Economy Accelerates Shift Away From Upfront Buying

Wary Marketers Cling to Budgets, Lean Toward Year-Round Purchases

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NEW YORK (AdAge.com) -- With the economy flailing, it doesn't take a rocket scientist to realize that TV-ad sales for next fall's prime-time schedule are primed to droop. Behind the scenes, however, lies something potentially more drastic. The dreary financial climate could trigger a permanent transformation in how shows such as "Lost" and "American Idol" are bought and sold.

Broadcast TV for decades has largely been a game of pay now and hope for the best later. Networks routinely sell between 75% and 80% of their ad inventory for the coming fall season during the glitzy "upfront" sales sessions that take place in May and June. As the recession deepens, however, it is becoming clear that marketers are being forced to keep their money in their pockets much longer. Putting down large chunks of change for ads that won't run for months is a less attractive option.

As instability continues, the situation looks to grow worse. Pricing for so-called scatter ad time, or inventory purchased on an as-needed basis, has stayed on par with what marketers paid last spring. So long as the economic slump continues, buyers are likely to think they can get good prices whenever they choose to enter the market in the next six to 12 months.

"It's the kind of scenario where there's no cost to hold your money, and you can come into the market and buy what you want on a fairly weekly basis," one media buyer said. "I think there's going to be less emphasis to feel you need to make a long-term commitment."

This year is already filled with ominous signs. The Super Bowl and the Oscars are two of broadcast TV's tent-pole properties, and selling them is typically less a matter of pushing hard than of letting interested parties come to you. This year, it was obvious NBC and ABC had to scramble to get clients to buy all their available inventory (when's the last time Coca-Cola ran a whopping seven ads in the Oscars?).

Increased threat of cancellations
According to media buyers, marketers have been pulling back anywhere from 12% to 14% of options for second-quarter broadcast buys; a typical cancellation rate is 3% to 5%. In their estimation, cancellations for the third quarter -- for which the window opens in April -- will be worse. Already, Veronis Suhler Stevenson is calling for spending on broadcast TV to decline 9% in 2009, compared with a dip of 0.5% in 2008.

"The heightened unstable economy really is beginning now to impact media markets," said Kris Magel, exec VP-director of national broadcast at Initiative.

Meanwhile, the call for a change in the way TV ad time is purchased has turned more or less into a steady drumbeat. In 2006, Johnson & Johnson caused some alarm when it said it would rather spend money on TV when its business objectives were more certain. J&J has stayed out of the upfront process ever since. A J&J spokesman did not return a phone call seeking comment.

Others hint that more advertisers could seek out different ways of doing business with TV networks. One network ad-sales executive said advertisers might seek to do a "calendar-year upfront," in which they sit out the traditional May session but plan to spend money in tandem with their corporate fiscal year.

"We will all find that there are strategies we put into place today that may be with us for a long time. The kind of pressure that we are under to deliver value, be innovative, and think about anything new that can drive efficiency and effectiveness -- that willingness, that spirit drives more change and innovation than in a more stable marketplace," Mr. Magel said. "The potential for us to come out of this with some new business strategies ... is very likely."

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