Upfront Deals Start to Get Done

TV Networks Relent on Pricing, but Buyers Still Push for Deeper Cuts

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NEW YORK (AdAge.com) -- After weeks of delays, TV's upfront marketplace is beginning to move, with the five broadcast networks all writing some business, according to media buyers.

NBC and Fox are both said to be a little more than half complete with their upfront negotiations. ABC and the CW have also completed some business, according to buyers and people familiar with the situation, while CBS has completed negotiations with at least one major agency and is nearing agreement with a second, according to buyers.

"We're getting to maybe a place where we're getting a little more comfortable, and we're closer now with how it's going to be and where the networks will go," said one buying executive. "We're looking for more than just a token or obligatory small decrease."

While buyers say they continue to push for CPM rate rollbacks (that is, decreases in the cost of reaching 1,000 viewers), there is some indication that both sides are agreeing to do deals based on declines of 1% to 3%, buyers said. ABC has held against moving below a 3% discount, buyers said, while Fox has been trying to stay less negative than its rivals. CBS has been trying to maintain flat pricing but has also had to do negative dealing, according to buyers. NBC, which has greater ratings challenges than its rivals, has been offering CPM rollbacks in the mid-to-high-single-digit percentage range.

Initially buyers were seeking double-digit CPM declines from networks, while networks were hoping to sell ad inventory at CPM increases of 1% or 2%, or at least flat with last year's price. Both sides have backed off their hard stands, however, and are compromising with declines in the low single digits, according to buyers.

Network executives declined to comment on ongoing negotiations.

All players expect the overall volume of dollars committed to be lower than in last year's market, when marketers earmarked about $9.23 billion for prime-time commercials on broadcast TV. Some Wall Street analysts have predicted that the broadcast networks will see a 10% to 20% decline from last year, which could mean the networks will be lucky to notch a take between $7.4 billion and $8.2 billion. Each year, the networks use the upfront to sell between 70% and 80% of their available inventory for the coming fall season.

The obstacles in the way
This year's haggling has been grueling -- and not just because the economy has forced advertisers to hold on to their dollars more tightly than in the past. Yes, it's true that economic fogginess makes it hard to allocate money for TV shows that won't air for weeks or months. But buying agencies have been ordered to clamp down severely on pricing, according to agency executives, and in some cases have been told not to come back to their clients without achieving deep discounts. In other cases, large media-buying agencies were able to lure new clients in the recent past with the promise of securing significant upfront discounting, and have been loath to come away from the bargaining table without it.

Another obstacle in negotiations has been pricing disputes over a range of dayparts. Buyers have also been pressing for severe price discounts in early morning and daytime, according to executives.

Time is also taking its toll. With some fall-season programs slated to get on the air in late summer, marketers face being left out of prime ad spots. By mid-August, buying executives have suggested, network sales executives could well decide to stop selling upfront ad time and instead decide to sell ad inventory as scatter, or on an as-needed basis. While the economy could keep prices low, marketers would face not being able to lock down important positions, such as Thursday-night prime-time ad berths for movie studios, or holiday ad rotations for retailers.

For their part, the networks are likely to hold on to more time than usual to sell as scatter later in the season. As the stock market rises and the economy stabilizes, the TV outlets will gamble that pricing will improve later in the year. Holding back more inventory than usual to sell at a higher price could help them meet whatever 52-week financial goals that have been set for them by their parent companies.

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