NEW YORK (AdAge.com) -- TV networks have placed a big bet that demand for ad time will increase as the ailing economy limps toward something resembling recovery. And early indications are that some marketers are starting to spend again.
All five broadcast networks -- and many of their cable counterparts -- have placed their faith in "scatter" advertising, which is purchased on an as-needed basis rather than weeks or even months ahead of time.
Many networks have reserved at least 10% more of their inventory than usual, in the hope that they'll be able to sell the ad time at better prices than they would have been able to in the recent upfront market, during which advertisers were under economic duress. Generally speaking, ad volume in the upfront was down 10% to 20%, with dollars committed to the new broadcast-prime-time schedule coming to between $7.8 billion and $8.1 billion, according to Advertising Age estimates, down from about $9.23 billion last year. But the networks won't know whether the gamble is going to pay off until well into the first quarter of 2010.
While more clients have canceled options for ad deals struck during upfront talks, "volume and pricing for scatter has been fine," said Mike Shaw, president-sales and marketing at Walt Disney's ABC. "You have more 'on-time' buying going on. A lot of times, you get a budget on Wednesday that Tuesday you didn't know was coming -- to be on the air the following week. We're seeing the broadcast model at the networks morph a little bit in the last nine months to what cable has historically experienced, which is a lower sell-out in the upfront and more scatter on a 52-week basis. So we're adapting to more of that model, at least in the short term."
"The trend now is unmistakable -- and some think might be irreversible -- that clients will wait as long as possible before they commit money, clearly to have maximum flexibility with their funds," said Richard Goldfarb, senior VP-media sales at cable's National Geographic Channel. Like ABC's Mr. Shaw, however, Mr. Goldfarb said he has seen robust scatter demand in past weeks.
Opportunities for some
A heavier-than-normal scatter market means some ad positions normally reserved in the upfront could be up for grabs. There could be some slackening in deals that call for weaving products into scripts and shows; these pacts often require more time and planning because of their complexity. And some longtime ad roosts may dissolve due to financial concerns. Some advertisers will be looking to pounce.
"We're looking at things a little differently than we have in the past. We know there's still validity in the upfront and there's still an opportunity for us to lock something in," said Mark D. Gibson, assistant VP-advertising at State Farm Insurance. "But this is an opportunistic marketplace, and we're seeing long-held sponsorships, long-held positions coming open because of what's happening in the economy."
Could this shift in attitude toward scatter buying become permanent, leading to a TV-ad marketplace that is more difficult to forecast? Marketers may like the ability to hold on to dollars until the last second, and also the heightened level of flexibility, but they also hate to pay more than they have to. The emphasis on scatter "will be temporary," said ABC's Mr. Shaw, "because at some point, somebody is going to end up paying 10%, 15%, 20% above upfront pricing [and say], 'Why am I going to do that when I can just buy the upfront?'"
In this kind of marketplace, advertisers' attitudes can change as quickly as their ability to commit money. "The one thing you can predict in this marketplace is that it's very unpredictable," said State Farm's Mr. Gibson.
Part of the reason for the interest in scatter is TV's overall power. Ad slots for Super Bowl XLIV, set to be broadcast in February on CBS, are 65% sold out, according to a person familiar with the situation. Pricing seems to be holding steady, with CBS able to secure between $2.5 million and $3 million for top positions, according to the person familiar with the situation. In a sign of how marketers are holding back, however, NBC had sold more than 80% of its Super Bowl inventory at about this time last year.
FedEx Corp., a veteran Super Bowl advertiser that pulled out in 2009 event in the midst of a tough economy, is considering whether it should return in 2010. "FedEx has not yet made a decision whether to advertise in the 2010 Super Bowl. A formal decision will be made later in our fiscal year," the company said in a statement.
There's plenty of risk involved, however, in banking on scatter. No one can really be sure when the economy will improve. With the stock market enjoying a great run over the summer, some finance watchers have recently been tut-tutting over September's traditional place as one of the worst-performing months for the economy. Networks are left anticipating a demand for their ad inventory that, if the economy stays in its weakened state -- or, worse, slips anew -- could be crippled.
No one believes the TV networks will be wiped out if scatter is less than robust in the months ahead, but it would certainly crimp their style. TV executives would have to "really look at this model and say, 'Why can't networks on a stand-alone basis be profitable?'" said Jamie Rizzo, a senior director at Fitch Ratings who monitors media companies. "Who's the odd man out in that equation? It could be the talent. It could be the independent producers. It would go all the way down the value chain."
Some money may come into network coffers in the fourth quarter, but much of marketers' allocation for the period was committed during upfront negotiations, media buyers said, mostly because this year's haggling extended well into August; normally the upfront wraps by late June.