Billion-dollar bust: Upfront sale freefall

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The primetime TV upfront market is looking worse than forecast, with the total take expected at $6.7 billion for this period-about $200 million below earlier estimates, and $1 billion less than a year ago. For the first time in nearly a decade, cost-per-thousand prices are tracking below the prior year.

"I think it was a little bit of a reality check," said one top network advertising executive. "We felt the full impact of what has been going on. The dollars really aren't there."

So far about 40% of all broadcast upfront inventory has been sold, with both NBC and ABC inking deals with 5% to 8% cost per thousand viewer price decreases vs. a year ago. Fox is doing somewhat better, with 1% to 3% decreases.

Notably missing is CBS, which is taking a renegade role and sitting out the market so far. Mel Karmazin, president-chief operating officer of parent Viacom has been telling CBS' troops to stick to their guns and not offer advertisers lower CPMs vs. a year ago. As a result, virtually no media agencies have done any deals with the network.

NBC jumped first into the market the second week in June after realizing that there are fewer dollars available than last year, and took the unusual stance of publicly admitting it is inking deals priced lower than a year ago. So far, NBC has sold about 60% of its upfront inventory, according to estimates. ABC is at about the same level.

Fox has also done a significant number of deals, as well as UPN and WB. UPN is up slightly in CPM pricing by single digits; the WB is telling media agencies they are dealing at 4% to 5% over last year's prices.

But now the fun begins.

If CBS continues to hold the line, agency executives expect Black Rock's $1.6 billion upfront last year to fall like a rock-to $800 million or, at best, $1 billion. That could mean the total upfront market could tumble further from the $6.7 billion estimate.

If CBS continues to hold out, it will be placing a bet that advertisers will spend heavily on the network in the fall scatter market. But some media buyers are saying that money will already be gone in this year's upfront.

The standoff between CBS and media buyers is so acute that Mr. Karmazin is taking matters into his own hands. An executive at a media buying agency said he was told by a CBS sales executive, "`Mel is probably going to call you. He does not believe us. He thinks all you guys are lying. He is saying to us, sit tight. The buyers will cave."' The buyer's response: "My position is, watch me."

CBS is using some logic in its stance. The network believes CBS should get flat pricing if ABC, NBC and Fox's pricing is 5% below last year. That's because CBS' individual CPMs are 20% below that of other networks, especially for the adult 18 to 49 demographic where the network hasn't done well in recent years. That means advertisers should buy CBS and still get a bargain, the network believes.

But this is probably true only for a small percentage of network advertisers, according to the buyer, who will buy CBS during this upfront. "I can name you 15 clients who are probably going to take them from $15 million down to $5 million. Maybe not zip [Mr. Karmazin]. But hurt him," said the media executive. "Some will take [CBS] to zero."

Overall, estimates are that NBC could slip to $2 billion from $2.2 billion last year. ABC could drop to a steeper level, to perhaps $1.7 billion, because it fell 20% in its adults 18 to 49 ratings. Fox could remain at $1.3 billion, the same as last year. UPN's tally could reach $200 million, up from last year's $150 million. The WB could rake in $450 million, also up significantly.

Advertiser budgets, on average, have slid 20% from last year's upfront.

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