Broadcast Networks Sell More to Get More

$9.2 Billion Upfront Market Gets Boost as Advertisers Look to Avoid Future Pain

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NEW YORK (AdAge.com) -- Advertisers have committed approximately $9.2 billion to primetime broadcast TV for the 2008-2009 TV season, but they did so out of concern they'd have to pay steeper ad prices come the fall, at a time when the economic outlook is blurry. They also did it because a few of the broadcast networks were eager to sell more time now to drive some of their take.

The five big broadcast networks -- ABC, CBS, NBC, Fox and the CW -- were able to drive dollars that were even with or a tick higher than last year's takes. In some cases, however, it looked as if the market for entertainment programming alone was flat.

Need to sell more
"I do think for these guys' total to be up, they have to be selling more inventory," said Michael Nathanson, a media analyst with Sanford C. Bernstein. Networks typically sell between 75% and 80% of their inventory in the upfront market.

The upfront is also not an indicator of how well the networks and their parent companies will do for the year. Many advertisers are taking money they would have earmarked for so-called "scatter" ad time, or advertising that is purchased closer to the time it airs, usually for a premium. Those costs have been steeper than in years past, owing in part to the fact that the big networks have seen ratings decline and advertisers must buy more ads to reach audiences of a size comparable to the past. "It really always comes down to scatter and ratings," said Mr. Nathanson. "Let's see what the fourth-quarter ratings look like."

Potential hole
The TV networks "would rather have the money upfront, and they'll play the scatter game later," said Ed Atorino, a media analyst with The Benchmark Co. "What advertisers are doing is locking in, [but] by taking it out of scatter, they're leaving a potential hole in the market."

NBC sold 80% of its inventory, slightly more than last year, to secure $1.9 billion. NBC took in about $1.8 billion last year. Likewise, ABC sold between 80% and 85% of its inventory, compared with 77% and 82% in last year's market. ABC expects to secure about $2.5 billion this year, compared with $2.4 billion last year. Both networks are including some amount of primetime sports programming in their totals.

CBS has secured approximately $2.5 billion in ad commitments, up from the approximately $2.45 billion it notched last year. The network sold the same amount of inventory it did last year, and its sales are for prime-time entertainment only, according to a person familiar with the situation. It would not specify how much inventory was sold.

Trouble at CW
At the ratings-challenged CW, commitments took a serious tumble, particularly because the network has turned over its Sunday-night schedule over to a third-party studio and did not make that time available to sell. The CW secured between $350 million and $375 million in ad commitments, down from last year's range of $630 million to $650 million.

News Corp.'s Fox was able to secure at least $1.95 billion to $2 billion in ad commitments, according to people familiar with the marketplace. Fox had the best ratings performance among the networks in the recently completed season. Fox secured about $1.9 billion in last year's upfront. A Fox spokesman declined to comment.

The network totals would represent between $9.2 billion and $9.28 billion, compared with last year's approximate total of about $9.1 billion.

Different strengths
Different networks worked different strengths. Fox, which caters more directly to an audience of young adult men and often boasts edgier programs, did a brisk business among movie studios, according to media buyers. The CW, which aims at a younger, female-skewing audience, saw strength among wireless providers and health and beauty marketers, according to people familiar with the situation.

While the upfront totals look eye-popping, the real dollars involved are much harder to pin down. Upfront totals represent commitments to purchase advertising, but can easily be repurposed or withdrawn depending on the ultimate lineup on a network's schedule. Most network ad-sales executives say they focus on their year-end revenue and profit, not their upfront take. Most analysts use the upfront as a means of tracking advertisers' interest in TV advertising, not as a sign of revenue flowing to the networks' parent companies.
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