Great American Sales Trip is over, and now the television advertising
world congregates this week in New York. And this year's upfront is a
jump ball like no other. Marketers-and procurement departments-are
scrutinizing TV ad buys like never before, looking for the ultimate in
flexibility and, of course, value for money.
$18 billion committed to TV during the upfront period, cable,
syndication and Hispanic TV have all been hammering home their messages
with the aim of chipping off a bigger slice of the broadcast pie. As
one pitchwoman commented to B&C, "The job is to kill SALY," an acronym for media plans, as in "same as last year."
Here are the five variables that will define the 2009-2010 season.
1. Predicting a Recovery
The key question for all upfront players is how to place their bets on whether the economy will return quickly or slowly...when it does.
The stock market has been rallying for the past two months, with media stocks beating the market, and that's boosted confidence somewhat. Media executives, from NBC Universal's sales chief Mike Pilot to CBS Corp. CEO Leslie Moonves, are predicting a stronger second half of 2009. "History would say that after a recession, the marketplace comes back pretty strongly and fairly quickly," Pilot told B&C earlier this month.
Buyers, whose natural inclination is to see things less positively, argue that their clients are under real pressure and unlikely to open up funds quite so quickly. Wachovia analyst Marci Ryvicker suggests that TV advertising lags the economy by six months. Retail sales, another leading indicator of the economy, were up in January and February, but fell back in March and April, dropping 1.3% and 0.4%, respectively.
2. How Much Money IsIn the Market?
The wide expectation is that the tally for this upfront will be much below previous years. Barclays Capital suggests the broadcast upfront will land on $7.4 billion; UBS is more pessimistic at $6.7 billion. Those figures are on the low end of the pre-upfront guessing game, but virtually no one believes the number will equal last year's $9 billion-plus take.
Nobody really knows how much money will get spent until agencies start to register their budgets, which could happen this week or next depending on how the schedule unveils. Right now, participants are likely having talks about concept deals and then will later hammer out which products will be paired with which shows. Figuring out how the market will play out is always tricky because it is driven by so many factors, such as the availability of ratings, emotion and what the pack is doing, rather than simply by the economic picture.
3. Pricing: Up or Down?
There seems to be an expectation that CPM pricing will come down across the board, though top cable groups such as Turner Broadcasting, headed by the always-bullish David Levy, haven't made any secret about their desire to be paid more.
Cable signed $7.65 billion in last year's upfront, but that doesn't mean cable won't face requests for declines, too. "Flat to minus 10 is consistent with what we're hearing in the market," says Steve Kalb, Mullen's senior VP of broadcast. "If it's not robust, then a lot of networks will take their chances in scatter." CPM pricing rose 5%-10% during the last upfront period; now marketers are talking about CPM readjustments.
And the posturing is well underway. Former Starcom USA CEO John Muszynski, now chief broadcast investment officer at a newly created Publicis unit, SMGX, articulates what's at stake: "There is a huge future for broadcast if they manage this properly. There are a lot of marketers who really would like to have the broadcast networks be a part of the plan. However, as the economics have changed, the broadcast networks have to be more realistic about what's going on."
4. Where Will the Money Land?
Agencies tell B&C their clients' No. 1 question is, "Why am I paying so much for network?" But that doesn't mean they don't want it or need it to push mass market promotions at a single stroke. With pricing historically cheaper in cable, however, one TV sales executive suggests, "Legacy CPMs could be their savior." With the wind at their backs, top-tier cablers could have a solid upfront, though many suggest a rougher time for those that are not part of a major grouping of networks.
Syndication, too, has a good case for landing dollars with cost-conscious advertisers. Syndie pitches itself as a viable replacement for broadcast, with shows generally watched live and short commercial breaks.
The 2010 census is also likely to help Hispanic TV argue for bigger spending in the rapidly growing market.
But broadcast isn't taking these licks lying down. CBS, NBC Universal and ABC are all out with separate ad campaigns aimed at sharpening their own brand positioning. ABC launched a new campaign challenging marketers to think about protecting their own branded products against encroaching generics. The tag is, "Your Products Aren't Generic. Your Media Buy Shouldn't Be Either." CBS' ad pitched its claim to growing viewership, while NBCU touts the company's entire broadcast-to-cable portfolio in celebration of its fifth anniversary as a conglomerate.
5. What's the Programming?
While the upfront might seem like a math equation, the perceived quality of the programming really matters and NBC's 10 p.m. Leno variety show is the wild card. The show is likely to be an attraction for advertisers, but again pricing will be key.
CBS' The Mentalist aside, broadcast networks have had a hard time finding the sweet spot with viewers this season. Still, advertisers are buying future stocks.
NBC unspooled its sizzle tape at infront presentations earlier in May and though buyers were generally impressed, they want to see what the competitive grid looks like before ringing any bells.
And there's some early buzz around Fox's comedy Glee. Craig Woerz, co-managing partner at agency, Media Storm, says he's thrilled Fox is giving the show a big unveil after the American Idol finale. "I want the guarantee people are going to watch it and they'll have the summer to talk about it...There is amazing interest from advertisers to be part of that show."