Upfronts 2009: CPMs Aren't the Only Thing on the Table

The upfront impasse has been breached and deals are being written (see related story, “Impasse, Interrupted“), but agency executives caution that market is far from wrapped.Still on the negotiating table, along with CPM pricing, are a whole host of deal points that in previous years wouldn’t be up for discussion. But this year is different, as few in the TV ad marketplace tire of saying.

Agencies are pushing for calendar year upfronts in the broadcast market, the kind that are already available in cable. While broadcast networks sell some 80% of inventory in May, ahead of the fall season, cable sells around 50% in the May upfront and then sells the balance in December for the coming year. The calendar year time frame is more suitable for some marketers who don’t know in May what their needs will be for the following year.

According to one senior agency executive, some major marketers are serious about sitting out the upfront altogether and are simply saying they’ll do fourth quarter buys in scatter to satisfy their fall marketing needs. “There is more to play out,” said one agency executive. “Maybe we’ll see people wait and say, ‘We’ll do it calendar year.’”

Agencies have also been pushing to renegotiate things like their clients’ base price, for year-round option-taking and so-called integration fees. ABC, CBS and NBC charge a network integration fee for incorporating an ad into a commercial break. The charge is as much as $470 per primetime unit. Option-taking refers to advertisers’ ability to cancel part of their upfront.

While CPM pricing is being played close to the vest this year, broadcast is averaging a negative four, with CBS and Fox accepting rollbacks of 1%-2%, ABC and The CW seeing slightly larger declines, and NBC taking declines of between mid-single digits and a negative seven, depending on whether the Jay Leno Show is included in packages. Leno is expected to rate lower than, say, a drama in that slot. Top-tier cable is writing business at similar levels to broadcast while second-tier is doing CPM deals at negative six.

One practice likely to see some change is the broadcast network tendency to over-project ratings on given shows and then later give make-goods elsewhere if those ratings don’t deliver. On the flip side, networks see little upside if shows over-deliver. In the past, because of ratings erosion and ADUs (audience deficiency units, also known as make-goods), they had to hold 20% of inventory; maybe now the networks can sell that because they’re being more realistic about the ratings.

One agency buyer cautioned that the broadcast market would see “some winners and substantial losers, when the upfront is all played out.”

Representatives for each of the broadcast networks declined comment.