Media Buyers Pounce as TV's Upfront Slumps

Networks Fight Hard, but Agencies Work Digital Boom to Their Advantage

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NEW YORK ( -- For a decade the marketing world has been wondering when the digital revolution would finally cut into networks' upfront payday. The smart money says this is shaping up to be the year, and TV's take could be down as much as $600 million.
Upfront spending is down from last year, which was down from the year before.
Upfront spending is down from last year, which was down from the year before.

Upfront decline
Although sales chiefs are still dickering, agency executives and analysts forecast the market to wind up anywhere between $8.5 billion and $9 billion. Either way, that represents a correction from last year's $9.1 billion haul, itself down from the $9.3 billion raked in for the 2004-2005 season.

A big reason is the explosion of digital options, which has given marketers bargaining chips. "The power has shifted back," an advertiser who spends big in the upfront told Ad Age. "It's cyclical ... because of all the pressures in the marketplace, it is amazing [networks] did as well as they did."

Those factors include not just digital opportunities but a willingness by some marketers to take their chances in scatter. Johnson & Johnson sat out the upfront entirely. And network arguments over payments for additional viewers watching shows in playback also marshaled agencies' resolve to play hardball this year.

Merrill Lynch projections
Merrill Lynch revised its upfront projection down from flat to -1%, putting the expected final number at $8.98 billion for the six networks, while media-agency projections were less bullish, at $8.5 billion.

Despite the decline, buyers suggested there were winners.

News Corp.'s Fox is set to finish north of $1.8 billion, and sold 80% of its inventory, a $250 million improvement on last year's $1.55 billion.

Thanks to powerhouses such as "American Idol," Fox won cost-per-thousand-viewers increases between 2% and 3% and, along with NBC, has the highest CPMs, at around $30, according to News Corp. President-Chief Operating Officer Peter Chernin. Fox made a play for volume and moved ahead of the market to capitalize on its improved ratings.

NBC drops rates
The Peacock's strategy to drop rates 5% to 6% proved smart. "NBC knew what was coming, and they took it like a grown-up," said one buyer, adding that the network did well to bring in as many dollars as last year. Insiders suggest the network is on track to match last year's $1.9 billion in sales, despite a second year of ratings declines.

CBS and Walt Disney Co.'s ABC were locked in mortal combat late last week with two agencies, OMD and Carat. Two agency media executives said ABC had done deals in a broader range than expected, writing business at CPM increases of 1% to 2%. ABC had been concluding deals at increases of 3% to 4%. One insider said lower increases could be attributed to pacts that excluded ABC's hottest shows.

Merrill Lynch projects ABC will end slightly up on $2.2 billion; an ABC spokeswoman declined to comment. Merrill anticipates CBS will end up at $2.6 billion; the network had no comment. Media agencies suggest the network is doing deals anywhere from a decrease of 1% to an increase of 2%.

Quibbling over CW
The CW (created this year by Time Warner and Viacom with the merger of UPN and the WB) wrapped June 23, and while insiders said the network came in above the WB's finishing point last year, there was quibbling over the accuracy of last year's upfront number, $675 million. Network sales president Bill Morningstar declined to comment.

While the networks fought for added volume this year, one agency buyer argued with projected tallies, estimating instead that no network saw additional volume. The executive said total broadcast volume would be down 3% to 4% at the end of the upfront.

"Some money disappeared to emerging media, and some didn't surface because of the ability to do deals 52 weeks a year," said Larry Novenstern, exec VP-director of national electronic media, Optimedia.

While emerging media was not as big a part of upfront talks as expected, demand is in evidence. CBS Corp. President-CEO Leslie Moonves told analysts at last week's PricewaterhouseCoopers conference: "Major advertisers and the major advertising agencies wanted to see how their money could be put to work throughout the system. So when you did a Budweiser deal, they also wanted to be on the web."

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Abbey Klaassen contributed to this report.
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