They sell a lot of ads, but they buy a lot of them, too. The top five media companies—Viacom, AOL Time Warner, Disney, Fox and General Electric-owned NBC—spent a combined $4.5 billion in advertising last year, up 3.5% over the year before. Over the past five years, ad spending by the Big Five has grown an average 4.9% a year.
Most of the outlay, of course, is to promote theatrical releases produced by their movie studios. Strangely, NBC, the only network that doesn't own a studio, reaps the biggest revenues from the media giants that do. Its Thursday lineup is prime time for movie advertising: Last year, it got $113 million of the $215 million spent to advertise films that opened on Friday.
AOL TW and Disney were among the top 10 ad spenders last year, according to TNS Media Intelligence/CMR, the ad-tracking service. AOL ranked third overall with $1.8 billion (behind General Motors and Procter & Gamble); Disney was seventh, with $1.1 billion.
According to a Sanford Bernstein analysis of ad spending based on CMR data, the top five media companies spent $1.5 billion in ads on broadcasting and cable networks—the others' as well as their own —in 2002. That's about 5% of the total spending on those outlets, according to the Bernstein research.
Over the past five years, Big Five spending on network TV has grown 8%, on cable 18% per year.
The single biggest piece goes to network TV. Collectively, they spent just over $1 billion in broadcast-net advertising in 2002, about 37% more than in 1998. And almost 85% of that, some $840 million, was allocated to movie advertising in 2002.
"It's all about the movies," says one network. Movie marketers are under intense pressure to generate awareness before a film's first weekend—hence, the big push on Thursday night and the urgency to push programs with younger demos.
The potential payoff is huge. Warner Bros. saturated the airwaves with ads for Matrix Reloaded
in the weeks leading up to its release, and, through June 22, it led summer releases, with $264 million at the box-office.
But consolidation and the increasing number of video outlets clamoring for viewer attention are also factors.
"The reality is, the more competition there is in media, the more the media has to advertise," says Tom Wolzien, entertainment and media analyst at Sanford Bernstein.
Consolidation helps. It's easier for MTV to promote one of its new series or specials on UPN or CBS because Viacom owns all three networks. And it's a lot harder for non-Viacom cable nets to get a commercial played there.
With the movies, though, it's a level playing field. "Everybody does business with everybody else's movie studios," says one network executive.
Among the broadcast networks, NBC was the biggest recipient of movie ads in '02, with $282 million worth of spots, according to CMR data. Fox had $216 million, CBS $113 million, ABC $109 million, The WB about $78 million, and UPN about $50 million.
Although cable networks have always bought time from other cable nets, the broadcast nets still don't accept commercials from each other.
And, while there is cross-promotion by commonly owned cable and broadcast networks, it's limited. "It's not that common because the time is very valuable," says Alan Wurtzel, president, research and media development, NBC. As a rule, he explains, NBC "does not accept direct competitive commercials." On a case-by-case basis, NBC will accept "generic" ads for a cable network or ads for boxed sets for the home video versions of programs like HBO's Sopranos.
ABC, CBS and Fox say that, on a case-by-case basis, they consider ads for shows on pay services like HBO and Showtime that aren't day- and time-specific.
HBO has been rejected enough times that it didn't even bother trying to get ads on the Big Four broadcast nets to promote Sex and the City. But it did buy ads on stations in New York and Los Angeles, in syndication, and on cable.