Psyching Out the TV Upfront Market

'Ad Age' Looks at Three Possible Scenarios for Broadcast and Cable TV

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NEW YORK ( -- Face it, nobody knows exactly what's going to happen in the upfront this far out. But it is possible to lay out what people on both sides of the desk believe could happen. As in chess, it all depends on who makes what move, and each player's ability to psych out the other. In 2005, broadcast networks booked $9.1 billion during the upfront, slightly down from the previous year, with NBC holding back and praying for a strong scatter market. That didn't happen.

Like a chess match, the upfront is about who makes what move.
Like a chess match, the upfront is about who makes what move.
So this year, all will be trying to write as much business as possible. Buyers are near unanimous in predicting that total dollars will be around the same this year as last. Cable took in $6.5 billion, up 5% from the previous season, and cable execs are hoping to hold their own in the battle for any incremental digital-media dollars. After talking to a wide range of players, Ad Age has come up with the most likely scenarios for how the 2006 TV upfront market will play out.

Scenario 1: Broadcast Plays Ball

Broadcast networks, led by ABC, opt for advertiser-friendly pricing, relegating cable to a game of "me too." Say ABC -- which could feasibly win in the 18-to-49 demographic race and still have the cheapest cost-per-thousand rates -- asks for moderate price increases of 6% to 7%. If buyers find that price friendly, then CBS and Fox, under pressure to up their take this year, will try to tuck two or three percentage points under that. NBC, following its failed experiment to hold inventory out of the market last year, will try to write as much business as it can -- and buyers will again be asking for decreases. The net has dropped 8.3% in viewers 18-to-49. (The only demo among which NBC gained viewers from last season was adults 50-plus.)

That would leave cable way behind. "I don't think we'll get to cable before August," said Jason Kanefsky, VP-account director, MPG.

And while the parity argument may work for ABC -- its CPMs are so out of sync with its ratings success -- it won't work for cable, said buyers. In fact, the gap between CPMs for cable and broadcast is expected to increase, much like last year. (If a cable-network CPM is half that of a broadcaster, then a 5% increase for both puts the cabler further behind.)

Cable lacks leverage, according to most buyers. Its ratings have been going up in aggregate, but according to a recent Magna Global report, no cable network's programming averaged a 1.0 rating among adults 18-to-49 in prime time, and only seven -- USA, ESPN, TBS, TNT, Cartoon Network, FX and Spike -- averaged even half a rating point or more.

Scenario 2: Cable Strikes Early

If the broadcasters go out with aggressive pricing, anything over 7% to 8%, it could open the door for cable networks to get some early deals done.

The cable networks with the most power are those that combine a well-articulated brand, strong ratings and digital platforms across which advertisers can carry a constant message.

Mark Gibson, assistant VP-advertising for State Farm, said he's shifted his TV mix from about 75% broadcast/25% cable to a 60%/40% mix, thanks to an increase in appointment viewing on cable. His strategy is to find big-event properties and build a deep media program around them.

Karen Soots, marketing media manager for Red Lobster, said her TV budget will be up slightly for the upfront. But considering the DVR environment, she said she'll continue to explore product integrations and other alternatives except for reality shows. "We'll move to more programming that may be more DVR-proof, like news and live sports."

Another factor in cable's favor is the debut of fifth broadcast network the CW. WB and UPN combined pulled in $1.2 billion in upfront dollars last year. This year, CW will be lucky to draw $800 million total, said one cable buyer. "There's clearly money up for grabs."

Of course, as buyers are quick to note, the upfront has many moving parts and smart players all have a chance to grab their share. "There is a desire on the part of many clients to focus their attention, which ... means they're going to do more someplace and less another place, but that doesn't necessarily mean when you roll it all up, you have the same winners and losers for all clients," said Elizabeth Herbst-Brady, senior VP-director of broadcast investment, Starcom.

"With respect to all the sellers, the bar has been raised," said Shari Cohen, co-president of broadcast at MindShare. "It's all about enhanced return on investment, the best prices, the best ideas, innovation that can live across multiple platforms and greater accountability and delivery insights. I wouldn't say anyone was exempt from delivering against these expectations." Which brings us to the last scenario.

Scenario 3: The Wild Card

This year's big unknown is just how all the emerging digital media will influence buyers.

And there's seemingly a digital divide between networks that can deliver a strong, integrated digital-media buy and those that have lagged. Despite the fact that its viewers 18 to 49 are down 3% season to date this season over last, broadcast TV has managed to capture most of the TV buzz -- and more new media buzz through distribution agreements with iTunes, Comcast and Google than almost any other cable network, save MTV.

Broadcast networks argue they are the players who can best drive large numbers to Web sites and mobile phones. "It all goes back to the advertisers' need to get the right package done. This is taking an idea that is content-generated and spreading it across other platforms, that's the strength of traditional media companies," said Jon Nesvig, Fox Network president-ad sales.

While the broadcasters may be making more noise around digital media, some cable networks, like ESPN, MTV, VH1, HGTV, Food Network, Comedy Central, Nickelodeon, Bravo and E!, are actually better positioned to sell more offerings to advertisers because they not only own much of the content but also many of the platforms -- their broadband players and mobile networks -- on which it lives.

The trick for marketers and buyers is to figure out where the digital buys fit in. "You want to follow the content regardless of platform, but the question is where is the content traveling to and how can the advertiser participate in that migration?" Ms. Herbst-Brady said.

Media shops are bringing their digital brethren back into the fold as opportunities mushroom. WPP recently disbanded its interactive and digital unit M1, and handed some of the accounts to MindShare Interaction, a new unit of media-buying shop MindShare. MediaVest also rechristened its buying teams as "Video investment and activation units." That could potentially make it tougher to see just how big a slice of the pie actually goes offline. Another headache for trend-spotters is the increasing phenomenon of "just-in-time" budgets. One major buyer said clients budgets could come as late as May, as P&G is wrapping up planning season and only now moving into budget mode.
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