Down and Upfront

Searching for ways to get more from less

Facing a negative upfront market for the second straight year, the broadcast networks must now find ways to eke out more money from a stagnant ad market where ad spending is down and clients are moving money to other media.

For broadcasters, salvation could come by generating more money from the leftover advertising inventory in scatter and selling advertisers on new digital platforms and integrated marketing. But the key could be scoring new hit shows in the new fall season.

Consider this scenario: If one of ABC’s new dramas skyrockets to Desperate Housewives status, the network can command premium ad rates in the scatter market. Besides product placements, ABC could stream the shows on its Web site or sell episodes on iTunes for $1.99.

The upfront is about potential—a strong new schedule, promising programs—and, at this point, the networks are relieved to have the money booked, even if their final take was lower.

After six weeks of protracted negotiations, the five major broadcast networks polished off the 2006-07 upfront last week, but were forced to settle for deals below expectations. ABC, CBS, NBC, Fox and The CW combined for $9.05 billion in advance sales, according to network projections, down from $9.1 billion a year ago and $9.3 billion for the 2004-05 season. Some media buyers, however, peg the number closer to $8.4 billion to $8.5 billion, down from about $8.7 billion last season.

Both sides agree that ABC and Fox were able to cash in on the success last season of hits like Grey’s Anatomy and American Idol. Also, early dealmaking by Fox and CBS helped those networks write brisk business.

Fox was the first network to finish its upfront deals, writing $1.8 billion in business and securing 2%-3% increases on cost per thousand (CPM) pricing, up from last year’s $1.55 billion. ABC finished last, wrapping its business just before the 4th of July holiday and booking $2.3 billion in ad commitments for its prime time, up from $2.1 billion last season, with 3%-% increases in CPM.

NBC, CBS and The CW managed to come in about flat with their previous season’s totals. NBC finished even with $1.9 billion, but to get there had to slash CPM about 5% and increase volume. The network got a much-needed cash infusion from its incoming Sunday Night Football franchise, which accounted for $200 million to $300 million of its upfront take.

No. 1 in overall sales

Overall, CBS was the top performer in overall sales, with $2.4 billion, which was even with its total last season. The network eked out low single digit CPM increases.

The CW, formed by the shutdowns of The WB and UPN, took in about $650 million in upfront commitments for its inaugural season.

Separately, Fox’s new My­Net­workTV has booked $50 million in upfront deals and will continue to negotiate through the summer.

Sports helped prop up the overall broadcast market. Along with NBC’s Sunday Night Football, ABC’s $2.3 billion take includes its upcoming new primetime sports franchises, Saturday night college football and NASCAR. Fox also includes its MLB baseball playoffs in its upfront tally, but does not break out the sales figures, according to several media buyers.

The networks say it is fair to include sports because the games are primetime programming and run on a regular schedule.

Digital not a factor

Digital platforms, such as video-on-demand and broadband, were not a significant factor. “Digital is not playing into our deals at all,” says Horizon Media’s Aaron Cohen.

Only NBC broke out a number for digital-related sales, saying it had $50 million in business. After a lot of hype at the upfront presentations, network execs and media buyers agree it is still early for digital to take a significant chunk of upfront dollars.

Given this year’s softer pricing, Horizon Media’s Cohen encouraged clients to buy now: “I don’t understand the logic of waiting for scatter unless a client wasn’t sure about a product coming to market or a viability of a product.”