Ad Market Wonders: Where’s the Money?

Cuts by big spenders, shift to sports seen as upfront volume lags
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The question many television ad sales execs are asking about this year’s upfront is: Where did the money go?

A few weeks ago, before negotiations began in earnest, most network sales executives conceded that they weren’t expecting this year’s market to be particularly robust. In fact, they mostly saw it coming in a tick below 2013, with lower volume taking some air out of price increases.

As agencies have turned in their budgets to the networks, they’ve been even lighter than expected. Instead of broadcast being down 2% in volume, it could be closer to five, buyers and sellers say. Cable, expected to be up 5% in volume, now is seen up less than 3%. Price increases are also a point or two smaller than last year, buyers say.

Some network sales executives believe that the agencies are holding money back, hoping to portray demand as weaker than it actually is to restrain price growth. One senior sales exec says he’s already gotten the impression that the agencies want to negotiate a price for volume lower than last year, than seek further price concessions in return for some of the held back money.

But sales execs don’t seem to be panicking. They’re going to make the deals they can now and hope that they can pick up the balance in scatter.

Buyers say they aren’t hiding money, though it is possible that their clients have decided that putting money down in the upfront is less important than retaining financial flexibility. The softness of the scatter market in the first and second quarter meant that this year, there was little penalty for not locking up ad inventory ahead of time.

Some fairly significant ad spenders have made sizable cutbacks, agency execs say. Packaged good giant P&G is spending less on TV. After two year of revving up spending, the automakers appear to be throttling back. And the movie studios seem to be spending less than in the past.

Buyers also note that there’s a shift from spending on entertainment programming to spending on sports programming. CBS’ new Thursday Night Football package appears to be selling well. Some of the money is new, some of the dollars had previously been earmarked for other football inventory, and some comes from marketers looking for big exposure during the weeks CBS is airing games, sources said. At the same time ESPN is looking for big bucks for its new college football championship playoff.

Finally some agency executives say some TV money is being siphoned off by the big online players who have jumped into video.

NBC, which jumped from last to first in the ratings, may be an exception. Sources close to the negotiations say NBC is about half done with its deals and that volume is up. Bank of America Merrill Lynch analyst Jessica Reif Cohen, speaking at the NewBay Media Business of Multiplatform TV Summit on Wednesday said she believed NBC would achieve some of its goal of increasing its ad prices and getting them closer to parity with the other broadcasters.

In addition to primetime, sources say sales of late night, where viewers are younger, is showing signs of strength. This year Jimmy Fallon successfully succeeded Jay Leno at NBC, Jimmy Kimmel is performing well at ABC and David Letterman announced plans to retire next year and CBS will replace him with Stephen Colbert.

“As we near the finish line, we are very confident that CBS has once again achieved the highest pricing and most total dollars in the Upfront marketplace," said CBS in a statement. "Agencies and clients continue to value the strength, stability and delivery that we provide as a pure-play broadcaster, and we are very pleased that in addition to C3, C7 is now playing a meaningful part in our negotiations.”

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