Upfront market returns to glory

Program pricing and dollar volume expected to rise

This season’s upfront advertising marketplace will go back to the days when things were buoyant.

Many media agency executives agree the upfronts — where broadcast networks regularly grab 70% to 80% of their advertising revenues — will return to positive results in terms of individual program pricing and overall dollar volume in 2010.

“The fundamental reason for the upfront hasn’t changed,” says Michael Pilot, president of advertising sales and marketing for NBC Universal Television Group. “Marketers get better terms, get their pick of shows and marketing elements. All of those things very much exist and drive the upfront.”

Says Jon Nesvig, president of advertising sales for Fox: “The scatter market has been very strong and the economy is improving. It’s hard to imagine that clients aren’t considering that in their planning.”

Last season’s upfront was an unusually depressed market. On the heels of a quickly eroding economy, TV marketers pulled back in droves. Estimates were that the broadcast network primetime market sank a massive 18%-20% in overall dollars to $6.2 billion, with deals unusually made in the last days of July. Typically the market moves in late May-early June.

But soon afterward, the scatter market — the quarter-by-quarter buying of national TV time, and a historical harbinger of how the next upfront market performs — rebounded. TV networks — broadcast, cable, and syndie programming — have since enjoyed rocketing price increases, with the cost per thousand viewer prices (CPMs) at 20%-30% above last year’s upfront market pricing.

“No one is arguing whether the upfront will be stronger this year,” says Linda Yaccarino, exec VP and COO of advertising sales and marketing for Turner Entertainment Networks. “The question is how much can you take, how much do you allow clients to load up on last year’s rollback CPMs?”

While things will be improved, Donna Speciale, president of Investment and Activation, MediaVest USA, doubts things will be back to the levels in the 2008 market. Even then, she notes, marketers were still looking to explore new media platforms. In 2009, for example, Speciale said, her agency made the first-ever upfront deal for Hulu.com.

Digital platforms will be of interest again this year. The CW has upped its position here, now looking to sell package deals — digital and traditional TV — by aligning its digital advertising inventory loads exactly like that of its traditional TV inventory, which is around 10 minutes of advertising time per hour show. CW made the move because its young viewers are notorious for watching such shows as “90210,” “Gossip Girl” and The Vampire Diaries” on laptops.

Increasingly — whether during the upfront or scatter market periods — many TV marketers have made decisions closer to when commercials go on-air. All this has made it tremendously difficult to size up the marketplace for media agency executives who make their advertising buys.

“All this has made clients feel good, but they aren’t doing this for negotiation,” says MediaVest’s Speciale.

A big factor in pricing TV shows comes with the dwindling supply of gross rating points, which analysts feel is not only affecting broadcast but cable networks are well, says Andy Donchin, exec VP and director of media investments at Carat North America.

Turner’s Yaccarino agrees: “The supply is challenged, and when there are not that many points to go around — whether in broadcast or cable — there is a sense of urgency.”

One place not as challenged are niche TV networks, such as Spanish-language Univision, especially this year coming off the big awareness around the U.S. Census survey, which is tweaking more interest by marketers in Hispanic viewers.

“We are writing the highest CPM increases this company has ever seen in scatter, in the 20%-30% range,” says David Lawenda, president of advertising sales for Univision, who notes scatter market year-to-year volume is up 50% year to year.

Overall, the value of the upfront as a barometer of the TV business may be changing — especially looking at the strength of the scatter market — versus that of last year’s upfront’s weakness with its big price declines.

“The upfront is a big part of the business, but obviously there is more to the story,” says Ed Georger, executive VP of advertising sales for the Hallmark channels. “The dramatic change between last year’s upfront and the market we are in today says that we need to measure success 365 days of the year.”

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