Digital Ads Fall Short of Hype

Broadband plays small role as mediocre upfront market wraps

No broadcast network pushed the broadband business more during this year's upfront ad presentations than NBC. Since he couldn't boast of Nielsen success, Television Group Chairman Jeff Zucker dedicated an inordinate amount of time to all the digital opportunities the network cooked up for advertisers.

So how much money will NBC actually book for spots on its broadband offerings during this year's upfront? Around $50 million. How much will it book for the broadcast network? Around $1.8 billion.

In an upfront market that is shaping up to be flat or worse, NBC has company. It is increasingly clear that the digital mania gripping ad buyers and sales reps simply isn't translating into big digital dollars.

Advertisers are making only modest commitments to new broadband-video projects. CBS Corp. CEO Leslie Moonves acknowledges that the digital revenue for his core network was “rather small.” But he says advertisers are rabid for ways to reinforce the messages of their broad TV-ad campaigns with more-detailed ad opportunities tied to the shows.

“It's all about integration; they all want to hear about it together,” says Moonves. “Did it live up to the upfront hype? It's going to.” He estimates that around 5% of CBS' upfront money will be tied to digital, either Websites for specific shows or episodes offered on CBS' new Innertube broadband-video site. With analysts—not Moonves—projecting that CBS will write about $2.2 billion, that would be some $110 million.

But failing to live up to the hype doesn't mean failure. For NBC, the $50 million is new money; it probably wouldn't have been spent on television at all. Also, an executive familiar with the network's deals estimates that an additional $200 million in conventional television ads and $50 million on its cable networks are tied to the broadband opportunities.

The rest of the upfront is turning out to be soft. Merrill Lynch media analyst Jessica Reif Cohen last week trimmed her already slack forecast, expecting a 1% dip in volume to about $9 billion. She had been predicting a 0%-1% uptick, so the shift isn't that dramatic.

Fox, CBS and ABC have largely wrapped up. Industry executives say Fox sold about 80% of its inventory, averaging a 2% increase in cost per thousand viewers (CPM). Without its dismal sports ratings, Nielsen scores for the entertainment shows on Fox's schedule increased around 15%, and the network is expecting another increase next year. So a 2% CPM increase translates into a 17%-plus increase in the cost per commercial spot.

CBS is close to finishing up after securing CPM increases for some but swallowing price cuts for a large chunk of inventory. The network is expected to end up around $2.2 billion with 2% CPM increases and a modest increase in its ratings guarantee, in contrast to a 5% drop last season.

At deadline Friday, ABC was on the cusp of wrapping up. The network secured average CPM increases of 3%-4%, booking around $2.2 billion.

NBC is in a tough position. Its ratings weakness means that the network is experiencing at least a 5% CPM drop. But the network is selling more advertising upfront than it did last year, going from 67% to 72% this year. Hence, upfront volume will be flat at $1.8 billion. And the effects of the ratings expected from its primetime NFL package have yet to be seen.

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