NEW YORK (AdAge.com) -- Advertisers are backing off their most radical and aggressive pricing demands in the upfront marketplace, according to executives at three different buying agencies and one selling executive -- a concrete sign that the market for TV advertising time in the new fall season is finally gearing up to move after weeks of delays.
Media buyers have said for weeks that they have been under direct orders from clients to secure deep price rollbacks from the big broadcast networks, and, as such, have been holding fast against entering into firm negotiations. Now, as the July 4 holiday stares them in the face, a sense is emerging that marketers "need to get on the air" in the fall, said one senior buying executive. Instead of holding out for double-digit price decreases in the cost of reaching 1,000 viewers, or CPM, a common measure in these negotiations, buyers are tempering their demands.
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Pricing at the networks
"To get double digit on anyone is going to be extremely tough," said one buyer. "We're going to try to get there. If the money is down as much as it could be, there would be validity to go that deep." Instead, this buyer said, most agencies could well settle for mid-single-digit to high-single-digit percentage decreases from NBC, the most ratings-challenged of the big broadcasters in prime time, and low-single-digit to mid-single-digit percentage decreases from CBS, ABC and Fox. Cable outlets could also see things shake out in similar fashion, depending on whether they are first- or second-tier operations.
Not everyone believes the market is primed to surge, and some executives caution there is still lots of negotiating to be done before an end is in sight. One marketing executive suggested only certain categories of advertisers are prepared to back off from demands of double-digit decreases. This executive said his company is prepared for the upfront to drag on well into the summer.
Already, however, discussions are under way. WPP's Group M is said to be in intense discussions with NBC Universal over a deal that could encompass both the NBC broadcast network and the company's cable outlets, according to buyers and one sales executive. Pricing for certain broadcast dayparts and cable is still being ironed out. Group M and NBC declined to comment. Group M and NBC Universal previously acknowledged they were in talks but said a deal had not yet been completed.
Interpublic Group of Cos.' Magna is in the midst of discussions with some networks, according to buyers, with Publicis Groupe's Zenith Media said to be gearing up for negotiations this week. Magna and Zenith both declined to comment, according to spokespeople for the agencies. Omnicom Group's OMD is also in earnest negotiations with one or more TV networks, according to people familiar with the situation. OMD executives could not be reached immediately for comment. Buyers also say they expect talks between News Corp.'s Fox and agencies representing movie studios to gain more momentum. Fox is typically a first stop for movie studios, owing to its ability to reach young male consumers.
But still a negative market
The activity shouldn't mask the fact that the overall market looks to be a negative one, at least initially. "Vendors know it's a negative market right now," said one buying executive. "There's not a positive being written." And indeed, this buyer suggested agencies have more media options than in the past and can use that for leverage in negotiations. "You could drive a truck through local [TV advertising]. If you can drive a truck through local, why should I be paying a minus five for national broadcast if I can get doubles [double-digit percentage decreases] in local?" this buyer said. "It's the same audience, the same viewer."
With the sagging economy placing many clients under pressure, some agencies are testing out other interesting negotiating tactics. According to one sales executive, several clients are bringing a reduced amount of money to the table, then trying to ensure that the terms negotiated hold true in case clients decide to commit additional funds at a later date. Negotiating such "expansion rights" is common in the upfront, but what's new this year is the amount of potential money under consideration. While the prospect of securing additional ad volume is intriguing, some networks are resisting these maneuvers, the selling executive said. Instead, they are telling agencies to purchase the ad time in the scatter market.
Indeed, many networks are apt to sell less time than normal in this year's upfront marketplace, in which they typically secure commitments for 70% to 80% of the next season's inventory. Instead, network sales executives have said they will be very comfortable selling a greater-than-usual amount of ad time as scatter, or inventory that is purchased closer to air date. Should the economy improve, pricing for scatter would increase, and networks would be able to bolster ad revenue.
Marketers routinely commit north of $9 billion to broadcast TV each upfront. The numbers are directional indicators at best, and do not represent hard cash in network coffers. Technology has put the annual marketplace under intense scrutiny in recent years, as a broadening range of digital-media venues begins to soak up audience and ad dollars from TV outlets. Last year's commitment volume for the five broadcast networks came to about $9.23 billion, and analysts have indicated they expect the market to drop by as much as 10% to 20% this year.
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