NEW YORK (AdAge.com) -- Advertiser budgets for next fall's TV season are coming in significantly off last year's totals, and could prompt some radical changes in how buyers and TV networks conduct the annual "upfront" sales process, when TV outlets typically sell 75% to 80% of their ad inventory for the season.
Some early client budgets are approaching "down double-digit percentages" from last year's totals, according to one media-buying executive, who suggested that the trend would be felt "disproportionately" by broadcast outlets and "in proportion" by cable channels. This executive suggested that domestic auto will spend less, while retailers will put money into reserving holiday-season ad inventory in the fourth quarter. Pharmaceutical marketers, this person suggested, plan to trim ad outlays to avoid government regulators' ire in the earlier days of the new Obama administration.
More money going to scatter
Meanwhile, a group of panelists at an "Upfront Summit" held by Television Week and Advertising Age in New York this morning concurred that money is tighter this year heading into the upfront negotiations, with more expected to go to "scatter," or advertising that is purchased much closer to air date, rather than at the upfront meetings that take place in May and June.
"Advertisers are going to spend when they're comfortable," said Mike Shaw, president-sales and marketing at Walt Disney's ABC, adding that he was less concerned with the total of upfront commitments he could secure and more interested in a "52-week number" that takes into account both upfront and scatter purchases.
Nonetheless, it seems clear that marketers will seize on this year's economic malaise to drive more complex, more targeted purchases tied to specific programs and networks -- and aren't that concerned about whether they give more money to broadcast or to cable.
"I care more about the program than the network that it's on," said Peggy Green, vice chairman of Publicis Groupe's Zenith Media. Rather than plunking down money across networks, Ms. Green said marketers were more interested in learning about the very specific demographics of the audiences watching individual programs and dayparts.
Ms. Green suggested marketers are less interested in putting down massive amounts of dollars and more intrigued by looking at how they allocate a diminished amount of dollars across various media.
Looking for help with content
During a separate panel, one advertiser drove the point home: "At the end of the day we sell mayonnaise, and we're not in the content business like NBC, Fox and everyone else," said Rob Master, Unilever's director of North American media, "so helping us tell more stories is going to be a bigger part of our upfront process this year."
This year's upfront could be unlike any other in recent memory. Not only are TV networks contending with a tough economy -- already, spending on network TV was off 3.5% in 2008, with overall U.S. ad spending down 2.6%, according to Nielsen Media Research -- but they are faced with drastic changes in how consumers obtain entertainment and information. More consumers are watching TV via the web or through mobile devices such as iPods, which mean the mass audiences TV counts on to justify its healthy pricing can't be relied on.
Making things worse is the increased penetration of digital video recorders in TV households, which make it easy for consumers to watch shows at a time of their own choosing and skip the ads that support them. Meanwhile, newer forms of media often make it easier for advertisers to link an ad pitch to an actual purchase, thanks to e-commerce or tracking mouse clicks.
Cablevision's exec VP-advanced platform sales, Barry Frey, another panelist at the Upfront Summit, noted that his company has had success in delivering interactive ads for marketers such as Walt Disney's parks, where a consumer watching TV can click on-screen and spark a customer-service representative to call him or her at home to book a vacation. "So we are delivering ROI, we are helping people actually track real sales," he said.
Interactivity, video on demand and DVRs, however, all put more pressure on buyers and marketers, said Tim Spengler, president of Interpublic Group of Cos.' Initiative USA. "How do we prove that advertising works? How can we prove that TV works?" he asked, later adding that "media channels need to prove how they deliver sales. If a particular channel or media type proves it does a better job of eliciting a response, then that is a more appealing place to put our money."
Slim ray of hope
One advertiser on the panel held out a slim ray of hope for TV outlets. In an uncertain economy, said Daryl Evans, VP-consumer advertising and marketing communications, AT&T, marketers need more flexibility.
"The upfront by its nature is less flexible," he said, referring to the idea that marketers put down dollars months in advance in order to advertise for future initiatives. Advertisers might be willing to submit to paying a "premium for flexibility" so long as the economy casts fog over the business landscape, he said.
Despite the economy, both Ed Erhardt, ESPN, president-customer marketing and sales, and Henry Schleiff, president-CEO, Crown Media (owner of the Hallmark Channel), expressed optimism about the upfront market. Mr. Schleiff noted that the most you can hope for is that you've done the best job you can on your side, and that because of that, you'll be treated fairly by those on the other side. Mr. Erhardt admonished the audience that you can approach the market with "fear," or you can approach the market with "guts," and now is the time for those with "guts."
Unilever's Mr. Master, however, was quick to remind the audience that the fear in the market right now does have a grounding in reality, and when marketers tell media sellers that they need flexibility and they need liquidity, those requests are coming from a basis in reality that can't be ignored, and media partners need to respect that this year especially.