Scatter is hot now, outlook dim for Q4

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The network prime-time scatter market continues to be hot in the third quarter, with broadcasters commanding prices on average 50% above levels of the 2001-02 upfront. But tight inventory means big revenue gains will be slim. The bigger issue is how scatter and the specter of upfront cancellations play out in the fourth quarter.

"It's the best market [in terms of pricing] they had in a long time," said Richard Kostyra, president-CEO of Media First International, a New York media buyer owned by Interpublic Group of Cos. "[But] everyone is virtually out of sale. The real question is the fourth quarter."

Media analysts expect little scatter-market money to materialize in the fourth quarter, which could mean a drop in prices vs. those made in the recently concluded upfront market.

less money

The upfront is when advertisers commit to a season's worth of ad time before the fall start of the broadcast season; scatter buying is when advertisers make near-term, quarter-by-quarter deals.

Less money will appear in the fourth-quarter scatter market because marketers have shifted spending from next TV season's scatter into this past June's upfront. Broadcast network prime-time upfront commitments rose 20% to $8.1 billion, according to an Advertising Age analysis (AA, July 15).

There could be more bad news, with advertisers possibly lightening upfront commitments made in June. These commitments, called holds, traditionally played by an industry rule: An advertiser was 100% committed to its fourth-quarter upfront agreement but could cancel up to 25% of first-quarter and 50% of second- and third-quarter upfront commitments.

Two years ago, however, many advertisers broke with tradition as some $400 million in fourth-quarter holds were dropped on the eve of the 2000-2001 broadcast season.

TV buyers say it likely will happen again this year.

not necessarily a boom

"It's a combination of things," said Mr. Kostyra. "The stock market is very shaky, and [corporate] management may need to reduce expenses for the end of the year."

So a hot third-quarter scatter market is not necessarily indicative of a boom market going forward.

Strong third-quarter activity has followed up on the vigorous first and second quarters, which showed 15% to 25% gains in pricing on network shows compared to 2001 upfront prices. This is primarily due to double-digit percentage declines in ratings at Walt Disney Co.'s ABC and News Corp.'s Fox that forced those networks to give advertisers additional inventory to make good their rating guarantees. As a result, there has been limited inventory to buy in the second quarter; and, now, even less in the third period.

rising prices

Rising prices in the third-quarter scatter are the result of networks looking to complete final make goods before the start of the new season in September. ABC and Fox are virtually sold out, though Fox is having success in generating new ratings points due to its hit, "American Idol."

Overall, Viacom's CBS and General Electric Co.'s NBC are beneficiaries. Agency executives said CBS and NBC's prices can be as much as 80% more than the 2001 upfront. Other prices are 40% to 50% above upfront levels. One network spokesman concurs that average price increases have been in the 50% range.

Adding to the tightness is that summer viewing usually produces lower ratings, resulting in fewer gross ratings points (GRPs) to sell. "If an advertiser has to buy 100 points in the second quarter, they can do that with maybe 12 or 13 [prime-time spots]," said one media agency executive. "In third quarter it would take about 25 prime units."

Reflecting the tightness of the market, the buying executive said: "We couldn't get [scatter] inventory for September during June."

Said another media-agency buying executive: "Whatever inventory is out there is going for ridiculous, ridiculous premiums."

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