TV Feels Its Oats

Some media buyers are pushing back against networks’ double-digit ad price jumps

The TV business may be looking at an upfront market from the good old days.

Healthy price increases are expected with buyers acknowledging the selling power of TV as their clients ditch digital, last year’s shiny new object.

Volume is likely to be up. How good that is for the networks depends on where that money so coming from. is it TV scatter money moving up front—or new dollars?

The market was so strong that most networks spent most of their time focusing on their quality content, while there was surprisingly little on data, a buzzword that was mainly put on the shelf for the next rainy day.

When the curtains closed, and as negotiations loomed, the question that lingered for many was how high is up. One executive at a giant agency conceded that big price increases were inevitable, in part because of the scatter market trending strong—and a chilled attitude towards digital advertising.

“The bloom is off the rose for digital with fraud, robots watching and viewability issues,” the executive said. “There’s talk dollars are shifting from digital to TV, and that’s true.”

Dollars will also be swinging from scatter, where some networks reported price increases in the 30% to 50% range in the past several quarters.

“I think there will be an over-reaction,” said a senior media buyer, who, like others declined to be named because of negotiations.

That will push prices to levels that might appear unacceptable to some.

But the buyer notes that the ratings decreases his agency saw this year and is projecting for next year are bigger than they really are because “the measuring stick is broken.” That means commercials are delivering more consumers than their C3 ratings would indicate. “You have to take that into account,” the buyer said.

If all media buyers adopted that stance, the market could move quickly and possibly be done before July 4, network executives said.

But other agency buyers were more defiant about swallowing double-digit price increases.

“That’s the popular belief, but I have doubts about double digits,” said one senior buyer. Last year the increases were 4% to 5% for the top networks. “If it gets to be more than that we have a lot of alternatives we can look at.”

“No one’s planned for that. Every agency would get fired if it’s a double-digit market,” said another agency’s top buyer.

“There’s no justification. Just because scatter, a small percentage of the total market, was double digits, that doesn’t mean the other 80% should be double digits,” the buyer said. “I think the buyers are going to have to dig in. I think everyone’s going to have to get creative.”

Network executives noted that a higher price alone wouldn’t make this a good upfront. “It depends where the money is coming from,” said one senior sales executive. He noted that if enough money moved to the upfront, there would be little left for scatter, where networks enjoy heftier prices. Money from digital would be much more welcome, as would money from new advertisers trading up to TV from other media.

Analyst Todd Juenger of Sanford C. Bernstein also did calculations that he said showed that a strong upfront with 10% price increases wouldn’t really create a big increases in TV companies’ ad revenues.

Because of that decline in ratings estimates, which gives most networks fewer eyeballs to sell, that double-digit price increase on a cost-per-thousand viewers (CPM) basis would translate into a 2% increase in ad revenue for the average broadcast network. For cable networks, which tend to sell more of their inventory at higher prices in scatter, a strong upfront would still leave them down 6% on average.

“Despite all the bravado from the networks (including CBS who is “salivating” to get to the negotiating table), we don’t think upfront results (whatever they turn out to be) for primetime entertainment will translate into exciting ad revenue growth relative to investor expectations,” Juenger wrote in a research note. “If anything, just the opposite.”

Nevertheless, the market felt good, especially to the broadcasters last week.

No. 1-rated CBS made its presentation last among the Big Four networks, on Wednesday afternoon at New York’s Carnegie Hall.

“We know it’s been a long week. You’ve heard a lot of jargon, so out of respect for your intellect and your time, we’re only going to have one acronym: CBS,” said Jo Ann Ross, the network’s president of ad sales. “The C stands for cut and the BS is what you’ve already heard enough of this week,” she told a weary audience of media buyers.

“Advertising on the No. 1 network in broadcast television is the fastest way to reach consumers. Buying CBS gets you where you want to go,” Ross said.

According to Francoise Lee, executive VP, investment director at media agency Assembly, the main themes of the upfront week presentations were that “content is king and that TV is not dead.”

Big data—TV’s way to compete with digital advertising—wasn’t that big. “They didn’t talk about it much this year,” Lee said. Turner talked data, and NBC mentioned its ATP, but the “networks had a lot to cover and only had an hour to do it.”

“I didn’t expect the TV networks to talk as much about traditional linear television,” added Marianne Gambelli, chief investment officer at Horizon Media. “I know these presentations are for us to see their great content, but what we’re all more interested in learning about is where and how are they going to distribute this content in the future as the linear platforms continue to weaken. As we continue to move to a more on-demand world, what’s it going to look like and how to we get it all measured? It surprised me no one really talked about that.”

At ABC’s presentation on Tuesday Ben Sherwood, co-chair of Disney Media Networks and president of the Disney/ABC Television Group, reminded media buyers that “TV Works, and great TV works greatly.”

ABC’s head of ad sales offered proof for her boss’s claims.

Geri Wang pointed to a survey that analyzed ad spending by 20 big brands over three years and the sales that resulted.

But buyers, who spend billions on TV seemed well aware of the media’s effectiveness. “We already know TV still works,” said Andy Donchin, chief investment officer, Aegis-Dentsu Network.

One way to make TV more effective is to cut back on commercials—a topic at a couple of presentations.

Turner has already cut back the ad loads at its truTV network and is planning to have fewer commercials—and more content—in upcoming original dramas on TNT.

Turner CEO John Martin said some clients have shown a willingness to pay a premium in a lower commercial environment.

Martin said Turner hoped 30-second spots would be replaced by longer ads. “We’re trying to talk people into two minute commercials,” he said. Those ads would have to be attractive and authentic to keep viewers tuned in.

During the Turner’s presentation, ad sales president Donna Speciale commented that “NBC, A+E, Fox and Viacom have noticed our move and are joining us in reducing ad loads.” She called on buyers to work with the networks to improve the viewer experience and make ads more effective. “We need you, the ad community, to support these moves. It is critical for all of us.”

Toby Byrne, ad sales president for Fox Networks Group, took time in his presentation to bash the numbers digital companies use to measure viewership.

He noted that YouTube claimed 14 million views for a video, about the same number as watched a World Series game. He pointed out that using average audience, a more TV-like measure the YouTube video’s audience shrinks to 1,620. Measuring viewers the way digital does, The World Series would have 6.8 billion views. “That makes the World Series a bargain and it’s pretty absurd,” Byrne said.

The biggest change during the week was NBCUnversal’s presentation on Monday, which united its broadcast, cable and digital offering. NBCU CEO Steve Burke called it “the biggest upfront that ever existed.”

Media buyers gave NBCU credit for trying something different. “Only NBCU could put on a show like that,” said Shari Cohen, director of national advertising at Mindshare.

Others were confused. NBC grouped its shows thematically—rather than by network—and agencies don’t buy that way, some buyers said. Nor would NBC sell those combinations of shows in isolation.

More importantly, by showing clips of so many shows in an unfamiliar context, some buyers said they found less likely to walk out with a must-buy program on their mind.

“They did themselves a disservice, they did the producers a disservice,” one agency executive said.