Media Agencies Name Fox Upfront Winner

Final Tally Will Be Down, but Full Year Will Be Up

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NEW YORK (AdAge.com) -- The broadcast networks are primed for another market correction when this year's upfront is finally complete. While the sales chiefs are still dealing, agencies and analysts are predicting an overall dollar decline, putting the final number anywhere between $8.5 billion and $8.98 billion. Last year's upfront took $9.1 billion, a decline from the 2004-2005 season, which hauled in $9.3 billion in broadcast TV ad sales.
Fox's Jon Nesvig declined to comment on talks his network will finish with more than $1.8 billion in upfront sales.
Fox's Jon Nesvig declined to comment on talks his network will finish with more than $1.8 billion in upfront sales.

One major marketer who spends big in the upfront told Advertising Age, "The power has shifted back. It's cyclical and it's been the networks for so long. We got a little bit back and because of all the pressures in the marketplace, it is amazing they did as well as they did."

Merrill Lynch revisions
Merrill Lynch revised its upfront projection down from flat to minus 1%, and put the expected final number at $8.98 billion for the six networks, attributing a possible take of $50 million to the new player, News Corp.'s My Network TV. Media agency projections came in slightly lower at around $8.5 billion. Despite the decline, media agency buyers suggested that there were multiple winners among the broadcast networks this year, with praise for Fox and, surprisingly, NBC.

News Corp.'s Fox is set to finish north of $1.8 billion and sold 80% of its inventory, a $250 million improvement on last year's $1.55 billion take. Jon Nesvig, president-ad sales, declined to comment.

The network won cost-per-thousand-viewer increases of between 2% and 3% and, according to News Corp. President-Chief Operating Officer Peter Chernin, has the highest CPM costs at around $30, along with NBC. Fox made a play for volume and moved slightly ahead of the market to capitalize on its improved ratings. (The network sells 15 hours of prime time, compared to the other networks, which sell 22 hours.)

Outperforming expectations
"NBC knew what was coming and they took it like a grown-up," said one buyer, who added that the General Electric Co. network did well to bring in as many dollars as last year. NBC insiders suggest the network is on track to be flat with last year's $1.9 billion sales, despite a second year of ratings declines and expected negative CPM prices. (The network dropped rates between 5% and 6%.) A Merrill Lynch upfront report on June 19 said that NBC had outperformed expectations and that 6% of its total dollar commitments will be derived from its digital offerings. The figure includes its Sunday Night Football ad revenue.

Walt Disney Co.'s ABC, CBS Corp.'s CBS and the CW (created this year by Time Warner and Viacom by the merger of UPN and the WB) are at various stages of completion. "ABC is still plodding along, they're confident, so they're taking people one at a time," said one agency buyer this week. Another said ABC, by still dealing, was holding up buyers' negotiations with cable.

But insiders at ABC today said the network is finishing up business this evening. An ABC spokeswoman had no comment on the final ABC take.

CBS and CW arealso close to finishing. The CW, which is establishing its bases as a new entrant, took CPM rates similar to its predecessor the WB. Whether it can take the same $675 million that the WB did remains to be seen.

Setting a precedent
When asked to characterize this year's upfront, media forecaster Josh Bernoff, principal analyst at Forrester Research, said: "The most significant thing about the upfront is that they set a precedent. The advertisers stared down the networks on the recorded vs. live viewing. If the advertisers couldn't buy in the upfront, they can always buy later. The networks have made promises to investors so they created a prison for themselves and it's not the best negotiating position to be in."

Larry Novenstern, exec VP-director of national electronic media, Optimedia concurred, saying that this was another good year for agencies and their clients. "The advertisers stuck together and we got the currency we needed." On the upfront totals, he said: "Some money disappeared to emerging media and some didn't surface because of the ability to do deals 52 weeks a year."

While emerging media was not as big a part of upfront talks as expected, the demand is in evidence. CBS Corp. President-CEO Leslie Moonves told analysts and media attending the PricewaterhouseCoopers conference this week that money had indeed been spent on new-media integrations. "The key word during this upfront season was integration. Now the money there is small right now in comparison to the big pie, but our major advertisers and the major advertising agencies wanted to see how their money could be put to work throughout the system. So when you did a Budweiser deal they also wanted to be on the web." Mr. Moonves said three of the big four networks had seen CPM increases. Agencies have pegged CBS's CPM increases at anywhere between 2% up and 1% down.

If the upfront ends below last year, as seems likely, that may have little reflection on the full-year ad picture. This year is expected to be a much healthier than 2005. Despite a yo-yo stock market, interest rate hikes, high oil prices, war and hurricane warnings, political advertising and new money from the likes of retailers such as Gap and Federated will boost full-year broadcast network advertising. An estimate released by PwC suggested ad revenue at broadcast networks would be up by 6.1% to $19 billion.

Cable market
Meanwhile, the cable market is slow to materialize but most top 10 cable networks expect to be close to fully registered by Friday night, although very few deals have been written. The early money indicates a market slightly up in volume -- 2% or about $120 million -- and flat overall CPM increases.

Interestingly, cable buys continue to consolidate as marketers draw a distinct line between the top-tier cable networks, including Turner, Viacom and Discovery, and lower-tier cablers. A major package-goods marketer, for example, divided the cable market into four tiers based on atings and perceived value and axed spending at the two lower-rated ones.

And cable continues to tout its advances in digital extensions, which sellers report are attracting the retail, auto and telephony categories.

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Abbey Klaassen contributed to this report.
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