NEW YORK — Broadcasters and advertisers haven’t yet entered the trading pit for the May upfront, but negotiations have begun in earnest.
A flurry of new forecasts issued by media research wonks and investment banks on Thursday are giving good odds that Fox, the WB and CBS will take share away from ABC, UPN and NBC, while dollar volume stands to jump 7% from last year, even as audience guarantees could fall 3%. Among the biggest winners could be WB, which according to one forecast could bill 27% higher rates this year thanks to hot series like “Smallville,” “Gilmore Girls” and “Everwood.”
Industry odds-makers also are betting on cable and syndication dollar growth of around 10% from the 2002-03 selling season, thanks in part to spillover demand due to limited broadcast inventory.
While predictions on pricing and growth in the all-important upfront are treacherous in the haze of the pre-game hype, there seems to be a broad consensus emerging that underlying advertiser demand remains strong enough to drive healthy CPM increases, but possibly not quite as much as broadcasters — most of whom are remaining mum on the topic for now — have been predicting.
“Primetime broadcast comprises only 9% of total viewing but 99% of the gossip and attention in the industry right now,” said Andrew Green, managing partner at media buyer OMD.
Staking out positions
There’s been a lot of jockeying for position so far, with broadcast network sellers hawking pricing increases of up to 15% this year over last, while advertisers, for their part, try to dampen expectations of huge price and volume hikes.
There’s certainly good reason for the already fevered pitch of salesmanship on both sides of the advertising/programmer fence. The upfront — essentially a TV advertising futures market for the coming fall season and beyond — represents more than 50% of total TV ad spending, which last year accounted for $15 billion in spending commitments and a record 85% of its ad inventory. Advertisers like the cancellation options and ratings guarantees of making their commitments early, not to mention the possibility of avoiding potentially higher scatter prices in future.
But 2003, while healthy, promises to be different from last year’s unexpected bull market (up 18%).
Prospects for a sustained economic recovery are still murky, while post-war consumer spending remains a bit rusty given the lack of economic certainty. And according to media research analyst Jack Myers, whereas last year network sellers did not anticipate market size and subsequent strength, this year, both buyers and sellers are better prepared for the strong market, though they’re uncertain how it will play out.
Broadcasters will have to perform a bit of a juggling act, as they try to balance the benefits of pushing through higher pricing at the expense of lower volume. If they choose to repeat last year’s upfront sellout of 85%, there again will be fewer slots available in the scatter market with which to exploit potentially higher prices as market conditions and the economy improves later this year and next. While the price increases are likely to come with ratings guarantees, Lehman Bros. analyst Linde noted it may be tricky for Fox and ABC to top their reality show successes in 2003.
JPMorgan came out more cautiously than most Thursday, forecasting a 5% increase in the broadcast TV upfront market to $8.7 billion, compared with $8.3 billion last year. That prediction assumes at least a 10% increase in CPMs coupled with a 3% decline in audience guarantees (in line with current broadcast viewing erosion) and an 80%-81% inventory sellout.
Healthy cable upfront
The bank nevertheless is estimating a healthy 10%-11% growth in the cable upfront market to about $5 billion, comprising a 4% audience jump, 3% price hike and 3.5% increase in available inventory. The smaller syndication upfront is projected to grow about 10% this year, thanks mainly to hefty expected CPM increases.
Lehman Brothers is hedging its estimates with a 6.7% dollar growth in 2003 broadcast upfront, due to the uncertain economic backdrop and the fact that there will be more national inventory from TV stations and cable available later this year in the absence of an election. Linde believes broadcasters may want to hold out for price increases later in the year and thus could see a lower upfront growth rate.
Beyond the big numbers, however, clearly some networks stand to gain more than others. Fox, the WB and CBS are expected to be the big winners, while Myers predicts ABC could drop 6.7% of its upfront revenues from last year. Overall, Myers is predicting a total upfront market up 9.6% across all TV media, with WB up a whopping 27%, Fox 11.5% and CBS up 10.5%.
Furthermore, last year’s big spenders — automotive, retail, movies and telecom — are expected to repeat their voracious ways again in 2003, though some economists reckon Americans may be tiring of buying new cars and cell phones after more than a year of heavy marketing.