Network pricing is a sore subject in ad circles, and the higher prices come at a time when many advertisers are having a hard time justifying price
hikes of their own, let alone increases to offset the higher TV-ad charges.
That, in turn, is keeping downward pressure on agency commission rates.
No wonder a just-released survey from the American Advertising Federation
showed that 72% of responding advertising executives said their industry is still
in recovery mode, with most doubting "the immediate prospect for strong growth."
But if agencies and clients are willing to pay, can the networks really be
overpriced? Probably not, but buyers certainly aren't smiling as they write
checks to cover the increases.
At the MediaPost ad conference in New York this week, David Poltrack, CBS'
executive vice president of research and planning, argued that when looked at over a 30-year
span, average network prime-time hikes have been a very consistent 7% -- some
years higher, some lower.
Fragmentation has taken its toll, he acknowledged, noting that in 1980,
purchasing 300 gross rating points on the networks would get a buyer 85%
audience reach. Today, those same 300 GRPs achieve a 75% reach.
Still, buyers said, this year's increases were a shock. "We all paid more
than we liked," said John Gaffney, chief operating officer of ad-buying firm Media Planning Group.
"The networks did an excellent job of managing the negotiating environment" and
persuading buyers to plunk down $9.4 billion in about three days, he added. "None of us
would look at [the upfront process] and say, 'Gee, this is a smart thing to
Yet, they did it. As ad-industry veteran Gene DeWitt put it: "We're all
consenting adults and elected to participate." On the other hand, he said,
bypassing the upfront is not really an option for many of the bigger
advertisers, or, at least, it hasn't been. The upfront process, he added, "is
designed to manipulate the marketplace." Big spenders who feel that they have to buy
a lot of network-TV time are essentially captives of the upfront market. But if
steep network increases continue, that will "drive the industry to look for
Cynthia Ponce, executive VP, ABC Sales and Marketing, took exception to
DeWitt's suggestion that the networks manipulate the marketplace. "Where was the
big hue and cry when the networks took a price cut at the height of the
recession two years ago?" she asked. The upfront market is designed for clients
who want to be on-air at certain times with guaranteed audience levels. And the
fact is that buyers knew what to expect, she said, adding, "They were planning for it for six
But the upfront isn't for everybody. And the fact is that brands can be built
without spending a dime on network TV, said DeWitt, who founded and ran DeWitt
Media, which he sold several years back to Publicis Groupe SA. He did it for BMW when the
carmaker launched its "Z-3" model.