Scatter makes a comeback

Although prices are sometimes exceeding upfront rates, it's not likely the start of full recovery

Executives on network row are buoyed by what has turned out to be a better-than-expected fourth-quarter network scatter market, which literally disappeared after Sept. 11 and remained soft in October.

Sales executives say the market has come back nicely this month, with scatter prices at or above upfront. The increases vary by network and client and range from small single-digit gains to more than 30%, sources report.

Questions remain, however, as to how long the buying surge will be, and no one is suggesting that the positive fourth-quarter activity even remotely resembles a full recovery for the ad market. It's way too early to suggest that, say sellers and buyers alike.

There is one other sign that the ad market may be perking up a bit: First-quarter cancellation options are said to be well below normal levels so far. A year ago, those options were being exercised at abnormally high rates, with advertisers canceling an estimated $500 million in upfront buying commitments for the first and second quarters of 2001.

"The broadcast economy has shown some steady movement in the fourth quarter," says Bill Cella, chairman of Magna Global, the buying arm of the Interpublic Group of Companies. "There's money coming in. It hasn't been gangbusters, but it's been steady."

Other executives theorize that some advertisers are spending out of a patriotic urge to help the boost the economy and that others are spending money left over from upfront budgets, money that wasn't spent earlier because of network price rollbacks.

Peter Mirsky and Eric Handler, media analysts at SG Cowen, issued a report last week that concludes that, overall, current scatter pricing is "even with or slightly better than upfront rates."

But Mirsky and Handler also contend that fourth-quarter demand is, to some degree, "artificial," created by "company-specific trends," including the automakers' aggressive push on 0%-financing offerings. They also state that ABC helped to tighten the available inventory because its ratings plunge this season exceeded the amount of time it reserved for make-goods to advertisers.

According to other sources, that left ABC with far less inventory to sell in the scatter market than the other networks. "They haven't been in the market for three or four weeks," says one competitor. Network executives declined to comment.

In addition, most of the ads canceled late in the third quarter following the terrorist attacks were re-expressed in the fourth quarter, further tightening the number of ads available.

CBS, says President of Sales Joe Abruzzese, will sell twice as much advertising on a total-dollar basis in the scatter market as it did in 2000, when the dotcom bubble burst and the soft ad market struck TV with full force.

Of course, CBS also held back much more inventory in the upfront this year because advertisers wouldn't pay the rate increases the network wanted. Abruzzese says CBS has been getting "close to 10%" increases in scatter prices with just 3% of its inventory left to sell in the quarter.

But it's too early, he adds, to declare the network's upfront and scatter strategy this season a success. "So far, it looks like we're okay. I don't think you can say whether it was a good strategy or not until next September."

Both UPN and The WB are reporting strong scatter-market sales. UPN Chief Operating Officer Adam Ware says the network "overall has experienced increased demand" for advertising in the quarter. Monday, targeting the urban audience, is sold out.

The WB will write perhaps 25% more scatter business in the current quarter than it wrote in the same quarter a year ago, according to COO Jed Petrick. "This has been our biggest scatter quarter ever."