TV Upfront Tally Slips to $8 Billion as Networks Take Their Chances on Scatter

As Prices Fall 1% to 3%, the Big Five Hold Back Up to 15% of Inventory

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NEW YORK ( -- This year's upfront tally is estimated to be between $7.8 billion and $8.1 billion, down from last year's about $9.23 billion. And for that you can thank Mel Karmazin.

In 2001, with the economy in decline and CBS still joined with Viacom, then-second-in-command Mr. Karmazin (now at Sirius XM Radio) ordered the Tiffany Network to hold back as much as 10% of its ad inventory from the upfront market, the better to sell it for higher rates later on when the financial landscape was more stable. The gambit was a risky one. Indeed, not until the following year was it clear that the decision had gradually resulted in a positive for CBS: The network was ultimately able to secure additional revenue for time held in reserve.

This year, as the smoke surrounding the upfront marketplace begins to clear, it's evident that all five broadcast networks are trying a similar Hail Mary pass, holding back anywhere from 10% to 15% of their inventory to sell later on in the year -- as "scatter" inventory that is purchased much closer to air date, often for a premium. "The last time we managed inventory like this was in 2002 and we ended up making a lot more money in scatter than if we had sold the inventory in the upfront," said Leslie Moonves, president-CEO, CBS Corp., in a conference call last week. He indicated CBS was seeing robust third-quarter demand for scatter in "core categories like retail, telecom, pharma and quick- service restaurants. And scatter pricing is up over last year's upfront which again bodes well for us going forward. And our third-quarter scatter dollars are up 30% from third-quarter scatter last year."

Even so, media buyers report they did not see that sort of demand in the upfront market, when the networks typically try to sell 70% to 80% of their ad inventory for the coming season. Money from fast-food advertisers was relatively flat, the one bright spot in this year's haggling. Ad dollars from sellers of package goods and telecommunications services were flat to down. Meanwhile, pharmaceutical marketers held back somewhat, retailers seemed mixed (though some pushed to spend for the coming holiday season) and automotive and financial services spending was down significantly.

The combination of lower overall spending and the networks' decision to hold back a larger portion of ad inventory has resulted in an upfront marketplace that Advertising Age estimates ranges between $7.8 billion and $8.1 billion. Add to this the fact that most networks agreed to rollbacks in the price of reaching 1,000 viewers, or CPMs, in the 1% to 3% range, according to media buyers. NBC, owing to greater ratings shortfalls, has been offering CPM rollbacks in the negative mid-to-high-single-digit range, buyers said.

The numbers shouldn't be taken as gospel. Each year, various TV-industry sources quietly whisper upfront results to the media, also making certain to cast aspersions on the data coming from rival fonts of information. The numbers are inexact, and advertisers can cancel or reallocate a portion of the money they commit in the upfront quarter by quarter. Even so, the numbers are often read as a barometer of the relative health of broadcast TV, and even the economy as a whole.

This year, the final tally is tougher to divine. Few if any of the regular TV-industry sources would offer guidance. Based on interviews with media buyers, Wall Street analysts and other executives, Ad Age has attempted to take a rough stab at individual network performance.

Volume at News Corp.'s Fox could be down as much as 10% to 12%, which would put Fox's upfront commitment total between $1.72 billion and $1.76 billion, compared with approximately $1.95 billion in 2008. In a recent conference call, News Corp. CEO Rupert Murdoch declined to answer questions about overall performance but said Fox "would rather keep availability for scatter than to lower our rates."

CBS, meanwhile, should see total dollars committed fall 10% to 15% to between $2.13 billion and $2.25 billion; last year, the network secured approximately $2.5 billion. Mr. Moonves said CBS expects to sell around 65% of its inventory in the upfront, compared with 75% to 80% last year.

Totals down
ABC, which has yet to indicate whether it is nearing completion in upfront negotiations, could see its upfront total down as much as 15%. If that's the case, ABC would have secured approximately $2.13 billion in commitments, down from $2.5 billion a year earlier. In a recent conference call, executives at Walt Disney said they were "comfortable" with ABC's upfront process and that they "anticipate selling less of our inventory in this year's upfront than in recent years."

Leslie Moonves, president-CEO, CBS Corp.
Leslie Moonves, president-CEO, CBS Corp. Credit: CBS
It's possible to roughly estimate that NBC saw upfront commitments for its overall schedule decline between 15% and 20%, according to a person familiar with the situation. Using those figures as a guide, commitments for the network's prime-time schedule could fall to between $1.52 billion and $1.61 billion, compared with approximately $1.9 billion in last year's upfront. The company's decision to sell less prime-time inventory -- about 10% less, according to the person familiar with the situation -- would play a role in the lower volume. Last year, NBC sold about 80% of its inventory in the upfront.

Other factors related to the drop in volume would include the fact that NBC isn't broadcasting the Super Bowl this year; it's got a five-nights-a-week program featuring Jay Leno that is expected to bring in fewer ratings at 10 p.m. than scripted dramas once shown at that time; and it also has less traditional prime-time inventory to sell overall due to its coming Winter Olympics broadcasts.

At the CW, the broadcast network owned jointly by CBS Corp. and Time Warner, volume was down 10% to 12% from the approximately $350 million to $375 million it secured last year, according to a person familiar with the situation. This person said the network, known for its broadcasts of "Gossip Girl" and "America's Next Top Model," sold about 65% of its inventory, down from approximately 75% to 80% in last year's market. As such, the CW could have secured approximately $308 million to $337.5 million in commitments.

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