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Upfront Ad Sales Negotiations Tougher, Slower Than Predicted (EXCLUSIVE)

For weeks, TV executives have crowed about the pace of ad sales for their blockbuster programs. In recent days, little of that wind has helped fill their sails.

TV’s “upfront” market, which many assumed would move quickly given the robust pace of scatter sales at many TV networks in recent months,  appears to be moving more slowly than expected, according to media buyers and other executives familiar with negotiations. Talks have bogged down over pricing terms, which buyers say are much too aggressive even if demand for TV advertising has been strong.

“There is simply not enough demand to drive the types of increases previously envisioned by the networks,” said one buying executive. “In some ways, that aggressive posturing early on may have chased some dollars away.”

The dynamic suggests old rules may not apply in a complex new world in which advertisers are trying to wrap their budgets around not only TV, but also social media, streaming video and mobile apps. Demand for scatter advertising, or commercial inventory purchased close to its air date, has been robust since late last year, according to TV executives. When that dynamic grows, it typically augurs a strong upfront, when U.S. TV networks try to sell the bulk of their commercial inventory for the coming TV season.

And while no one is suggesting the networks won’t capture greater volume in the upfront haggle than they have in recent years, network sales executives may have to work harder to get it. The five English-language broadcast networks secured between $8.02 billion and $8.69 billion for their 2015-16 primetime entertainment schedules, according to Variety estimates, compared with between $8.17 billion and $8.94 billion for the 2014-15 season.

At issue, according to ad buyers, who have an interest in tamping down the market, are pricing demands. TV ad time is based on the cost of reaching 1,000 viewers, a measure also known as a CPM that helps to assign a value based on each network’s ratings. With demand high in recent months, some TV executives have talked about the opportunity to secure CPM increases in the double-digit percentage range. But Madison Avenue, at least so far, is holding firm against such hikes, one ad buyer said.

“The sellers are starting to see the money isn’t as robust as they expected,” this executive said. “No way it’s double digits.”

Indeed, TV networks have not been able to secure such price increases in years. In 2015, CBS, ABC and NBC did deals with CPMs rising between 3% and 5%, while the CW notched 4% on average. Fox was compelled to offer “rollbacks” by as much as 2%, owing to a lackluster programming schedule and a base price that had risen significantly as the network enjoyed the success of “American Idol.”

TV executives may beg to differ with some of the sentiment from the other side of the table. A person familiar with thinking at CBS said the network believes the upfront market will be strong and sees no indication that it cannot achieve previously stated financial targets.

To be sure, discussions are said by several executives to be fluid and in early stages, and a slow start is not necessarily a predictor of CPM ranges. And there are other factors at a play. Publicis Media, the large media-buying arm of Publicis Groupe of France, is emerging from a massive restructuring, and has faced challenges in registering all its client budgets as a single entity, according to a person familiar with the situation.

In years past, the sales process would start earlier. In 2013, for example, the CW wrapped its sales by June 5. In 2014, all the networks had joined the sales fray by June 4.. In 2005, Walt Disney’s ABC had nearly completed its upfront sales before the end of May, buoyed by hits like “Lost,” “Desperate Housewives” and “Grey’s Anatomy.”

But the landscape is very different a decade later. Social media platforms like Facebook and Snapchat and new-media upstarts like Buzzfeed and Vice did not factor into ad budgets in 2005 as they do today. Advertisers are still expected to commit a greater volume of ad dollars in advance for TV’s biggest shows. Getting them to part with the money, however, is not going to be as simple a task as it once was when demand was high.

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