So conventional wisdom is the market will be flat, and if that's the case the broadcast networks will be scrambling for their share of the $9.1 billion spent last year. Buyers are predicting a positive upfront for ABC and Fox, think CBS will fall in the middle and NBC will be flat or forced to cut rates for the second straight year.
Not surprisingly, ABC is expected to come out with the highest cost-per-thousand viewer increases this year on the back of its still hot shows. The Walt Disney Co. network has already been approached with agency requests to do early deals and is widely expected to pitch CPM rates at 6% or above. Last year, ABC booked $2.1 billion in ad commitments after pitching a moderate 4%-6% CPM increase. One buyer said ABC might have a harder time asking for more than a 6% increase, because there isn't any more strength on the network than in the previous season.
Bullish on Fox
Buyers are also fairly bullish on News Corp.'s Fox, which, in addition to a still-growing "American Idol," has seen medical mystery "House" build its audience, along with "24" and new entrants "Prison Break" and "Skating with Celebrities." Geoff Robison, senior VP-national TV, Palisades Media Group, who buys for a variety of movie studios and will be active in this year's upfront, said: "Fox is in good shape. They'll be in the 4%-6% range."
The pre-upfront speculation suggests that NBC might again be looking at rolling back CPM rates, though a strong development slate coupled with the arrival of "Sunday Night Football" might help the General Electric Co. network stave off cuts. The network is, for many advertisers, still the most expensive. Last year, it got no increase on its CPM rate, and in some cases wrote business at 2% less than the previous year's rate.
"If I were NBC I'd be going out and trying to write share and get back money they didn't write last year," one media buyer advised. The network booked around $2 billion, down $900 million from the previous year. However, this buyer suggested that NBC might not need to go any deeper than negative three, if they do end up in a roll-back situation. "At a certain point, no-one's going to shift any more money so what's their incentive to write deeper than that," said one agency executive.
Another tough year for NBC
Palisades' Mr. Robison added: "It is going to be a fight for share of budgets. NBC will have another tough year, though its development was strong and maybe they'll get some momentum out of that. They've still only had one correction year. They had such big CPMs, they may be in for another year of it, but it depends on what the money is."
CBS is yet again the steady network in the middle of the pack. While the network has admirably kept its hold on Thursdays, buyers say its pricing for the 18- to 49-year-old audience may be on the high end. Traditionally, CBS has sold on the power of its slightly older demographic, 25-to-54, and with fewer 18-to-49 ratings points to sell, its price is higher than other networks. Others complain that while CBS's shows do well with viewers, they don't have the same buzz factor as ABC or Fox programs.
CBS has kept its cards close to the vest, though buyers expect CBS to fall in the middle of the pack with regard to CPM-rate increases. CBS Corp. President-CEO Leslie Moonves told analysts during a first-quarter call that he expects the upfront market to increase 4%, a much more buoyant prediction than conventional wisdom.
Frustrated with CW
Several buyers voiced frustration about the lack of detail available about the CBS/Time Warner joint venture, the CW, the merger of WB and UPN. One buyer said agencies needed to know now if the network was going to be "obnoxious" on pricing. Others have said they don't think the network can charge any more than the WB was charging, even with the additional strong shows from UPN that are being added to the mix. The WB took $675 million during last year's upfront market, while UPN took $375 million, with CPM rate increases at 3%.
The Cable Advertising Bureau, meanwhile, is predicting that cable channels might take a further $750 million out of the expected $18 billion TV advertising market this year. Cable took around $6.5 billion of the total pie last May. While one buyer said he would make significant commitments to top-tier cable channels in order to retain prize inventory, many others said they doubted cable would grow much more. "People have reached a tipping point with cable. How much can they put there?"
The football market is likely to be strong this year, with many clients signaling their interest in buying DVR-proof programming such as sports and news. CBS is already out shopping the Super Bowl, which next year will be played in Miami. But the hoped-for "enhancements" that the NFL was touting to buyers in the last few weeks look like they're increasingly unlikely to happen. One buyer said "in-game sponsorship" opportunities might be shelved until next year. The NFL did not immediately return calls.
A negotiating point that is sure to lead to a face-off between agencies and networks is the debate over digital video recorder ratings, known as "Live +7." Nielsen Media Research late last year began reporting viewers who watched programming "live," meaning when it aired, as well as how many viewers recorded the program on a DVR and watched it within seven days of the original air date. Most agencies don't believe advertisers should have to pay for additional viewers who watch shows in playback up to a week later. Of the seven buyers from media agencies both large and small that Advertising Age spoke to, all insist they won't negotiate off anything but "live" ratings. The expectation is that one or more of the broadcast networks will be forced to cave to their demands. Another buyer said ABC's strident views about ensuring payment for live-plus viewers would determine how aggressive the network could be on pricing.
Syndication executives are also touting the fact that most viewers watch syndicated shows such as "Ellen," "Martha" or "Entertainment Tonight" live. That's the message Syndicated Network Television Association President Mitch Burg is selling while making the rounds to agencies. Mr. Burg's pitch also notes that syndicated shows have a digital component, as entertainment programming Web sites are a big draw. The syndication market took between $2.5 billion and $3 billion in the upfront last year.
When asked about how the overall upfront might shake out this year, Jon Mandel, chairman, MediaCom U.S., said: "Part of the question is how much money gets driven into other media. That's all a matter of the price value relationship and that will change throughout the course of the upfront." Mr. Mandel said the move toward commercial ratings would be a strong theme for his agency. His argument is that networks could challenge digital media on the accountability front and thus boost dollars if they're prepared to negotiate off commercial ratings. Mr. Mandel suggests there has been some openness on the part of the networks to see how it might work in theory.
The consumer spending index for March released May 1 will give the TV ad market some cheer. The Commerce Department reported that spending for the month was up some 0.6%. Retailers such as Target, Wal-Mart and Nordstrom also exceeded analysts' expectations this week, reporting stronger-than-expected April numbers. Target Corp. said stores open at least a year rose 10.4% in April. The big negative for all marketers, however, is the high cost of oil, which has an impact across the board, and higher interest rates, which might hit consumers' pocketbook.