Every year, TV executives ask themselves the same question: Do upfronts still matter?
This year, the question arises again, but for different reasons. Ad dollars are expected to be flat, around the $9.1 billion that was committed last year. But the chemistry has changed.
Network execs are sweating the upfronts (which run May 15-18) due to a number of factors. They are trying to gauge the impact of new media; new players like the CW and MyNetworkTV may change the landscape of ad spending; and the ratings numbers are fuzzy, since the nets want DVR viewers to be included and the race for No. 1 is nearly a tie (see story, page 22).
Yes, new media are siphoning off ad dollars, but so far, for only a small slice of the overall pie. (The webs are not hemorrhaging; it’s more like a series of paper cuts.)
And, yes, buyers are increasingly withholding money from upfront spending, gambling on better deals in last-minute buys later in the season, or waiting to see if they can catch the next hit like “Deal or No Deal.”
“I don’t see advertisers increasing their broadcast budgets at this point; there’s just not a lot more money going into the pot,” says Michael Nathanson, advertising analyst at Bernstein Research.
But primetime is still the engine that drives the other technologies, from iPods to the web to video-on-demand. Nobody would be ordering “24” clips on their cell phone if it weren’t for the Fox success.
There is still no more valuable a property in media than a hot TV show. This year, every network has got at least one, and some have two, such as ABC with “Lost” and “Grey’s Anatomy” or Fox with “American Idol” and “House.”
In the scramble to gain share of a static pie, each network has its own challenges.
ABC has the strongest hand based on the continuing strength of hits like “Grey’s Anatomy” and “Extreme Makeover: Home Edition.” It is expected to lead the market in rate increases and possibly dollars. It could even beat the network’s upfront take last year of $2.1 billion, not including “Monday Night Football,” which this season switches to sister cabler ESPN.
ABC is the only network that will finish higher in the ratings both in 18-49 and in total viewers — both up 8% over the 2004-05 season. ABC has also moved up among upscale viewers, with a median income of $60,000, just short of NBC’s $63,000, according to media firm Magna Global USA.
Like last year, both agencies and competing nets expect ABC sales topper Mike Shaw to set the market ceiling on increases in CPMs (cost per thousand viewers).
The challenge for ABC will be to explain why it didn’t do an even better job in the past season of building on the success of “Desperate Housewives” and “Lost.” Those shows, while still strong, are showing signs of having plateaued and have only seeded one follow-on hit in “Grey’s Anatomy.”
And for the first time in decades, ABC’s Shaw will have to sell programming on Monday night without “Monday Night Football” to fall back on.
Coming in second in terms of dollars is likely to be CBS, with shows that lack the buzz of ABC or Fox, but with a schedule that brings in the most total viewers and turns in the most consistent night-by-night performance.
The Eye will finish the year slightly down in 18-49, which could limit its ability to increase its sales volume significantly from last year. But the Eye wins three nights outright, more than any other network.
“We’ve got hits every night of the week,” says CBS network sales prexy Jo Ann Ross. “We don’t have that many holes to fill.”
Overall, its sales could grow slightly depending on how much it is able to increase CPM rates.
Miller Tabak analyst David Joyce predicts the network, even with fewer viewers, will come in about level with the $2.4 billion it took in during last year’s upfront.
NBC is expected to be third in terms of dollars in the upfront, but the question is whether it can maintain the high CPM rates it inherited from its golden “Must See TV” years.
The network’s rates are still the highest in the market, and buyers will be looking to shave a few hundred million from the $2 billion NBC booked for the 2005-06 season.
NBC has a few hits in its stable, including “Deal or No Deal,” but its attempt to take back Thursday night with quirky comedies “My Name Is Earl” and “The Office” is being threatened by stalled ratings for those shows.
Nevertheless, NBC has been able to build buzz around a slate of new shows it already has picked up for next season, including Paul Haggis’ “The Black Donnellys,” and “Studio 60 on the Sunset Strip,” about the cast of a fictional “Saturday Night Live”-like comedy show.
NBC will also have Sunday night football, a potent counter to ABC’s “Desperate Housewives” and “Grey’s Anatomy” and a platform to promote new shows.
With its sagging primetime, NBC U is making a particularly strong push for cable and digital assets, such as USA Network, Sci Fi and Bravo.
“We’re going to take it all to market with an online component that we haven’t done before,” says NBC sales prexy Keith Turner.
Fox gets bragging rights for being first in 18-49, a significant feat. Yet even with double-digit gains from “American Idol,” it will finish a tenth of a ratings point lower than last year.
That shouldn’t hurt the net too much, however, because it also has two of the hottest shows in “Idol” and “House.” Media fragmentation to cable and the Internet has only enhanced the value of hit TV shows, which remain the only mass-reach medium, and advertisers are willing to pay a premium to be associated with those brands.
“People want, especially in primetime, the hit shows,” says Peter Gardiner, chief media officer at ad firm Deutsche Inc.
The biggest question marks are the CW and Fox’s upstart MyNetworkTV.
Depending on the positioning of shows imported from the WB and UPN, analysts expect the CW to get a boost from the WB’s $675 million take last year, to perhaps as high as $750 million.
The removal of one network and 10 hours of programming targeted largely at women 18-34 helps the CW. It will no doubt position itself as the only net marketing directly to that demo, with shows like “The Gilmore Girls.”
The CW’s schedule also will include a couple of solid performing UPN shows that target other demos — wrestling and “Everybody Hates Chris” — that should make the net slightly more attractive to advertisers than either one of the two webs it replaces.
Nevertheless, the merger leaves several hundred million dollars to fight for, which presents an opportunity for Fox’s MyNet, a vehicle for low-cost primetime soaps.
Just how the upfront shakes out will depend on how ABC sets its rates. If buyers deem the fees too high, they grumble that it makes more sense to simply hold back money for later in the season, in what is called the “scatter market.” Where once advertisers were forced to pay a premium to buy spots at the last minute, in recent years, they have found such methods as more buyer-friendly, says Steve Grubbs, CEO of Omnicom’s PHD USA, a media buying firm.
To what extent that happens this year depends on the price point that the networks set at the upfronts, Grubbs says
Increases of plus 4%? “I think buyers will likely hold more money back,” Grubb says.
In the meantime, the networks have tried to prove they are much more flexible than in the past in giving advertisers options. In the face of dwindling audiences, they have spent the past year in a digital frenzy to show that they can go where they audiences are headed. CBS rolled out its web offering Innertube in the weeks before the upfront; ABC enraged its affiliates by putting primetime shows on ABC.com.
This contrasts with last year when downloading of TV shows on such sites as iTunes and Google didn’t even exist.
“It’s clear the ‘third screen’ will play a bigger part of our communications plans going forward,” Grubbs says.
Viewers’ changing habits also have created what may be one of the more acrimonious disputes in this year’s upfronts. Nielsen has started
collecting numbers on shows watched on TiVo and other digital video recorders.
The webs argue that even programs watched a week after the program airs are as valuable to sponsors as when they are watched in real time. One reason: The hottest and most desirable shows are the ones that get the most playback.
Advertisers, however, don’t want to have to pay for viewers who watch a show after its initial broadcast date. And they note that viewers with DVRs have a nasty habit of zapping the commercials.
Advertisers like General Motors stress that while they are diversifying onto other platforms, they simply could not do business without the 30-second spot.
“We will continue to shift dollars from traditional media, but it is not a significant shift,” says Ryndee Carney, GM’s manager of advertising and marketing communications.
On the invitation to its upfront presentation, Fox’s MyNet gives a quote from Albert Einstein on the definition of insanity: “Doing the same thing over again and expecting the same results.”
As much as MyNetworkTV is goading advertisers with its provocative invite, the fact is that it, too, is holding an upfront, showing that however flawed, in the end, something about the ritual still works