According to four executives familiar with negotiations, the kids' upfront is expected to finish this week with volume down as much as 10% to 15%, a far cry from the optimistic flat-to-2% prediction several key executives first gave Ad Age back in February. So what hit a market valued at more than $1 billion in 2008? Toy sales, or lack thereof.
Category leader Mattel's net sales were off a whopping 19% year over year during the second quarter of 2009, following a 6% slide in the first quarter, due to sluggish sales of megabrands such as Barbie, despite its 50th-anniversary celebration.
No. 2 toymaker Hasbro, however, saw a sales spike of 5% in the second quarter on the strength of tie-in toys for its "Transformers" and "G.I. Joe" movies. But with a cable network on the horizon for Hasbro and Discovery Networks in late 2010, it's unclear how much the No. 2 toymaker will spend on its competitors come next upfront. Smaller spenders Lego and Spinmaster are also said to have increased their upfront dollars, but not enough to offset the 10% to 12% decrease in overall toy spending, according to three executives.
Pricing for ad-supported kids' networks Nickelodeon, Cartoon Network and Disney XD varies. Market leader Nickelodeon is expected to finish with pricing decreases based on cost per thousand viewers on par with the cable-market average of 3% to 4%, with Cartoon taking rollbacks in the 4%-to-7% range. Disney XD, the rebranded network formerly known as Toon Disney, however, could finish the upfront with an increase in spending, thanks to ratings increases and marketplace demand that didn't exist when it was in its previous iteration, according to two executives.
While Nickelodeon is still the undisputed market leader ("Whatever Nick does is pretty much the rest of the market," said one media buyer), the fight for No. 2 is becoming more competitive among Cartoon Network and Disney XD.
Each network is targeting boys with a mix of animated and live-action programming, the latter of which has caught Cartoon Network some flak from viewers and reportedly has it contemplating a name change to The Network. Disney XD has made some market strides since its February 2009 launch on the strength of high-rated new programming and advertising interest from fast-food restaurants and boy-targeted athletic marketers who don't traditionally buy TV.
Elsewhere, package-food marketers were down in the 1%-to-3% range after a major marketing reformulation for sugary snacks and cereals caused Kraft, Kellogg and others to radically rethink their strategies.
Worst is over?
Several key executives said they believe the worst is over for most of the top food brands, which has helped the networks adjust to the new realities and partner with companies on health-and-wellness initiatives and other custom programs. "While there are still some inherent issues, they're still looking to find ways to find their consumers," one executive said. "That category wants just as much marketing presence as ever for the brands that are involved."
A few bright spots include movie studios, with spending flat to up 2%; retailers, with spending flat to slightly down; and new business in the personal-technology and wireless category. Although volume for fourth-quarter holiday sales is expected to finish on par with previous years, many agree that some of the unforeseen market challenges will have to be made up in scatter in 2010. "Kids has traditionally been isolated and restricted to a few key advertisers. The going-in assumption was those advertisers were recession-proof, and that's proven not to be the case," one executive said.
With the broadcast market closed and the kids' upfront expected to wrap this week, cable and syndication are the lone stragglers in the protracted upfront, with 10% to 20% of deals left to complete in the next two weeks.