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Media Companies Threaten to Shift Spending to Cable

By Published on .

NEW YORK (AdAge.com) -- Drawing a line in the sand at today's Advertising Age/TelevisionWeek's Upfront Summit, media agency executives threatened to shift their spending to cable if broadcast TV networks demanded double-digit price increases during the upcoming upfront.

The one-day event, at the Manhattan Grand Hyatt Hotel, was designed to bring together top authorities from the TV and media-buying communities on the eve of the annual upfront selling market, during which as much as $8 billion in TV advertising is sold in a few frantic days. "Upfront" refers to the period when TV networks sell about 80% of their ad inventory before the start of the new TV season.

'Tipping point'
The mood of the market was summed by

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David Verklin, CEO of Carat North America, who noted, "You are going to see a tipping point this year. You are going to see some mid-level advertisers that aren't going to buy prime time [including] other network dayparts, cable, syndication or network sports."

The upfront TV advertising market is set to post major price increases, according to a number of estimates from media sellers. Peggy Green, president of national broadcast for Publicis Groupe's Zenith Media Services, characterized network buyers as "bullish this year."

Along with price, the very viability of the upfront concept was a hot button discussion topic.

"It's crazy and goofy that we do business this way at 3 a.m. eating cold pizza," said Mr. Verklin, who has been consistent opponent of the upfront process.

Though not his client, Mr. Verklin used Campbell Soup as an example: "Can Campbell Soup raise the price of its soup 2 cents? They can't. How can clients continue to pay [network] price increases when they can't increase the price to consumers?"

In one panel on network programming, Mike Shaw, president of ABC sales, pointed out that in 11 of the last 12 seasons, upfront pricing was cheaper than the scatter market -- therefore, he said, the benefit of the upfront still favors advertisers.

Both syndication and cable panels at the summit complained that they were not getting their fair share in terms of their ratings performance. "The value difference is so out of whack," said Dick Robertson, president of Warner Bros. Domestic distribution. "It's irresponsible business behavior."

"The shift and the percentage of dollars continues to move to cable," said Steve Grubbs, CEO North America for Omnicom Group's PHD USA. "I was astounded this year looking at our two largest clients' budgets being shifted to cable."

And there could be more shifting on the way. On the network panel, John Muszynski, chief broadcast investment officer of Publicis Groupe's Starcom USA, said clients were giving buyers more "flexibility" than ever on the issue.

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Richard Linnett contributed to this report.

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