TV upfront negotiations are trudging along as advertisers continue to push back against price increases. But one thing seems clear: Somewhere between $800 million and $1 billion will disappear from broadcast prime-time's take this year.
It's an astounding shift, caused in part by a weak broadcast season, leaving the big networks with smaller audiences to promise advertisers in their upfront talks.
CBS, the strongest broadcaster heading into negotiations, wrapped its sales in early June, securing price hikes but still taking in $2.5 billion to $2.75 billion -- in line with last year. If the No. 1 network among 18-to-49-year-olds came out flat, the other big nets will likely see the total value of their deals decline.
Fox has already taken a 10% hit in the volume of dollars committed, securing about $1.8 billion in upfront commitments, compared to as much as $1.99 billion in 2012, according to a person familiar with the network. It sold about 80% of its inventory for the upcoming season, on par with years prior, but had fewer ratings points to sell this time because it ended the season down 22% in key 18-to-49-year-old ratings.
Meanwhile, NBC and ABC, whose 18-to-49 ratings were down 4% and 8%, respectively, are quietly signing deals, as are big cable groups such as Turner and A&E. The CW wrapped business last week securing hikes in the price to reach 1,000 viewers -- the CPM, in industry jargon -- between 5% and 6%, down slightly from last year's increases.
According to a media buyer 35% of the broadcast prime time market is still at play.
So where will that $800 million to $1 billion go, if not broadcast networks' upfront ledgers? Some will shift into cable and digital. Another chunk could end up remaining in advertisers' pockets.
"There are a lot of folks that are pulling back and sitting on the side," according to one media-buying executive. "They just took the money out of the market and... are unwilling to make commitments at this point; they are concerned about economic conditions."
Movie studios and auto makers, in particular, have cut budgets, according to buyers.
Much of the money may yet end up with the broadcasters, especially if some have strong seasons, giving them more viewers to sell in the so-called scatter market. Scatter is bought closer to air date and is typically more costly for advertisers than doing business in the upfront, but scatter pricing ultimately demands on the supply and demand as the TV season unfolds.
In the meantime, ABC isn't budging on pricing, asking for 7% to 8% increases, according to media buyers and a person familiar with the network. It was able to secure CPM increases between 6% and 7% in last year's upfront, doing deals with some advertisers at rates of as high as 8%.
"They are staying true to their pricing strategy even if it means selling less in the upfront and trying their luck in scatter," a buyer said.
NBC is also seeking 7% and 8% increases, higher than the 5% to 6% range where it completed most of its deals last year. NBC may be able to secure these prices because the network is starting out at lower rates, according to a buyer.
NBC Universal has gone to market this year trying to sell its entire portfolio of broadcast, cable and digital assets together. It could be nearing the final stages of negotiations, according to a person familiar with the network, who noted it's garnering price hikes of about 8% and 9% for networks like USA Network and Bravo.
Univision, for its part, is three-quarters of the way finished with its upfront business, so far seeing a 15% increase in dollar volume and securing 5% to 6% CPM increases, according to a person familiar with the network. The network is writing business much faster than last year, the person said, noting that Univision was still at the half-way mark at this point in the process last year.
On the cable side, about 40% of business is complete, one buyer estimated, with Turner Broadcasting quietly negotiating CPM increases between 7% and 8%.