Fox to Use Hulu Inventory for Advertiser 'Make-Goods'

Network's Maneuver Pushes TV, Online Audiences Closer

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NEW YORK ( -- Fox has secured agreements with about a dozen advertisers to supply them with inventory from online-video site Hulu to make up for ratings shortfalls on its broadcast network, according to the News Corp. network's top ad-sales executive. The move is the latest signal that marketers are growing more comfortable with the idea that consumers who watch TV via the web are comparable to a more traditional TV audience.

Fox routinely purchases inventory from Hulu -- owned by its parent, News Corp., as well as NBC Universal and Walt Disney Co. -- to sell as part of broader sponsorship packages or in the normal course of sales, said Jon Nesvig, Fox Broadcasting's president-sales, in an interview. This season, he said, the network's need to provide additional inventory to marketers due to lower-than-guaranteed ratings on its fall schedule -- a practice known in the industry as providing "make goods" -- prompted a different solution. Mr. Nesvig declined to identify the advertisers that had agreed to accept Hulu viewers as make-goods for traditional TV viewers.

Fox's effort follows that of the CW, which this season started selling packages of ad inventory that encompassed its TV network as well as its streaming-video website, The networks' desire to now sell these packages, rather than keep advertisers primarily buying TV inventory, shows media companies rushing to adapt as new technology erodes the typical audience for prime-time TV, the priciest part of their schedules. And Fox's ability to use Hulu inventory to make up for broadcast shortfalls shows that advertisers are coming along.

"This is what television is going to be," said Michael Bologna, director-emerging communications, at WPP's Group M. He predicts the emergence of an "aggregation model," with networks cobbling together audiences from any number of viewing opportunities, whether they hew close to the couch-potato method of watching the boob-tube or hail from new behaviors, such as watching online.

Group M and other big media buyers are encouraging TV networks to offer and negotiate packages that include both standard TV viewers and viewers watching TV programs online, according to Mr. Bologna. "From what I'm hearing, this move is supported by a large part of the television community," he said.

Group M had not yet made a deal to buy Hulu inventory but is in the midst of discussing the idea, Mr. Bologna added.

In years past, Fox would have tried to keep its clients buying as much TV inventory as possible, while marketers might have blanched at the notion of using Hulu, a video service in its relative infancy, to replace viewers not watching mainstream TV. These days, however, audiences have dispersed among a plethora of new devices and viewing behaviors, ranging from playback on digital video recorders to downloads from iTunes to video on demand.

To be sure, Fox has had challenges this season. Its much-anticipated drama, "Lone Star," fell flat right out of the gate and its airing of the 2010 World Series, which featured teams not based in New York, Chicago or Los Angeles, lasted only five games and did not draw as big an audience as past broadcasts, particularly last year's matchup between the New York Yankees and the Philadelphia Phillies.

Reaching an agreement to mix online inventory with TV-ad purchases isn't the easiest thing to accomplish. The CW uses online-impressions data from DoubleClick as well as Nielsen VideoCensus data to give advertisers a sense of how its shows are watched online. Nielsen has been working on a plan to provide commercial ratings for shows watched on TV or online, but only so long as the ads streamed online match those that aired on TV -- which will only prove useful to the networks if people who watch TV programs via the web eventually see the same amount of ads as they might on TV, not fewer, as has been the norm in recent years.

Marketers need to determine the number of unique viewers an ad streamed in online video will reach, Mr. Bologna suggested, as well as the number of commercials seen during a break. Hulu is known for running fewer ads in a commercial break than TV networks do, meaning that Fox may be supplying its clients with inventory that would help them stand out better in certain cases than a traditional appearance on television.

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