Here is a much chewed over question doing the rounds among upfront players: Will anyone be able to raise the price of TV advertising in the midst of the worst economic crisis since the twenties? (Click here for complete upfront coverage.)
It seems inconceivable, but some think the answer is yes. Well pricing may be up, but it will be for a smaller chunk of upfront real estate this year, so the overall spend won’t climb in the same way. And you can thank or blame Jay Leno for that possibility depending on which side you’re on.
Here is the rationale: If the broadcast networks collective ratings are going to be down this year, lets say by 8% to 10%, and are likely to be down by perhaps the same amount this time next year, the overall effect will be a significant decline in the number of GRPs (or gross ratings points) available for advertisers to buy. And NBCs decision to schedule Jay Leno at 10pm will add to the problem given that the show’s ratings will likely be lower than whatever filled the slot this season. Couple that with the strong possibility that both CBS and NBC will be selling less inventory in the upfront and the likely result will be more competition for less airtime which equals premium pricing.
From an advertisers’ perspective there could be a significant downside to sitting out the upfront, and it is this: If the economy picks up and advertisers suddenly have cash, the prime places to spend it may be gone. As one seller (though obviously with an agenda) put it, “If you haven’t purchased enough GRPs now, you’re screwed and you’re buying scatter and so is everyone else.”
Remember too that marketers don’t actually spend any real money in the upfront, they’re only making a promise of spending the money and they can cancel up to half of that commitment every quarter (just ask the networks about that recently).
Scarcity, of course, is the horror movie that sales executives trot out every year, only to have agency buyers respond by saying there’s greater competition than ever for their scarce ad dollar be it from cable, syndicators or the Web. And advertisers carry the carrot of spending more with certain folks in order to get deals that beat the market.
But let’s get back to Leno for a second. So his ratings won’t be as big as Law and Order. Who cares, some would argue, as certain advertisers aren’t interested in traditional ratings. They care about specific subsets such as the highly-prized live viewer and hard-to-reach young men, who NBC hopes are likely to be among Leno’s core.
Syndicators have long pointed out how well their shows do on live ratings since they’re stripped across the week and topical and less likely victims of DVR playback.
One TV executive, not employed by NBC Universal, thinks the Leno move will ultimately prove a profitable one for NBC, though this person says, everybody hates it except General Electric management and down the road it will stem the erosion for one third of network.
No wonder NBC Universal chief executive Jeff Zucker said last week that being number one in primetime really doesn’t matter any more. Being the most profitable matters more, especially these days.
But at some point, broadcast networks could lose critical mass and must therefore play a sensitive game with regard to raising the CPM [cost per thousand] prices.
Normally the upfronts are closely watched by Wall Street analysts as a gauge on who’s winning the most TV ad dollars. This year is different. With media stocks already suffering along with the rest of the jittery S&P (despite Monday’s rare day of bullish media stock numbers), it’s unlikely anyone will be penalized as a result of a perceived poor upfront number.