Broadcast networks have, in most cases, been able to secure mid- to high-single-digit percent increases in the cost of reaching 1,000 viewers, also known as CPM. Fox, the only network to show ratings growth in the 2007-2008 season, has in some cases been able to negotiate percentage increases in the low-double-digit range, according to media buyers and other executives, who put the network's CPM increase at 9% to 12%. Buyers expect the News Corp. network to increase its upfront commitments from last year, when it secured about $1.9 billion.
Predicting a final tally is still difficult. Buyers, who have a vested interest in keeping expectations down, are tentatively putting this year's upfront take at anywhere from slightly down to about $9.2 billion, compared with 2007's $9.1 billion. "It could definitely still be flat," said Marci Ryvicker, a Wachovia media analyst. "The ratings were down so much, and viewership is down so much."
Lost in all the numbers, however, is a serious consideration of the ramifications advertisers are bound to face come fall. With more viewers getting entertainment and information from the web and other emerging venues, the networks' supply of ratings is dwindling -- and so is a marketer's ability to get ads on TV without advance planning.
"The question that really remains is: What will be left later on in scatter?" asked Gary Carr, senior VP-director of national broadcast at independent media buyer TargetCast TCM, referring to ad time that is purchased closer to a show's air date. "Are [the networks] going to higher sellout levels, and only a little bit will be left later on?"
Buying in early
Most networks and media buyers agree advertisers are putting more money into the upfront market this year, eager to lock in lower prices for TV time now rather than deal with expensive scatter later, when they could still be facing a shaky economy.
Advertisers have already run into trouble in this area. With ratings eroding in the 18-to-49 demographic -- a condition exacerbated by this year's writers strike -- it takes more showings of a single commercial to reach the same number of viewers. Except for Fox, which grew, all the broadcast networks ended the season May 25 with double-digit ratings decreases among 18- to 49-year-olds. With supply down and demand even or increasing, the cost of scatter has skyrocketed. At the same time, the loss of ratings means networks often must provide more ad time to clients whose ads didn't reach agreed-upon targets, also known as make-goods.
Market conditions prompt some uncertainty. "Scatter was pretty expensive this past year," said Ben Poore, VP-marketing, Nissan North America. "I don't think anyone really knows" what scatter pricing will be later in 2008. And in a presidential-election year, there's always more demand for ads bought at the last minute by campaigns, tightening a limited market even further.
Already, NBC has said it expected to take in about $1.9 billion in ad commitments for its fall schedule, up from last year's $1.8 billion -- although the Peacock network sold more inventory, 80%, this year than it did in 2007 to get to that figure. NBC secured CPM increases of 5.5% to 7.5%, according to people familiar with the matter. The CW is expected to secure about $350 million to $375 million, down from last year's range of $630 million to $650 million, while notching CPM increases in the 7% to 8% range. The network has turned its Sunday-night schedule over to a third party and has not made that inventory available for sale during its upfront. ABC has secured CPM increases of about 9%, while CBS has seen CPM increases in the 7% to 9% range, according to people familiar with the matter.
On the cable side, Time Warner's Turner appears to be leading the marketplace, with nearly 50% of its deals closed by Friday, according to an executive familiar with the negotiations. Networks such as TNT and TBS saw CPM increases of 9% or above. Turner is poised to wrap as early as Wednesday, and other cablers such as the NBC Universal, MTV and Discovery networks should start moving business in earnest this week.
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Contributing: Andrew Hampp and Jean Halliday