Networks, Media Agencies Inch Forward in Upfront Talks

Negotiations for TV Time Still Slow, but Some Deals in Works

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NEW YORK (AdAge.com) -- A flurry of new TV shows is set to hit the airwaves come September. Now media buyers are starting to ask how much time they'll have to purchase airtime if networks want to ensure that all those shows have a full slate of advertising behind them.

In a typical year, the so-called upfront marketplace, during which the big broadcast networks work to secure north of $9 billion in advertising commitments for about 75% of their ad inventory, would be completed in mid-June. But the lagging economy has prompted a standoff between marketers that want to see double-digit price rollbacks, and TV networks, under the gun to keep profits rolling in as the ad market contracts.

CBS, NBC
Several executives point to the fact that more advertisers have registered budgets, and suggest that discussions between TV networks and buyers have ramped up in recent days. Group M and NBC are talking in earnest and are expected to reach some sort of upfront deal soon, people familiar with the situation said, though a Group M spokesman said a deal was not yet complete as of June 25.

CBS is actively visiting clients and buyers, according to one person familiar with the situation. "Things are starting to percolate," said one ad buyer. "Once all the budgets have been registered and my friends [the TV networks] see the money is down, I think this will start to move."

That can only be good news for both sides. The longer the impasse continues, the more the logistics of placing TV advertising for the fall season are starting to look messy, according to media buyers.

"Unless things move very quickly" after July 4, said one media-buying executive, advertisers and networks could face a "a Band-Aid situation" in which they are forced to negotiate a temporary contract just so both sides can approve advertising schedules and determine when and in what shows commercials ought to air. "Then you can come back and focus on the rest of the year, adjusting what you've already bought," this executive said.

Others envision a desperate, intense late-August during which networks, buying agencies and clients work furiously to get schedules approved and inventory placed appropriately before the season begins in earnest. Still others wonder if the late third quarter won't simply be an "all scatter" period, in which most ad time is purchased on an as-needed basis, rather than in advance.

Volume expected to be down
These scenarios, are, of course, of the worst-case variety. Executives on both sides of the haggle say they fully expect upfront negotiations to begin in earnest soon. "I think a lot of conversations are going on now, as we speak," said one cable executive. Most TV networks remain confident that they can wrap up negotiations in time, though one TV executive suggested that volume in the upfront is likely to be down and lesser performers will agree to price rollbacks that are down in the single-digit percentage range.

Even so, both buyers and sellers are anxious for the impasse to resolve itself. "It's the slowest game of 'chicken' ever played," said Mary Price, principal-brand media at Richards Group, an independent Dallas agency. "It will be interesting to see who blinks first or who turns the steering wheel first."

Here's the reason for the disconnect: Advertisers are, rightfully, basing their perceptions of the market on the past several months, while TV networks see the economy stabilizing and don't want to give price cuts on ad time they think will only grow in value as the state of business stabilizes or improves.

In truth, it seems advertisers can't hold out much longer. Many marketers develop concrete promotional plans for the fourth quarter, end-of-the-year holidays and the Super Bowl. After so much work, these advertisers would be loath to not have ad time already reserved for their marketing entreaties.

At present, however, "given the length of the upfront marketplace and the timing of when the Super Bowl marketplace really kicks in, I have to believe we're not going to hear much for a while," said one media buyer.

Precedent for a slow upfront
There is some precedent for a late upfront market. In 2001, with the economy sluggish in the months leading up to terrorist attacks on Sept. 11, negotiations didn't begin in earnest until late June, when networks got a good sense of the money available to be spent and opted to lower the price of reaching a thousand viewers, a common measure in upfront discussions.

Timing "might not matter much, because final details are often only completed in time for the fall season," said Michael Nathanson, a media analyst with Sanford C. Bernstein. "Meaning it takes all summer to iron out the real terms of these upfront commitments in the past year. [There] just will be a tighter cycle between reservation and final version."

One type of advertising could suffer, however, in drawn-out negotiations. Weaving products and ad messages into particular shows could be crimped, as the programs will have to go into production whether or not ad deals are signed, sealed and delivered.

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