"There doesn't seem to be anything here to write home about. ... I think it's going to be another tough year-and I'm a positive guy," said Bill Cella, chairman of Interpublic Group of Cos.' Magna Global USA, New York. The 2001 upfront prime-time network market, where marketers commit ad dollars to a network for the entire broadcast season that begins in September, drew $6.8 billion, down 10% vs. the year before. Including all network dayparts, the upfront slide was worse: down 15% to $9.1 billion, according to one major media agency. Cable posted $3.8 billion, off 17%, and syndication pulled in $1.7 billion, down 33%, the media agency estimated.
"There is no great strength working out there," said Mel Berning, exec VP-national broadcast at Bcom3 Group's MediaVest USA, New York.
In the just-concluded fourth-quarter scatter market, media executives said program pricing was somewhat surprisingly the same or slightly higher than that of the upfront a few months before. But the boost was artificial.
Since ABC's ratings sank like a rock-down 20% among adults age 18-49-the network has needed to shell out major make-good commercial inventory to advertisers. The Walt Disney Co. network had very little to sell as a result, causing a smaller network supply, forcing up program prices for all the networks. "It artificially tightened the market," said Mr. Cella. "If [not for the ABC situation] there wouldn't be any increases."
The winners were Viacom's CBS, which pulled in big dollars in the fourth-quarter scatter market, some $200 million in prime-time money. General Electric Co.'s NBC pulled in about the same, a trend both networks hope will continue. But CBS still is playing catch-up with NBC, which led the upfront market last summer with $1.9 billion in bookings. Because CBS decided not to sell for lower prices in the upfront, it is still $500 million behind.
Moreover, the $200 million was only $75 million more than anticipated for CBS, and somewhat less for NBC. While broadcast networks typically like to make scatter market deals at prices 10% to 20% higher than upfront pricing, both CBS and NBC made deals at flat to slightly above upfront pricing.
"What we were missing was $200 million at [prices] 25% above upfront pricing," said Joe Abruzzese, president of advertising sales for CBS Television Network. "We wrote the volume but not the premium [pricing]."
The pricing pressure should continue in the short term. "The first quarter will be a tough quarter for the rest of the marketplace," predicted Bob Cesa, exec VP-advertising and cable sales at Twentieth Television, News Corp.'s TV syndication division. He worried there might not be enough scatter dollars in the market this year, due to big events such as Super Bowl XXXVI and the Olympic Games.
Cable networks have been following their broadcast brethren. TNT and TBS have been doing scatter deals at the same prices they inked during the upfront, according to Mark Lazarus, president-group sales and marketing for AOL Time Warner's Turner Entertainment Group and Turner Broadcasting Sales. But, he notes, the pricing has not been as aggressive in sports programming. "We think the first six months we'll be in a slow recovery period," he said.
Perhaps the most troubled is syndication. Media agencies note there is plenty of inventory available in many shows with cheap pricing, something not typically seen with syndication where little inventory is sold in the scatter market. "I'm thinking we've hit bottom," said Mr. Cesa.
Larry Goodman, president of CNN Sales & Marketing, a division of Turner Broadcasting Sales, agrees the upfront market for 2002 is looking at flat pricing and no revenue growth in the near term. He said the wild price swings between the 2000 and 2001 upfront were not good for the market. Now, he said, "We'll reach equilibrium, and I think that will be healthy for the growth of television, because it gives advertisers the confidence to invest in the medium, year to year."