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TV Top Recipient of Ad Dollars But Digital Future Beckons

Big 4 TV Networks, Ad Men Make Time, Eye Other Partners

Madison Avenue and Big TV might want to consider couples’ counseling.

TV and advertisers have long gazed lovingly into each other’s eyes, and with good reason. For advertisers, nothing sells a bar of soap or can of soda like a commercial placed on media that draws the biggest potential number of consumers. And — until recently — nothing held as much promise of revenue for TV networks as selling those blurbs. Now, as technology changes, the two lovers are starting to sneak furtive glances in new directions.

The current upfront market is a telling indicator of the relationship. Expectations overall are for the market to be flat or slightly down from the $8.8 billion to $9.3 billion in advance ad commitments secured in each of the past two years, a signal that advertisers may still love TV, but not any more than they did in 2011 and 2012 (and maybe a little less).

Meantime, advertising on digital media is primed to explode, according to projections from Magna Global. The media research firm expects digital ad revenue, cobbled from a variety of areas, to rise 13.4% to $113.6 billion in 2013. Meanwhile, TV ad sales are projected to increase just 2% to $196.5 billion.

To be sure, TV remains the biggest recipient of ad dollars, but winning cash is growing more complicated, as advertisers yearn to test out social media and mobile devices. With their sponsors finding comfort in the arms of other lovers, TV is supplementing advertising with revenue from sales of programing to streaming services like Netfl ix and Amazon Prime and to overseas venues. The theory is that even with audiences fracturing, a show on broadcast TV makes the biggest impact, and can therefore draw potential subscribers for streamers and new audience for syndicators.

As the most-watched network overall and in the demo this past season, CBS set the terms of this year’s haggle. CBS Corp. topper Leslie Moonves said just before the upfronts opened that price increases “will look a lot like they did last year, from high-single-digit to low-double-digit.” CBS ad sales worked behind the scenes to determine what price point would generate maximum value while attracting dollars earmarked for other nets that may have been slower to negotiate.

CBS offered to do business for CPM increases of 7.5%. While ABC pushed for steeper hikes and NBCUniversal worked to secure package deals for its entire media portfolio, CBS started to write business in earnest. Fox, meanwhile, crimped by ratings declines at “American Idol,” worked to secure its ad base with hikes between 5% and 7%.

As of June 13 , CBS and the CW had secured ad commitments that were flat with 2012 and 2011. The CW had scored $400 million to $420 million in ad commitments while CBS booked between $2.5 billion and $2.75 billion. Fox, meanwhile, saw its volume of commitments dip 10%, to just short of $1.79 billion from slightly less than $1.99 billion in both 2012 and 2011.

NBC and ABC continued to write business. NBC was said to be securing CPM increases between 7% and 8%, according to buyers, though the network’s prices are still relatively cheap, owing to its poor performance in recent years. ABC was said to be holding fast to CPM increases of 7% and 8%, according to buyers. Cable had also started to move, with Turner, Discovery Communications and Fox’s cablers all writing deals.

Buyers seemed comfortable doing business with networks that accepted CPM hikes lower than last year’s. In 2012, for example, CBS got CPM increases of 8%-9%; Fox secured 7%-9%; the CW booked 5.5%-6.5%. Meantime, In 2012, ABC negotiated CPM hikes of 6%-8% and NBC got hikes of 5%-7%.

Because advertisers can rearrange their ad deals as the TV season progresses, upfront totals are at best signals of how well TV and marketers get along. They won’t be heading to divorce court, but they are definitely bickering.

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