After a quick start to TV's annual upfront negotiations, talks seem to be stuck in a slowdown.
Aside from The CW, which completed its upfront sales process on Wednesday, the broadcast networks have hit an unexpected wall with advertisers that's lasted all week, according to media buyers and analysts familiar with negotiations.
The crux of the issue is there is less money in the marketplace than networks originally expected, according to buyers, who say the tone of negotiations is different than in years prior. "The pace is significantly slower than last year," one buyer said. "I don't think much business has been done at all."
Heading into the annual negotiations for ad time in the new TV season, industry insiders expected the broadcast networks' deal volume to be roughly flat with last year or down slightly. Now some are saying volume could decline more than that. Last year, the Big Four broadcasters and The CW together secured about $9.2 billion in ad commitments.
So where is the money going? Media buyers say their clients may hold back some dollars to spend later in the scatter market, where advertisers secure ad time closer to the air date, and may shift more into cable, digital and cinema, where ad rates are lower. There is less money in the marketplace from movie studios and autos, according to media buyers.
There's also more pressure on the broadcast networks to secure price increases as ratings declines give them with less inventory to sell, according to media buyers. "The networks aren't adjusting to the realities of the marketplace," the buying executive said, and are "less willing to budge on price hikes."
Upfront negotiations always involve a bit of posturing, of course, as each side tries to bring the other closer. People close to the networks say business is still getting written, albeit at a slower pace than last year.
Fox was once again an early mover, securing deals with increases in its CPM, or its cost per thousand viewers, between 5% and 7%. The network is at the final stages of negotiations, according to a person familiar with negotiations.
But some buyers questioned the amount of business that's actually been written. "At least two studios I know haven't done business," a buyer said.
Media buyers previously predicted that Fox would wrap up its talks by the middle of this week.
ABC, NBC and CBS are in the midst of negotiations, but not much business appears to have been written. ABC is seeking CPM increases between 7% and 8%; NBC is looking to secure increases around 8%.
"The stalemate between NBC and advertisers means that buyers could potentially threaten to negotiate with the cable networks, leading to lower CPMs/inventory sold," UBS analyst John Janedis wrote in a note earlier this week.
But other buying executives say the sheer size of the NBC Universal deals naturally mean it will take longer. This is the first year the media conglomerate is going to the marketplace selling its broadcast, cable and digital assets under one umbrella.
The CW finished its upfront sales process on June 5, striking deals totaling volume that is similar to the $400 to $420 million it secured in the last two upfronts, with CPM increases between 5% and 6%, according to a person familiar with the situation. That's lower than the 6.5% to 7.5% CPM increases that the network, which is jointly owned by CBS and Time Warner, received in 2012. The CW made about 75% of its inventory available in the upfront, in line with last year.
"After a promising scatter market and positive outlook, the drag in negotiations over the last week has surprised us," Mr. Janedis wrote. Still, he expects broadcast upfronts to wrap by the middle to end of this week.