After a blistering upfront, the national TV marketplace has suddenly hit a slowdown. The third-quarter scatter marketplace is barely moving, according to agency media executives, with prices 5% to 20% below that of last year's strong upfront. The most recent upfront hit $8.3 billion, with broadcast and cable networks posting hefty 15% to 25% price increases vs. a year ago.
'IT'S VERY QUIET'
"It's very quiet," said Tim Spengler, exec VP-director of national broadcast of Initiative Media North America, Los Angeles. "Many advertisers moved money to the upfront from scatter, and last year there were many dot-coms buying in the third quarter."
"It's kind of surprising given what has gone on all year," said Chris Geraci, senior VP-director of national broadcast for BBDO Worldwide, New York. "We had strong demand in first and second quarter."
Major advertisers, including Procter & Gamble Co., as well as some unidentified automotive and financial companies, are taking virtually all of their options on upfront commitments of a year ago. During the third quarter, advertisers can cut back their financial media commitment by 50%. And, if networks make program changes, advertisers are allowed to trim even more off their budgets.
Specifically, some broadcast networks, such as ABC, have been hurt by the softness this period, according to media executives. "ABC has no [ratings] erosion," said one veteran network executive. "Their numbers are up. ABC has usually owed advertisers in the last few years." That means that ABC now has more gross ratings points to sell than in previous scatter periods, leaving it with more inventory.
Cable networks, in particular have been hurt, because, unlike their broadcast brethren, they already have a big supply of commercial inventory. The third-quarter softness "is sucking out whatever money they would be getting," said one veteran network executive.
THE OLYMPIC FACTOR
The softness has been caused by a number of factors. First, the Sydney 2000 Summer Olympics, which will air on NBC this September, have had a major effect. "You'd be kidding yourself if you think the Olympics wouldn't have an impact in the third quarter," according to a network executive. "That's $900 million [spent on the Olympic Games]." This means, according to a media buyer, major advertisers will be sitting on the sidelines this period.
Second, the networks have seen a rare occurrence this summer--higher ratings. Usually summertime means reruns and lower ratings than in the first two-thirds of the broadcast season. But due to summer shows such as CBS's "Survivor," and "Big Brother," and ABC's "Who Wants to Be a Millionaire," gross ratings points in the marketplace are higher than in previous years.
"Ratings points are holding; they usually go down 5%," said Mike Mandelker, exec VP-advertising sales for UPN.
All this has made it easier for media buyers. "The deficit used to be so large in the summer," said Doug Seay, senior VP-director of national broadcast for Publicis in New York. "Now you are ahead."
Typically, the supply of TV ratings points is smaller in the summer as networks remunerate advertisers with make-good advertising units due to underdelivery earlier in the broadcast year.
The softness in the market could extend to the fourth quarter, warns another media buyer. He reports some cable networks are asking advertisers to shift money already slotted for the first and second quarters of 2001 to the fourth quarter of 2000.
Copyright August 2000, Crain Communications Inc.