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Upfront 2015: Fox Starts To Sell, Faces Pricing Pressure

TV’s “upfront” marketplace has begun to move – albeit very slowly and not with the kind of momentum that would put a smile on the faces of TV executives.

Fox has begun securing advance advertising commitments as part of this annual haggle for commercial time on TV, according to three media-buying executives familiar with the pace of negotiations. Fox’s process is in its early stages, these executives said, and does not necessarily indicate that what has been a slower-than-usual market is about to pick up.

These buyers said Fox has begun to write business by lowering its rates in the cost of reaching 1,000 viewers, a measure known as a CPM that is integral to these annual talks. Fox is doing deals that are flat with the CPM hikes it achieved in 2014 or cut them back by as much as 2%. The network has come under pressure by advertisers to lower its pricing, owing to ratings shortfalls it has weathered in recent seasons with the aging of “American Idol.”  Because of its ratings success in past years, Fox has some of the highest rates for reaching 1,000 viewers in the business.

Fox’s strategy – offering reasonable rates in order to drive a greater amount of advertiser interest – may be emblematic of how 2015’s upfront will proceed. Ad buyers and TV executives both suggest that the volume of money being registered this year by advertisers for TV commercials is down from what was allocated in 2014, which means media outlets may feel pressure to make pricing concessions.

In 2014, Fox did deals that called for a rate of increase of between 2.5% and 3.5%, and in 2013, did deals with rate increases of between 5% and 7%. Fox has come under pressure to restructure its pricing.

The pricing pressure comes as advertisers are maneuvering in a more complex world. They are eager to place more emphasis on streaming video and mobile devices and they are also prodding TV networks to help them concoct ideas that help them move more forcefully to appeal to narrower bands of audience.  Armed with new reams of data from such sources as set-top boxes and customer-loyalty cards, advertisers are pressing to align their commercials with particular kinds of viewers – yogurt fans, first-time car buyers, or diet-soda drinkers, to suggest three examples – and the efforts are making them move more methodically.

All the broadcast and cable networks are in the midst of serious discussions, according to various executives familiar with the talks. Fox often sparks the upfront market, because it has fewer hours of primetime to sell than its rivals and typically attracts a younger audience than they do. Movie studios in particular often rush to reserve ad space at the network. Whether Fox’s rates place pressure on others to lower their offers remains to be seen as talks continue.

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