Will Give-Backs Become Contagious?

Buyers Say More Networks Will Need to Pay Cash to Underserved Advertisers

As broadcast-network ratings continue to plummet, the possibility grows that more networks will be forced to dole out cash payments to advertisers, many buyers said.

NBC just made give-back payouts in the neighborhood of $10 million for underdelivering audiences in the 2006-07 season. The network’s continuing struggles made it impossible to make good on last season’s unfulfilled commitments. For the first 11 weeks of this season, NBC was down 19.4% in live viewing in the 18- to 49-year-old demographic, according to Nielsen Media Research data.

NBC is not alone. CBS, ABC and The CW are all down double digits in live viewing over a year ago. CBS declined 16.7% in the 18-49 demo compared with the same time last year, while ABC fell 10.5% and The CW lost 28.6% (and slightly less in its target demo of 12- to 34-year-olds).

The NBC payouts were spurred by a tight scatter market and a lack of inventory. With no new hits and last year’s star, Heroes, in a sophomore slump, it became increasingly untenable to offer advertisers make-goods.

Fox was the only network not facing a ratings drop-off, posting a 3.4% uptick compared to last year. And the network is headed into January with American Idol -- which has the potential to be an even bigger ratings juggernaut than usual since it will face little competition. Fox will also get a monster ratings draw in February with the Super Bowl.

NBC said in a statement that the give-backs amounted to "an extremely small portion" of the network’s business and reflected clients’ changing market plans. In other words, some clients felt compelled to spend the money elsewhere to meet their GRPs -- gross ratings points, or the total number of impressions delivered.

But with no new breakout hits so far this season and the effects of the ongoing writers’ strike coming home to roost early next year, the entire industry could be facing a very chilly winter.

The potential for more give-backs across the industry also could lead to difficult conversations since media buyers are banking on getting their GRPs. Give-backs can dynamite a client’s marketing strategy.

"You never want to give the money back," one ad-industry source said.

But for the networks, the give-backs aren’t always bad. A network might be able to resell the inventory for a higher price in the scatter market.

Make-goods -- when networks make good on their commitments to buyers by giving them additional airtime -- are also a common business practice and networks traditionally hold back a small amount of inventory each quarter to facilitate make-goods.

The quality of the make-goods is also important. Some buyers think the networks may actually encourage clients to take some money back this season. Rolling over make-goods is a slippery slope in a contracting market, and throwing a spot in an episode of a subpar reality series is not going to sit well with advertisers.

Network executives are trying to put the best face on the situation even as they are staring down February with few, if any, new episodes of many of their top-rated shows.

"We’ve added a number of reality programs to February," CBS CEO Leslie Moonves said at an investor conference recently. One of those is Tucker Carlson-hosted game show Do You Trust Me?.

NBC, meanwhile, will launch a remake of 1980s ironman competition American Gladiators, and Fox will unveil Moment of Truth, where contestants are asked potentially embarrassing questions while strapped to a lie detector.

"We have a lot of terrific plans, and ratings probably will not be as high without the influx of all of our great original programming," Moonves added. "But by the same token, costs will be down considerably."