Advertising and Marketing

Commercial Prices Still Holding Up

Lower network ratings in primetime have not cooled hot scatter market 11/01/2010 12:01:00 AM Eastern

Ratings are down. New series have
been canceled. But ad buyers aren’t panicking.
They’ve seen this show before.

“Some level of erosion is the new normal,” says
Ethan Heftman, senior VP, director of national
broadcast at Initiative Media. “Erosion concerns
us, but it’s not out of balance or out of whack with
what we’d consider the new normal.”

In the first three weeks of the new season, using
the C3 commercial ratings on which most ad
buys are based, the broadcast networks are down
4% in primetime among adults 18 to 49 compared
to the same three-week period a year ago.
NBC is up 3%, CBS is down 1%, ABC is down 9
and Fox is down 11%. The CW is up 7%.

The ratings decline and show cancellations
mean the networks have to put sponsors’ ads
into other shows, or provide extra spots to
make up the shortfall. “If you put some money
down on Lone Star, you’re going to make
it good in other programs, whether it’s direct
replacement [ads in the show in the same time
slot] or something else that fits your brand needs,” Heftman
says. (Fox typically uses the World Series to make good for
some advertisers, especially if there are a lot of pitching
changes and the series goes beyond five games.)

In the topsy-turvy world of media buying, the mostly lower
primetime ratings are contributing to continuing high prices in
the scatter market by limiting supply after an upfront market in
which the nets sold an unusually large share of inventory. With
advertisers spending despite concerns about the overall economy,
the TV commercial market is perky, with prices more than 10% higher than the upfront, buyers and sellers say.

“There’s demand, which is coming in very
strong. No one’s pulling back. The money is coming
in. But because the ratings supply is dropping,
it’s inevitably adding to the price increases,”
says Donna Speciale, president, investment & activation
and agency operations at Mediavest.

Peter Knobloch, CEO of media agency RJ Palmer,
says CBS’ strong performance so far this season
could spell opportunity for buyers: “They have a
little more supply than they probably anticipated.”

Most other dayparts are also strong, particularly
sports. “The network daytime marketplace is
strong because there’s no inventory left in daytime.
And early morning is holding up,” Knobloch says.
On the other hand, late night is weaker.

Knobloch doesn’t think the strong market will
continue: “I’m still saying the scatter market is going
to fall apart. There are going to be some great
opportunities throughout the rest of the year.”

However, the next mile marker for the market,
first-quarter options, seems to be another bullish indicator.
Clients who buy ads in the upfront have an
option to cancel up to 25% of their purchases during
the first quarter and 50% in the second and third
quarters. Buyers and sellers report that so far, it appears
clients will use options to reduce buys by about
5%—a fairly normal level. But many advertisers have
asked for extensions rather than committing.

“In terms of first-quarter options, it’s still a little
early,” Knoblauch adds. “Everybody’s asking for
an extension anyway, but I just don’t see a whole
lot of fallout there.”

“We haven’t gotten any indication of any signifiicant cutbacks in the first quarter,” says Jon Nesvig,
president of ad sales for Fox Broadcasting.

Beyond options, the market has an eye on retail sales, the
stock market and economic indicators. “The two biggest drivers
of our business are the overall economy and corporate
profits,” Nesvig says. “Profits seem to be holding up among
the large companies. The economy and unemployment are
worrisome, but consumer spending seems to be holding.”

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