In a rare occurrence, three to four broadcast networks are nearly sold out of prime-time inventory. This started with Walt Disney Co.'s ABC and News Corp.'s Fox in the fourth and first quarters when those networks had to run make-good ads for advertisers after failing to deliver the size audience they'd guaranteed. This tightened the market and kept prices flat to slightly up from program pricing deals made in last June's upfront market.
Now, inventory is depleting at an even quicker pace across a number of networks, including Viacom's CBS, AOL Time Warner's WB and General Electric Co.'s NBC, according to executives.
There are other reasons for the sudden tightening. Broadcast networks sold more upfront inventory for 2002's second and third quarters than they sold for the fourth quarter of 2001 and this year's first quarter, betting on cheaper prices in the scatter market, according to executives. The upfront market is where advertisers buy commercial time for an entire broadcast season; the scatter market is where advertisers, after the season begins, buy commercial time for near-term air dates.
Cable networks, meanwhile, are benefiting from the tighter broadcast scatter market. "The general marketplace is starting to tighten up, and that's fueling fire into the second quarter," said a cable sales executive. "Whether or not the broadcast networks are filling up because of [audience underdelivery] issues or whether there is generally more revenue coming into the marketplace, frankly, I think is a bit of posturing on both sides."
What does all of this bode for this spring's upfront pricing? Possibly very little, caution media-buying executives.
The second quarter is typically a strong indicator of where the next upfront market will head. But this TV season has been anything but usual. First, the Sept. 11 attacks occurred, pulling national advertising off broadcast networks for a week. Then ABC and Fox stumbled badly out of the gate this season, losing 16% and 17% of their respective audiences.
NO 'RAGING MARKETPLACE'
"Where is the demand going to come from?" said Mel Berning, exec VP-director of national broadcast at Bcom3 Group's MediaVest Worldwide, New York. "A lot of money is being redistributed to those that can write business in scatter. Is the market better? Probably. But it's not a raging marketplace."
All this is giving media executives some headaches in fielding ratings and share estimates for next season. "We haven't had a period of time where you could draw a real good comparison," said Rino Scanzoni, exec VP-director of national broadcast for WPP Group's Mediaedge:CIA, New York.
Rough early forecasts from media buyers peg the upfront market as down 1% to 3% or up 1% to 3%, depending on network; early estimates suggest the overall upfront will be flat to up 1%. Last year the $6.8 billion broadcast upfront market took an unprecedented tumble, falling 3% to 9% in program prices. Networks also delivered a smaller audience; the combination of lower program prices and ratings resulted in the overall broadcast upfront falling 16%, or $1.3 billion.