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Fox Grabs More Upfront Dollars with Limited Price Hikes

ABC also in mix, seeking price hikes of 7% to 8%

Fox continued to secure business in late-week “upfront” talks by giving advertisers what they asked for: lower price increases.

While other broadcast networks and advertisers haggled over terms for ad inventory, the News Corp.-owned network has moved farther along, according to a person familiar with the situation. It was unclear whether the home of “American Idol:” and “The Simpsons” would complete its process by early next week or need more time.

The “upfront” is the annual ad-sales effort by the nation’s TV nets to sell the bulk of their advertising time for the coming season. In 2012, the Big Four nets and the CW secured between $8.8 billion and $9.3 billion in ad commitments from sponsors.

After intially seeking price increases of 8% or more in the cost of reaching 1,000 people – a measure used in upfront talks and also known as a “CPM” – Fox is doing deals with CPMs between 5% and 7%, according to an ad buying executive and another person familiar with the pace of negotiations. In last year’s negotiations, Fox negotiated for CPM hikes in the 7% to 9% range.

Ad buyers and analysts have suggested for weeks that the networks’ ability to secure bigger price increases than those from last year would be under pressure. After two years of CPMs rising in the double-digit percentage range  or high single-digit percentage range, there’s only so much farther prices can go.

Fox’s decision to take a lesser increase to start its market could influence the ability of its competitors to demand better numbers. Rival networks with better performance are likely to try and top Fox’s CPM hikes, using the network’s 7% as a floor in their own discussions.

Indeed, ABC has been seeking CPM increases in the range of 7% to 8%, according to a person familiar with the situation. The Walt Disney-owned networks is also believed to have completed some early deals. In 2012, ABC did deals with CPM increases in the range of 6% to 8%. The CW has begun to write some early deals, according to a person familiar with the matter, though CPM details could not be immediately learned.

Fox’s first-mover status should not be interpreted as domination of the market. Fox is often first to notch deals in this annual process, owing to the smaller amount of ad inventory it has to sell. The network broadcasts from 8 p.m. to 10 p.m during the week and a few more hours on Saturday and Sunday. Because its programming skews toward younger men, movie studios and several other ad categories consider it an important place for getting out a promotional word.

In last year’s upfront, Fox secured an estimated $1.98 billion to $1.99 billion, flat with the amount of ad-dollar commitments it notched in 2011.

Ad buyers have cautioned that clients aren’t stampeding to get deals done in the 2013 upfront. One buyer said clients have made it clear they aren’t interesting in paying what they may consider outsize price hikes after the broadcast networks experienced overall ratings losses.

“My clients are basically telling me my budgets are flat to down,” said one ad buyer.. Some TV network sales teams have pushed ad clients to increase their budgets, this buyer said, which “tells me they are disappointed with the volume they are seeing.”

The other TV networks are also in discussions with advertisers. NBC is in active negotiations, according to one person familiar with the matter. In a statement released Friday, CBS said it was “in active negotiations with major agencies across the industry.” The network said it was “confident” it would “lead in both volume and pricing.”

Upfront commitments represent money that is promised, not paid. Advertisers don’t actually have to fork over any of the dollars they promise until after their ads run. And sponsors can withdraw or trim the money they promised if TV programming is rescheduled or canceled or if they simply want to keep some of that ad money in the bank.

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