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Media Buyers, ESPN Negotiating $20M in Bowl Game Ad Makegoods

ESPN hears the wrath of its advertisers who saw their ad dollars spent on under-delivering games 1/08/2016 11:00:00 AM Eastern

Scott Clarke / ESPN Images

Despite the efforts of the College Football Playoff committee and some media outlets downplaying the financial hit ESPN took by being forced to televise the two national championship semi-final games on New Year’s Eve, media buyers say the network owes upwards of $20 million in ad makegoods for ratings shortfalls for the two games.

ESPN may have gotten a bit greedy when setting its ratings estimates and offering higher guarantee levels to advertisers for the two games, knowing audiences might not flock to their TV sets, despite the optimism of the CFP committee. However, advertisers are concerned about next season’s potential audience levels for the games, which will also be televised on New Year’s Eve. Even if the ratings guarantees by ESPN are set lower, advertisers would prefer the games be moved to New Year’s Day or even on consecutive primetime nights, exclusive of New Year’s Eve, when more people would likely watch.

But CFP committee officials are on record as adamantly supporting the continued airing of the playoff series games on New Year’s Eve as scheduled, which will occur in seven of the remaining 10 years of the 12-year original deal. And that position has been taken even after the 36% combined ratings decline for the two games was disclosed.

So ESPN is caught between a rock and a hard place. On one hand, it has to keep its mouth shut and parrot the CFP’s belief that ratings will get better in subsequent New Year’s Eve telecasts, even though privately they believe that to be nonsense. It can’t been seen criticizing its long-term partner publicly. On the other hand, ESPN has to hear the wrath of its advertisers who saw their ad dollars spent on the severe under-delivery of the guaranteed audience for the two games.

Some media outlets have pointed out that since ESPN sells packages for all the bowl games and a sizable number of advertisers are in all of the games, that the New Year’s Eve ratings shortfalls were considerably mitigated.

One buyer called that analysis “a bunch of spin,” adding that College Football Playoff Committee executive director Bill Hancock’s statement that the New Year’s Eve games’ ratings declines were simply “modest” was “just plain wrong.”

Try selling the “modest” ratings declines to the movie studios that were in those New Year’s Eve games who paid big bucks to reach an audience they wanted to reach immediately that turned out to be more than one-third less than the size that they paid for.

Sure they can get makegoods down the road, but some marketers needed those eyeballs sooner, not later.

ESPN is trying to make things right with its advertisers, although its sales executives will not discuss the situation publicly beyond a general statement issued by a network spokesperson.

“As is standard practice with any sponsored television event, inventory is managed and contingencies are put in place to protect advertisers,” the ESPN statement reads. “The specifics of those deals vary and we work with our advertisers to make them whole in the event of a shortfall.”

Well the “shortfall” did occur and all this week, media buyers and ESPN sales folks have been negotiating locations where audience deficiency ad units or makegoods can be had sooner than later.

The two most obvious spots are the CFP national championship game on ESPN on Monday night between Clemson and Alabama, and ESPN’s Saturday afternoon NFL wild card playoff game between the Kansas City Chiefs and Houston Texans.

Buyers say ESPN anticipated a ratings drop-off for the two New Year’s Eve playoff semi-finals, despite the CFP committee’s overblown optimism, and did hold back from sale several units in the championship game that it can use for makegoods.  The network, likewise, held from sale several units in its NFL telecast.

However there are likely not enough ad units still available in both those games to cover all the makegoods owed.

“ESPN does have enough inventory left in the championship game and the NFL wild card game to eat up a big chunk of the ADU money owed,” a buyer familiar with the network’s ad avails situation says. “But not all of it.”

So where will the rest of the ADUs come from?

Some advertisers, like some of the major CFP advertiser partners and bowl game name sponsors, could be more cooperative and wait for makegoods to come in either next season’s major regular season or bowl games, or even ask for spots in the NBA Finals telecasts in June.

“There are limitless ways to issue ADUs and ESPN has plenty of inventory in the future, but it is a negotiation to determine where and when those ADUs will be awarded,” one buyer says. “That’s what’s been going on this week.”

Fast forward to Monday night’s college football championship game with many buyers not sure that the ratings will match last year’s record numbers. This time, unlike the New Year’s Eve debacle, it would not be because of when the game is airing, but because of the two teams participating.

While Clemson enters that game undefeated and ranked first in the nation, and Alabama is rated second in the polls, neither is from a major market. While Alabama might have more of a national following. Clemson has virtually none, although many may tune in to see if Clemson can complete its season undefeated.

But buyers are still concerned that shelling out as much as $1.3 million per 30 second spot might not get them the ratings they were guaranteed. And much like for the two semi-final games, ESPN did not leave much money on the table.

Last year’s game drew 33.4 million viewers and an 18.2 household rating, making it the most watched program in the history of cable. Buyers say in order for ESPN to bump up its asking price from $1 million per 30 for last year’s championship game to $1.3 million this year, it had to sizably increase its ratings guarantees.

Media buyers are sympathetic to ESPN’s situation and are also appalled and angry at the attitude of the NCAA and the College Football Playoff committee and the public comments being made by their executives.

The CFP’s Hancock told The New York Times this week, “We don’t make decisions based on television numbers. I don’t have a TV number that influences my measurable for success.”

Talk about a slap in the face to his media partner ESPN which is now some $20 million in the hole because of Hancock’s arrogance, after the network paid the CFP $600 million for the TV rights of the bowl games, including the two New Year’s Eve semi-finals.

One buyer is hoping that ESPN, which tried to get the committee to change the date away from New Year’s Eve this season to no avail, reapproaches the committee and makes another attempt for next season.

“If I were ESPN, I would have another conversation with the CFP and I would walk into that meeting with some of the major bowl sponsors and advertisers to demand the date be changed,” the buyer says.

One competing exec whose network carries both college and NFL games, sympathizes with ESPN, but says there is not much that can be done if the CFP sticks to its position.

“You do these long-term TV rights deals hoping that if an issue comes up that things can be altered, but if the content provider refuses, the network is stuck,” the exec says. “It’s like getting married and hoping you can change your partner. Most times you can’t.”

The exec says ESPN, in addition to the units it held back in the college championship and NFL wild card games, can find ways to slip in extra commercials in during replay and injury timeouts, although even those are usually pre-sold with advertisers on a list.

Meanwhile ESPN, despite its “partnership” with the CFP, finds itself alone on the island with no help from the committee or its leadership.

As Hancock told USA Today this week, “Let’s see what happens. We’re confident that every year will be different and over time these games will be ingrained into a part of the New Year’s Eve tradition.”

And while it waits for that to happen, ESPN can lower its ratings guarantees, charge less for its ads, and not cover the $600 million TV rights fee it is paying the CFP.

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