But buyers say that after starting out asking for double-digit price increases in the cost of reaching 1,000 viewers, or CPMs, all the networks will probably have to contend with agencies seeking price hikes in the mid-single-digit range, around 4% to 6%. "Mid-singles is probably going to be the range that we all sell ourselves into. Most agencies have prepared their clients for that type of market," said one buyer.
Fox in talks with studios
Still, Fox has been able to secure high-single-digit increases in negotiations, according to media buyers, and has been moving first with movie studios, a typical Fox maneuver. A Fox spokesperson said, "We've come to terms with many of our clients, and negotiations are under way with the rest." The spokesperson declined to comment on pricing.
The networks' ability to secure such increases is surprising, as the upfront market has been flat to down in recent years and there has been a noticeable decline in live ratings in the recently completed TV season, owing to usage of digital video recorders. Even so, networks appear to be following a standard strategy for media outlets that are seeing audiences dissipate due to new technology. Like newspapers, the TV networks are touting their abilities to reach broad audiences in an increasingly fragmenting media landscape and asking for more money. Spokespeople for CBS and Fox have offered no comment on pricing.
The ratings decline is forcing networks to be more aggressive on the pricing front, said Michael Nathanson, a media analyst with Sanford C. Bernstein, in a research note issued today. "This massive decline in ratings underscores why most broadcast networks have started their negotiations with offers of 12%-15% price inflation. Double-digit pricing is required just to keep revenue flat given the double-digit decline in audience delivery. Time will tell if the market develops in their favor," he said in the note.
First using commercial ratings
Earlier this week, Group M and NBC Universal unveiled a multiplatform pact valued at more than $800 million that encompassed NBC's broadcast, digital and cable properties. The deal is the first to use Nielsen's commercial ratings, which measure the average viewership of commercial breaks during specific periods of time, and also use a "live-plus-three" metric, which means the ratings include viewers who watch the ads as much as three days later through use of a DVR. NBC was able to secure price increases in the high-single to low-double range for its daytime and late-night broadcast schedule and increases of around 5% for its prime-time inventory, according to buyers.
Buyers suggest the large pact is setting the tone for the upfront in many ways, prompting acceptance of commercial ratings and live-plus-three metrics by many parties. In certain cases, however, networks have set up different pacts for advertisers such as retailers and movie studios whose ads are more time sensitive. In some of these situations, these buyers said, networks are asking for a slight premium to offer a commercial-ratings deal based on viewing up to one or two days after an ad airs.