GM's option activity.