Networks scramble to lock in upfront buys

“Sell in May, then go away” is an old catchphrase on Wall Street, but a new bout of economic turmoil has made this spring’s selloff pretty biting. And that’s the last thing media companies want to hear while they’re in the middle of negotiations on upfront advertising sales.

The European crisis, which never really left, has erupted again on fears that Greece could dump the Euro and on renewed concern over Spain. A weak U.S. jobs report Friday sank the market moving into June, and the Dow Jones Industrial Average opened Monday at its lowest level since December. That was after a disappointing tally earlier in the week for May auto sales.

The S&P 500, which includes many of the industry’s biggest advertisers, has fallen about 10% since its peak in early April. The major nets are off to a good start in upfront sales, commanding healthy price increases from last year. But economic jitters could make big-ticket advertisers have second thoughts about big hikes in marketing expenditures over last year.

“It would be crazy to think the macro environment won’t play a role” in upfront discussions, said analyst Richard Greenfield of BTIG.

The market started to move last week with Fox and ABC leading the charge on Thursday and CBS slowly cutting deals by Friday. But talks are ongoing. Given the rocky economic climate, the faster they wrap up the better from a network perspective.

Certainly there will be no upside surprise given this market, said Alan Gould of Evercore Partners. But he figures at this point the numbers will land pretty much as expected. “As long as the scatter market is above the upfront (like now), the following year is usually up,” he said.

Todd Juenger of Sanford Bernstein said the dour climate could give buyers “an excuse. A little more leverage.” But he thinks advertisers have already decided what they can spend, and networks what they can take.

“Hopefully, the guys in the room negotiating around the clock aren’t even reading the papers,” he said.

The risk of a downward spiral could prompt some buyers to take a bigger chance in the scatter market, although they run the risk of paying much higher prices down the road if demand for TV time spikes. Upfront commitments aren’t carved in stone and still leave advertisers with wiggle room later in the year.

Upfront sales have been brisk the last two years after two dismal years following the 2008 implosion of Lehman Brothers signaled the start of an economic tailspin.

The market was mixed on Monday. The Dow ended a hair down, the Nasdaq slightly up. Stock of General Motors, one of the country’s three biggest advertisers, plunged by more than 4%. The company is said to be playing hardball in the upfronts as it looks to slash ad spending.

Slipping share prices per se won’t impact the upfront process, Wall Streeters said, as much as a sense of longer-term business vulnerability.

Showbiz stocks took a beating last week, like virtually every other sector, but were mostly higher Monday save Viacom, which has had a major run-up the last two months. It dropped 2.45% to $50.12.

NBCUniversal parent Comcast was up 1.12% at $28.95; Time Warner rose 1.07% to $34.12; CBS firmed 0.96% to $30.62; News Corp. gained 0.43% to $18.81; and Disney nosed up a penny to $44.41.

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