Broadcast Networks Make Gains in Upfront

Estimated $9.2B in Total Sales Edge $9.1B Total from 2007

The broadcast networks surprised skeptics by concluding a buoyant upfront ad-sales market with an estimated $9.2 billion in total sales, up slightly from $9.1 billion last year, and with impressive CPM (cost per thousand homes) unit gains in the high-single-digits (6%-9%).

Given the sluggish economy and severe woes in other traditional media such as newspapers, the slightly up ad-dollar volume and CPM gains twice the inflation rate represented a good showing.

The current strong scatter market -- ads sold in-season close to airdate -- coupled with surprising strength in some advertising categories that were questionable kept ad demand strong. Pharmaceuticals, retailers, cars and movies -- all on the watch list at the start of the upfront -- were healthy, according to the networks.

In rough estimates as the dust still settles, ABC booked $2.5 billion in sales, up about $100 million; CBS was flat at $2.5 billion; NBC’s $1.9 billion was up $100 million; Fox made a small gain with its $1.95 billion; and The CW weighed in at $350 million (down from $570 million after off-loading five primetime hours to a third-party producer).

Excluding The CW, which underwent a structural change, the network volume gain was even more impressive. The networks sold an estimated 80% of their primetime ad inventory in the upfront, slightly above historical norms and about the same sellout rate as last year.

Given the fact that ad rates in upfront have been lower in 18 of the past 20 years in comparison with scatter, advertisers chose to lock in prices in the upfront. Advertisers also shook off concerns about the network ratings decline due to heavy reruns of programs in the aftermath of the Hollywood writers’ strike.

Wall Street forecast a decline of 2%-10% in upfront ad volume due to the weak economy, which proved off-target. Investment houses figured that ad volume would be around $300 million less and CPM increases less robust at 5%-7%, which proved to be a few percentage points too low.

As advertisers now intensify cable negotiations, basic-cable networks look to be in position for healthy CPM gains, given growing ratings strength from increased original production. The outlook for TV’s scatter market seems to imply gains next season, although it remains to be seen if advertisers moved scatter money forward into the current upfront, which would reduce later ad demand.

Broadcast networks completed deals this year without wrangling over audience measurement, as was the case last year with the tussle over including three days’ digital-video-recorder-delayed viewing dubbed the C3 metric.

The increased complexity of deals due to bundling online did not slow broadcast network negotiations, which had been a concern.

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