Coupled with an already-sliding TV ad market, the tragedy is affecting the launch of the fall TV season as a significant percentage of deals in the $6.7 billion upfront market have yet to be turned into firm orders by advertisers.
"Maybe one-quarter of the entire upfront hasn't been ordered yet," said one veteran media executive. "If I was at the network, I'd perhaps delay a week."
This year's weak upfront market translates into lower prices for 30-second commercials, which generally have fallen 15% to 20% from a year ago.
Advertising Age's annual prime-time network pricing survey has a new leader: CBS's "Survivor: Africa," which is expected to average $445,000 for a 30-second spot, according to media buyers. TV faces a new reality: For the first time, the most expensive regularly scheduled series in the launch of a season will be a reality program. This is the show's second season (however, it is its third incarnation; it launched as a summer series in 2000), and since it wasn't sold in the upfront last year there isn't any comparison pricing.
The upfront market showed its first big decline in a decade. Major networks witnessed program cost- per-thousand-viewer price decreases of 4% to 9%. Couple this with some audience-projection declines, and this means many programs' 30-second unit prices have seen big drops.
Many of last year's top shows witnessed lower pricing this season. General Electric Co.-owned NBC's "ER" slipped to No. 2 from No. 1 in pricing, according to the survey, to $425,400. NBC's "Friends" was next at $353,600. Walt Disney Co.-owned ABC's "Monday Night Football" was priced at $330,200, in fourth place. NBC's "Will & Grace" is next at $321,200. Viacom-owned CBS's "Everyone Loves Raymond" grabbed $305,600.
The survey results were based on media buyers' estimates and input from some networks. CBS, which cooperated on the survey in past years, declined to this year. "Year after year, media buyers offer prices for reporters who then turn around and attempt to coerce networks into sharing proprietary information `to set the record straight,"' CBS said in a statement. "There is little evidence that anyone tells the truth when leaking these prices." Three rival networks, however, said Ad Age's estimates this year were generally close to the mark.
In the upfront market-the spring marketplace for time bought ahead of the fall TV season-advertisers agree to buy time, which is then set aside for them; they normally turn those agreements into formal orders around Labor Day before the season starts. But as the economy weakened, the upfront market extended from its usual May close into late June, and everything was delayed.
"This is highly unusual," said one TV network executive.
As of last week, agency executives said many upfront deals have yet to be ordered. Agencies have submitted orders where advertisers need to be on the air in the first weeks of the season.
Some deals will go to order once the season is under way, said Dan Rank, managing director of Omnicom Group's OMD USA, New York.
Networks are confident that most of the outstanding deals will turn into firm orders.
Some nervous midlevel TV advertisers have dropped their upfront advertising commitments altogether-something that harks back to last season when a sudden weakening economy forced $400 million advertising cutbacks in the last weeks of August. Executives, say, however, this season's canceled TV buys aren't close to the level of last season.
Right now, there is little business being conducted in the fourth-quarter scatter market; scatter refers to time bought during the season for a specific quarter.
The next hurdle for the national TV market will occur next week. Advertisers will decide then whether to cut upfront buys for the first quarter of 2002. Typically advertisers can drop up to 25% of their buys in the first quarter.
"It wouldn't surprise me if some options were exercised to reduce spending for the year," said Allen Banks, exec VP-exec media director of North America at Publicis Groupe's Saatchi & Saatchi, New York.
Some TV networks, which were counting on the scatter market to improve their financial standings, are facing major troubles. CBS, which sold far less inventory in the upfront market in anticipation of a better scatter market, faces challenges amid the soft market. Parent Viacom issued a statement last week warning advertising revenues would be hurt as a result of the recent events.
For TV buys that were pre-empted by news coverage of the tragedy, ABC and other networks are moving those buys to later in the year. According to Mike Shaw, president-advertising sales for ABC Television Network, "85% to 90%" of the advertising money that should have run in that week of the terrorist acts is coming back.
For the fall TV season, newer shows garnered a wide range of commercial prices, depending on their respective time slots. "Inside Schwartz," for instance, in, arguably the most valuable spot on network TV-the NBC 8:30 p.m. time slot after "Friends"-pulled in a $238,800 number, the highest for any new network show. NBC's "Scrubs" was second best, grabbing a $213,000 price-because of its powerful "Frasier" lead-in.
On the newer networks-which Ad Age has started to monitor for the first time this year-"Buffy, the Vampire Slayer" is earning $62,000. The show is moving to UPN from the WB this year. "Buffy" is earning a bit less than its old companion show, "Angel," on the WB, which is pulling $68,400.
NBC remained the top network in terms of an overall average 30-second commercial price with $158,400. Next comes Fox at $154,600. ABC is in third with $149,700. CBS is at $129,000. WB grabbed $66,000, and UPN, $37,400.