DE-DEMONIZE THE UPFRONT

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Oh my god! It's the upfront again!

And with it the annual debate about fixing it, as it apparently keeps people up at night.

Well, it has never been that efficient a process and either you will be up all night working or up all night worrying about the other guy who is up all night working.

However, there seems to be some real movement about fixing it even though doing so could force a crisis regarding topics for the industry's interminable panel discussion circuit. While the immediate focus is on some of the sillier aspects of the upfront negotiating process, it is just one example of our industry living with the "evil it knows" past when it should because that's simply human nature. We are not alone in our imperfection.

Why do we think the Federal Communications Commission is all tied up in knots? They are trying to apply rule-making grounded in decades-old realities to 21st century technological and business realities. Just ask Bono.

Sure, there is a lot we could do to improve the upfront process, and we should-such issues as timing, liquidity and inventory transparency come to mind. Only question is whether we are all gathering around the right issue as regards network television.

First, let's and put it into some perspective.

The prime-time upfront is neither bellwether for the television industry nor the base cause of network television inflation. Prime upfront cost per thousand increases are not even a terribly accurate predictor of overall changes in network revenues. Certainly the upfront event should get attention as it traditionally includes the media inventory of most perceived value, and it brings with it the risk of being shut out, but "fixing" it will not change some basic economic realities.

The networks do not dictate total revenues. That figure is a macro allocation decision by the ad industry. As network rating points available for sale decline each year (also a macro trend largely outside the control of the networks), we end up in self-inflicted inflation-the upfront negotiating process is the emphasis on the syllable, not the word itself.

Not a new headline: Network television is a declining business model. (Larry Tisch knew that 20 years ago, and I bet even Mel Karmazin would agree at some level today.) Its share of audience compared with its share of channel real estate remains impressive, but the advantage shrinks each year.

Think of the networks as having sort of a high but declining "Channel Strength Index" if you will. They are like a large powerful brand in an increasingly competitive category where the competition has some unique manufacturing and revenue advantages. The big question is how well do the managements of the networks understand and appreciate their situation, and what reasonable midterm plans (i.e., beyond the next broadcast year) exist to allow them to efficiently compete as the inevitable continues. It's an issue that is important to advertisers, the networks themselves, the creative community, the rest of the television business (ironically including cable) and obviously viewers.

The core issue of the network business model is what we really should be keying in on. Instead the focus will be about CBS taking on NBC for Thursday night, and we, as an industry, will spend more than 10,000 man hours in one week looking at half-completed pilots populating a prime-time grid that will never run as scheduled. Add in the networks' cost of putting on the show, and the industry is spending millions on this magical week.

Will I go? Absolutely. It's a great show and a wonderful venue to catch up with clients and colleagues. And the shrimp ...

Will I come away with a better understanding of how these networks will deal with fundamental business challenges?

Unfortunately, I doubt it.

Will we fix the upfront? Maybe-hopefully, before the subject is moot.

Mr. Gerster is CEO of Interpublic Group of Cos.' Initiative Worldwide.

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