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Buyers See Ad-Commitment Decline for New TV Season

Haggling continues, but buyers project volume decline at ABC, flat totals at NBC

Advertisers’ love affair with broadcast TV appears to be cooling. For the first time since recession-wracked 2009, the nation’s five English-language broadcast networks are likely to secure fewer advance advertising commitments overall for their new schedules, according to estimates from ad buyers and other executives familiar with the TV-advertising market known as the upfront.

In all, according to people familiar with the pace of negotiations, ABC, NBC, CBS, Fox and the CW are likely to secure between $8.5 billion and $9 billion in advance ad commitments for their prime time schedules, compared with 2012’s total of between $8.8 billion and $9.3 billion. Meanwhile, cable is likely to see an increase of just 1% to 2% in volume, according to one executive with knowledge of discussions.

Even though the economy has improved – employment has slowly increased and the Dow Jones Industrial Average has risen – big advertisers have held tight to their cash, ad buyers explained, keeping it close at hand or sinking smaller amounts of it into marketing efforts that reach consumers more precisely. Movie studios spent less in the upfront this year, according to ad buyers, having found digital techniques, such as letting movie trailers stream online. Automakers have focused ad efforts only on newer models, not an entire fleet of vehicles for sale.

The money available for upfront commitments “is actually worse than what some of the Wall Street analysts were projecting back in the springtime,” the executive said. “That’s probably what has taken the market a little bit by surprise.”

To be sure, the upfront – an annual session that starts in May and typically ends by mid-June – continues. ABC and NBC are said to be in the midst of negotiations with a passel of media-buying agencies owned by large ad conglomerate WPP. Both ABC and NBC have been holding out for rates of increase in the cost of reaching 1,000 viewers, a measure known as a CPM used in discussions about ad sales, that are equal to or greater than what they secured last year.

In 2012, NBC secured CPM hikes of 5% to 7%, but in 2013, it has been seeking CPM hikes of 7% to 8%, according to ad buyers and other people familiar with the discussions. In 2012, ABC secured CPM hikes of between 6% and 8%. In 2013, it has been holding out for CPM increases of 7% to 8%.

But those offers move counter to those of rivals. CBS, which secured price hikes of between 8% and 9% last year, settled on an average increase of 7.5% in 2013. The Eye’s move makes ABC’s and NBC’s stances more difficult, because if the network with the best ratings is willing to be flexible, why aren’t lesser performers?

Meantime, Fox in 2013 secured CPM hikes of 5% to 7%, after getting increases of between 7% and 9% in 2012. The CW also offered a haircut, agreeing to price hikes of between 5% and 6% in 2013, after getting CPM increases of between 5.5% and 6.5% a year earlier. Even cable leaders like Time Warner’s Turner proved flexible and willing to accept a smaller rate of increase than it did a year earlier.

With those deals in the background, ad buyers expect volume at ABC to be down by at least 5%, while volume at NBC is seen hovering around flat. One projection at ABC calls for flat primetime volume for 2013, according to a person familiar with the situation. NBC sees an increase in primetime volume, according to a person familiar with the network.

Using the 5% figure as a guidepost, ABC’s volume of ad commitments could total between $2.1 billion and $2.28 billion, compared with between $2.2 billion and $2.3 billion in 2012. If NBC’s volume is flat, it would secure between $1.7 billion and $1.8 billion, on par with 2012.

Volume at the other networks has come in flat or down. CBS expected to secure between $2.5 billion and $2.75 billion, on par with its totals for 2011 and 2012. CW expected to secure between $400 million and $420 million, also equal to the volume of commitments it has secured in the past two upfront sessions. Fox, suffering ratings declines at its flagship “American Idol,” saw volume fall by 10%. The network secured between $1.78 billion and $1.79 billion in 2013, compared with $1.98 billion and $1.99 billion in 2012.

The figures are commitments, not cash. Advertisers can cancel a portion of their ad-time reservations each quarter, and can even pull their money over schedule changes or outside business factors.

Talks with ABC and NBC are likely to last a few more weeks, according to the executive with knowledge of discussions. Only when those negotiations are concluded will advertisers’ true interest in broadcast TV for the year ahead become more evident.

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