Trouble ahead for upfront?

Primetime inventory moving slowly

NEW YORK — Due to a weak broadcast network advertising marketplace, it looks like the networks could be in for a rough upfront this year.

The advertising upfront — the period when the networks book the majority of their ad sales for the year — usually begins at the end of May, and the so-called “scatter” market preceding the upfront is usually a good indicator of how the upfront will go.

Media buyers said that network primetime inventory is selling very slowly, and what business is happening is for prices flat with upfront, and in some cases, lower than upfront. Buyers added that it’s unlikely the scatter market will turn around by the time of the upfront.

End of an era?

The last few years have been robust ones for the networks. Despite declining ratings, the strong economy and the networks’ ability to reach millions of viewers at one time have vaulted the networks to double-digit upfront gains.

This year, the tables could likely turn.

“The networks are terrified,” said one major media buyer. “A weak second quarter means a weak upfront.”

The logic goes that if buyers can currently purchase inventory at prices below what they paid during the upfront last year, why shouldn’t they spend less during this year’s upfront and then wait for the cheaper prices.

“The scatter market does have a psychological impact on how they price the upfront,” said Steve Grubbs, executive VP and director of national broadcast for BBDO. “If you’re an advertiser looking at a second and third quarter that’s soft, why should you buy upfront. Why not just buy scatter?”

The broadcast networks acknowledge that the signs leading up to the upfront are not too rosy, but they argue that it’s too early to predict the upfront.

“The buyers are correct in saying that a softness in the second quarter usually means a softness in the upfront,” said Marvin Goldsmith, president of ad sales for ABC. “But it’s much too soon to take a guess about the upfront market.”

Some are upbeat

Goldsmith said that it’s still possible for the second-quarter scatter market to tighten. He cited positive factors such as a continuing strong national economy and increased spending by automotive and pharmaceutical companies.

However, a network sales executive who spoke on the condition on anonymity painted the picture a bit bleaker.

“I don’t think the scatter market is going to come back,” said the exec. “And I wouldn’t be surprised if we have to limp through the third quarter.”

He blamed much of the marketplace softness on CBS’ Winter Olympics coverage, which sucked $650 million out of the marketplace.

Another factor that should work against the broadcast networks this upfront is the introduction of optimizers at some ad agencies. Optimizers –now the hottest buzzword on Madison Avenue — are basically computer programs that design an advertising budget based on certain criteria.

These criteria can vary, but media buyers said that more often than not optimizers create budgets that have a higher percentage of cable spending than before.

“These computer optimizations that we do, at times, indicate that bigger percentages of spending will go to cable,” said Rich Hamilton, CEO of Zenith Media Services U.S.

Hamilton caused a bit of a stir recently at a Cabletelevision Advertising Bureau conference when he said an optimization run for one client came out with 58% of the budget allocated for cable.

Broadcast sales executives downplay the effect of optimizers because not many agencies use them yet.

“I don’t think optimizers will be a factor in the upfront,” said Goldsmith.

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