Q4 Scatter: There's Money Out There!

The fourth quarter kicks off Thursday, Oct. 1, opening up a new cycle in the TV advertising calendar–one that can just about be described as ‘post-upfront.’  While this year’s Q4 seems certain to be an improvement over the stomach-churning end to 2008, there are some wild cards at play.

TV ad players report that scatter pricing in broadcast is already running low- to mid-single-digit percentages, but that could rise if demand increases further into the quarter. Some sales executives point to the $2 billion of TV ad dollars that didn’t materialize in the upfront market and suggest that may get spent in the scatter market.

One major agency ad buyer confirmed that clients are laying money down to drive business at the end of their fiscal year.

“Last year we saw people pullback and hold it,” the buyer said. “Now they’ve decided to go into the fourth quarter. The money didn’t go away, the clients are all watching the holiday season.”

Still, the buyer added, “I wouldn’t talk optimism at this point.”

That doesn’t mean cable sales executives aren’t confident about where they stand. Scripps Networks’ Steve Gigliotti, executive VP of ad sales, said, “We’ve had a strong scatter marketplace, I guess dovetailing with the economy and people feeling more confidence. I expect it to continue.”

Elsewhere, top-tier cable outlets say they have little visibility on how fourth quarter will transpire since agencies are still doing rush-delivery of their seasonal buys and are just now turning their attention to the final stretch of 2009.

Gibbs Haljun, managing director of media investment at Mediaedge:cia, North America, observes, “I think the market is still trying to figure out what it is doing. The late upfront delayed [client] presentations and delayed orders; it’s just bumping along at this point.” Haljun did not think any single category of advertiser is driving the scatter market. “Once the upfront negotiation is done there are all the added value elements, and then there are the 50,000 little negotiations that happen.”

He added that while some were dropping upfront holds, others were adding to their buys overall. TV ad players report no significant breakage between negotiations and schedules actually ordered. One ad sales executive quipped that the state of affairs was some turn-around given the frantic upfront negotiations over agencies requiring flexibility to cancel buys just a few months ago.

For now, the biggest fourth-quarter ad trend is tightness in retail, though one major buyer suggests that’s normal for this time of year. Retailers are apparently having a tougher time getting on-air during the critical Wednesday-through-Friday time period.

Beyond the usual ebb and flow of fourth quarter, market watchers have some new issues to keep tabs on. For the first time in years, broadcast networks will be much bigger players in the scatter market because they held back inventory at much greater rates. Whether there is a knock-on effect for the cable scatter market remains to be seen. CBS for instance sold only 65% of inventory this upfront against a typical year which might have seen the network sell up to 80% of its airtime in advance.

“Broadcast [networks] weren’t very much involved [in scatter], and now they’ll be much more competition.  There are some taller players out there on the court,” says Scripps’ Gigliotti. “Scatter pricing may be competitive; it is yet to be determined and a lot depends on what they held back. We have to make sure what are seeing isn’t a W-shape [recovery] but a V-shape.”

Also on the minds of TV ad executives is the “Olympics effect.” The market is unsure of how NBC Universal will price the unsold inventory come December, and some fear that marketers might jump into the Winter Olympic Games in Vancouver if NBCU decides to sell it cheaply. “There is definitely money out there,” said one mid-tier cable chief, who wished to remain anonymous. “There are a lot of questions about the Olympics. They have a lot of inventory unsold that could take money out if they sell it more cheaply then they forecast.”

Another subplot playing out during Q4 scatter: A handful of executives report an up tick in pricing in top-tier cable daytime pricing thanks to a flood of direct-response advertising that is limiting avails and helping cablers maintain pricing. Those direct-response commercials are making it harder for agencies to compete for the usual cheaper hours, regarded as “high efficiency” periods for those who don’t want to spend big on primetime.

Another mid-tier cable chief sounded a note of confidence about future activity in the market: “We are tracking at 15% ahead of last year in total dollars. It is not where we were in 2007, but it’s at the midpoint between then and the worst of the recession.”

Sales executives point to a strengthening presence of the auto category both General Motors and Chrysler currently on air. At The CW, the youth-focused network is having no problem attracting the big spending wireless, technology and studio clients to shows such as Melrose Place and Vampire Diaries.

Rob Tuck, The CW’s executive VP national ad sales, says, “For us it’s been a fairly active scatter market. People are surprised because the upfront just completed. Everybody saw the schedule, and they like what they saw.”

A couple of market data points might provide a feeling of greater confidence in the ad market. The Dow is nearing the magic 10,000 mark and M&A activity is picking up. But agencies warn that the ad market may not reflect that immediately.

“If it has gotten better, then we might not know it for another quarter,” said Larry Novenstern, executive VP of Publicis Groupe’s Optimedia. “Advertising is generally a lagging indicator of the economy.”

Ultimately buyers report a sense of relief that network programming has opened big and viewers are still coming to mass market TV. If the ratings fall away in the coming weeks, then agencies report that viewer erosion could cause some serious headaches for both sellers and buyers.