Broadcast TV Holds Its Breath Waiting for Go from Marketers

Concern that Some Upfront Commitments Could Evaporate

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NEW YORK ( -- With their extraordinary TV ratings, the Beijing Olympics have captured the gaze of nearly everyone in the media and ad business. Back on these shores, however, there's another contest that has begun to absorb attention: whether broadcast TV can rebound from an awful season and keep ad dollars flowing into its coffers.
The Beijing Olympics provided extraordinary ratings, but can broadcast TV rebound from an otherwise awful season?
The Beijing Olympics provided extraordinary ratings, but can broadcast TV rebound from an otherwise awful season? Credit: AP

Already, there is cause for concern, say media buyers and Wall Street analysts. The sagging economy is sparking chatter that clients may be ready to trim the ad dollars they previously committed for the fall TV season during what is known as the "upfront" marketplace. Between now and mid-September, these buyers said, advertisers may be prepared to pull back on the ad outlays they had already negotiated.

"I'm not sure if there's fire yet, but there definitely seems to be a lot more smoke" than is the norm around the time marketers finalize upfront buys, said one media buyer. "I know the networks are nervous. They've been calling. I have not had anybody go to order yet, so I have had a couple of people ask about trimming," this buyer added.

Still effective
All the to-and-fro just goes to show how much hand-wringing advertisers are doing over the state of broadcast TV, which, despite diminishing power, remains one of the best ways to get a promotional message in front of the broadest possible audience. Pricing for scatter advertising, purchased much closer to air, remains moderate in the third quarter, noted Wachovia analyst Marci Ryvicker in a recent research note, and scatter inventory for the period remains "plentiful" -- a sign that demand has slackened.

How much might be lost? Typically, between 2% and 3% of ad time ordered in the upfront "slips" each year when the time comes for advertisers to "go to order." Among media buyers, the consensus is that the percentage could be anywhere from slightly higher this year to 4% or more. "I think the networks are probably assuming" that "breakage," or trimmed upfront commitments, could be higher than usual, said Rino Scanzoni, chief investment officer at WPP Group's Group M. Networks "probably built that into the scenario" during the upfront and "allowed the sell-out rates to go as high as they did" in this past market, he said.

Buyers are dampening any sense of alarm, and some believe nothing beyond the norm will take place. Mr. Scanzoni said he has not heard anything out of the ordinary from his clients, and John Swift, exec VP-managing partner at Omnicom Group's PHD U.S. thinks some advertisers may even add to their upfront buys. One TV network executive said clients are not dropping any of their "holds."

Proof of decline
Evidence is already in, however, that advertising is taking a hit. General Motors' recent decision to walk away from advertising in ABC's coming telecasts of the Emmys and the Oscars shows what happens when corporate and economic weaknesses start to press hard. "We are not abandoning TV by any means; it remains a key part of our media mix," a GM spokeswoman said. The choice to leave the awards telecasts is part of a corporate "decision to reduce and consolidate sales and marketing budgets, with a focus on protecting launch products and brand advertising," she said. One buyer suggested that the auto category is where networks will see signs of slippage, while movie studios may want to add to what they have already reserved.

There are other signs, too. Total broadcast-TV ad revenue fell 4% in the second quarter of 2008, and 1.3% for the first half of the year, according to an analysis by the Television Bureau of Advertising. Network-TV ad revenue was down 4.8% in the quarter and 1.5% in the first half of the year.

And it's not just TV that's suffering. Just over half of a group -- about 53% -- of 100 marketing executives surveyed by the Association of National Advertisers indicated they expect their advertising budgets to be reduced in the next six months as a result of the tough economic climate; 87% of those polled are already being challenged with identifying cost savings or reductions with current marketing and advertising efforts. Meanwhile, in the second quarter, overall U.S. advertising growth decelerated to -1.5%, according to Bernstein Research.

Strength cracking
Advertising on traditional media fell 5.5% in the same period, marking the fifth consecutive quarter of negative growth, said analyst Michael Nathanson in a research note.

All this takes place as broadcast TV's main strength, delivering millions of viewers, is cracking. In a telling sign, NBC noted that its Olympics viewership for the night of Saturday, August 17, came to 31.1 million viewers, representing "the best Saturday night viewership of a program on the network since an airing of a "Golden Girls" spinoff called "Empty Nest" starring Richard Mulligan that ran Feb. 24, 1990. (Who knew the Olympics had something in common with an almost forgotten 1990s sitcom?)

Fall often brings renewal to the medium. But the writers strike that took place earlier this year means there are fewer new programs for the big networks to promote. Meanwhile, cable outlets including News Corp.'s FX and Time Warner's TNT are launching ambitious projects in the fall -- such as the Steven Bochco drama "Raising the Bar" and the last season of "The Shield" -- that will vie for attention alongside NBC's new show, "Kath & Kim," or Fox's much buzzed about "Fringe."
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