Upfront Dam Breaks: Broadcast Networks Finally Writing Business

After two months of wrangling, broadcast networks are concluding upfront deals with volume significantly down on previous years. According to three separate ad sales executives, business is finally being written with the broadcast networks. Sources suggest that average CPMs in broadcast are at negative 4.ABC, CBS and Fox have each separately been trying to hold the line at declines of anywhere between two to three percent. That’s mid-way between the 10 percent rollbacks that agencies had been pressing for and the flat to slightly negative deals that broadcast networks had in mind at the outset of the negotiating season. Reps at each of the broadcast networks declined to comment while several industry sources stressed the high level of secrecy around any discussion of any precise CPM numbers at each of the networks.

Yesterday, NBC Universal co-chairman Ben Silverman suggested that upfront deals were much further along than previously thought. Reuters quoted Silverman as saying, “You are seeing healthier numbers than I think we anticipated,” adding advertisers are realizing “there are efficiencies in utilizing broadcast networks.” Silverman was speaking at Fortune magazine’s Brainstorm: Tech conference in Pasadena.

Beyond the broadcast market, agencies report tying deals with Turner Entertainment, NBC Universal cable and MTV Networks.

One agency source explained why the publicly circulated CPM numbers are less important this year explaining that many clients have been trying - some successfully - to renegotiate their initial bases. A client’s base price is largely determined by the length of the relationship with the networks. So P&G for instance would have a very low base.

One media buyer explained, “We used to tell clients that we’d beat the published prices by one percent.” That metric doesn’t work for clients anymore. “When you look at a CPM of minus two, that’s not the real number, the base is. It could be $27 or $31. Once in a while the [CPM] increases get out of whack. The focus should be on whether the base is good or bad.”

An advertiser getting a 5% CPM rollback off a bad base isn’t doing as well as a rival getting a 2% rollback off a good base. This person explained that no-one wants to discuss CPMs this year because, “The year over year agreements have taken on a whole new meaning over the past ten years. It is not the true measure.”