Surprisingly, since the troubled season started, the XFL has added two national advertisers-Walt Disney Co.'s Buena Vista Motion Pictures and videogame marketer Activision-according to executives. After the first week, XFL lost American Honda Motor Co., which pulled its advertising.
Why would anyone even think about buying XFL time, given all its fumbles? Because it delivers younger men-and because XFL is offering deep discounts.
Even with declining ratings in its fourth week, where its men 18-34 ratings stood at a collective 3.9 on General Electric Co.'s NBC and Viacom networks TNN and UPN, the XFL still produces high male viewership numbers at below-market prices. The XFL was the second-best vehicle in the male demos for Feb. 24 and 25 after a Winston Cup race on Fox.
More important, the XFL-even for existing advertisers-is still charging less than a $45 CPM on the men's 18-34 demo. That's less than half of other comparable sports programming for the same demo. And its rates have gone down since the start of the season. Back then, $100,000 would've bought a spot in each of the games on NBC, TNN and UPN. Now the same deal can be had for about $60,000.
Falling ratings are an ominous sign. The league is about 50% below its audience guarantees to advertisers. At the start of the season, XFL booked nearly $60 million in national ads for the leaugue's first season for its broadcast partners, NBC, UPN, and TNN. But because of declining ratings, the league will pull in far less than that amount. That's largely because, unlike virtually all other network programs, the XFL has to return cash to advertisers.
Here's why: Typically, advertisers get make-goods when a network can't meet ratings guarantees. But because many advertisers have at least one spot per game in each of telecasts on NBC, UPN, and TNN, advertisers normally won't add more commercial time. Instead, the XFL is now giving cash back to advertisers. "It will start to hurt them," said Chris Geraci, senior VP-national broadcast for Omnicom Group's BBDO Worldwide, New York. The severity of cash rebates will depend on how many make-good ads marketers choose over cash back.
XFL's TV production is uneven at best, and neither NBC nor its partner in the XFL, WWF Entertainment, seems to be telling advertisers just who's making final decisions concerning the league.
Advertisers initially were told the XFL would be a separate operation from WWF Entertainment and that they would be buying football-not a faux wrestling-like sports program. This matter is of concern following the resignation last week of Bob Riordan, VP-ad sales at WWF Entertainment (AdAge.com, Feb. 28); the XFL says its ad sales unit now is run by Jim Rothschild, senior VP-advertising of WWF Entertainment.
Despite the XFL's free-fall drop in ratings and harsh attention in the press, advertisers say they knew what to expect.
"If people thought they were going to keep on doing 10 ratings like they did in the first week, they were misinformed," said Larry Blasius, senior VP-national broadcast for True North Communications' TN Media. "It took the [Arena Football League] six years to build ratings. Four weeks does not a season make."
Or even a new league.
Another XFL advertiser said it's a little unfair to expect that WWF Entertainment, which directs much of the operation of the league, would become a quick success given the history of its wrestling programming. "The WWF was not an immediate slam-dunk success," said Marc Shmuger, vice chairman of Universal Pictures Group, which has bought time on the broadcasts. "They had their ups and downs."
Still, the ratings direction isn't promising. In its first four weeks, its key demographic numbers, men 18-34, have dropped sharply. On NBC, for instance, the demo rating dropped to 1.5 from 10.2.
Still, all this hasn't hurt NBC much in February sweeps. NBC ended up the No. 1 network in the key adults 18-49 audience for the February sweep period, which ended Feb. 28. The danger, however, is more long term. "As of today, it hasn't hurt them as much, but as the season progresses, it could affect them for the season overall," said Steve Sternberg, senior VP of TV research for TN Media.
Scott Sassa, president-NBC West Coast, said the network willrun the games throughout the rest of the schedule. NBC continues to say the XFL is a "work in progress."
Since NBC has a firm two-year contract with WWF Entertainment, executives estimate NBC would need to buy out the WWF Entertainment by agreeing to give it $10 million to $20 million to bolt from the two-year, 50-50 venture. There is no indication NBC plans to write that check.