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Broadcast Nets Strike C7 Ad Deals in Big Upfront Sales Win

After years of debating the issue, a group of major advertisers has decided that viewers who watch favorite TV shows up to a week after they air are worth some money.

The nation’s largest broadcast networks have struck deals with one major ad-buying firm that will result in that agency’s clients agreeing to a measure known as “C7,” according to several people familiar with the situation, that will make it possible for the major broadcast outlets to get paid in some fashion for viewers who watch commercials up to seven days after they air on live TV. The pact does not include Spanish-language broadcasters or cable networks, and is only for primetime inventory, according to some of these executives. The agency is said to be large media buyer GroupM, according to executives at rival agencies. The agreement could put pressure on other media buyers and advertisers to agree to similar terms and change the way Madison Avenue and the television industry do business.

At present, advertisers pay for “C3,” or three days’ worth of commercial views by audience. But broadcast networks like CBS, NBC and Fox have all pushed for the value of viewing that takes place over a longer time frame, citing increased use by consumers of digital-video recorders and, more recently, video on demand. As technology offers up methods for counting viewers who watch programs on tablets and mobile devices, the push to include those people will likely intensify as well.

Leslie Moonves, chief executive of CBS Corp., has been particularly vocal on the matter, telling investors as early as November of 2012 that the “most significant development we are seeing is the increased levels of viewing via the DVR streaming and video on demand. This is a good thing for us. It means that more people are watching our programming in the situations where there used to be scheduling conflicts. But it also means that you have to be more savvy when reading the ratings these days. It now takes more time to determine the true performance of a show and, in fact, even a network.”

A CBS spokesman confirmed the network had struck a “C7” deal, but did not name the agency involved. Fox confirmed that it has an agreement in place to do a “C7” deal with a major agency it would not name. NBC has struck a similar deal with one agency, according to a person familiar with the situation. ABC and the CW did not respond immediately.

The deal does not mean that the current “upfront” market, in which the U.S. TV networks try to sell the bulk of their ad inventory for the coming fall season, has begun to move. In fact, the market has been slow to spark, with ad buyers suggesting advertisers continue to register budgets than are lower-than-expected while both sides bicker about pricing.

But the pact does suggest that advertisers, seeing a continued splintering of the audience once attracted to watching live TV, will now chase after that audience more willingly. While live TV viewing remains the dominant couch-potato behavior, so-called “time-shifted” viewing has begun to increase. In February, Nielsen found time-shifted viewing of TV content has grown by two hours over the previous year, rising to an average of about 13 hours per months. Meanwhile, live viewing averaged nearly 134 hours in 2013, down about three hours from 2012.

None of the executives involved would name the agency at the heart of the deal, but the large ad-buying agency known asGroupM was cited by executives from rival ad buyers as a near-certain candidate. Controlled by U.K. ad conglomerate WPP, the consortium of agencies that includes MindShare, MEC and Mediacom represents blue-chip advertisers like Unilever, American Express and Subway. The company has a history of crafting broad deals with the TV networks that push for adoption of new technologies and accommodate new consumer habits. Executives at GroupM were instrumental in the construction of “C3”ratings in 2007, and struck a massive deal valued at between $800 million and $1 billion in June of that year with NBCUniversal to ensure the new measure would be adopted across the industry.

A GroupM spokeswoman declined to comment. One of GroupM’s rivals, Starcom MediaVest Group, controlled by Publicis Groupe of France and representing clients like Procter & Gamble and Coca-Cola, is not involved with the deal, according to people familiar with the situation.

The call for a move to “C7” was heard plainly during several network “upfront” presentations in recent weeks. “In order for us to continue to make massive investments into our quality entertainment programming, we need to recognize the evolution of the media landscape and with so much of our audience choosing to watch on their own schedule, our business needs to evolve as well,” said Toby Byrne, president of ad sales for Fox Broadcasting, as the network unveiled its fall programming. “I think you can see where I’m going… for our business today and for tomorrow, we need to have a meaningful discussion about ‘C7.’”

The deal is likely to raise some eyebrows. While the TV networks have pushed for “C7” for some time, putting it in place in broad fashion is difficult. Certain advertisers – like movie studios looking to promote a Friday-night opening or retailers hoping to lure customers to a holiday-weekend sale – have in the past been said to look askance at paying for people who saw their commercials after a certain amount of time. What’s more, “C7” measures don’t add much audience for cable programs, according to several executives, which rerun their shows several times in close proximity to the original air date. As such, cable networks would not likely feel any urgency to make such deals a standard.

The deal is likely full of nuances. To get ad buyers to agree to pay for time-shifted viewing beyond three days, TV networks may have had to offer attractive guarantees in the cost of reaching a 1,000 viewers, a measure known as a CPM that is a bedrock element of talks for TV ad time. Favorable terms for expanded audience might draw sponsors to the new concept, while TV networks gain acceptance for the new measure and the chance to perhaps negotiate increases the more they can prove growth in time-shifted viewership.

The push for “C7” has been met with gradual acceptance over time. ABC has in past seasons confirmed that select clients had agreed to such deals, and Fox last year did some as well. Automobile manufacturers have shown the most interest, according to executives with knowledge of the market.

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