See You in Scatter: Upfront Winds Down

Shops Wait for Digital Deals, Keeping Spending Below Last Year's $9 Billion

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The broadcast network upfront is wrapping up as media agencies report that business might conclude by mid- to late week, allowing buyers to start talks with cable and syndication in earnest.

With the upfront take likely to be flat to down compared to previous years-broadcast TV took in $9.1 billion last year-agencies and networks have set the groundwork for a potentially buoyant scatter market. Agencies have said they'll hang back and hold money out because many new opportunities-particularly in digital-arise outside the upfront period.

Despite expectations that it would lead the market, ABC got off to a slow start as buyers reported it was holding out for the cost-per-thousand rates that it wanted, reportedly in the 4% to 6% range. By June 15, however, the Walt Disney Co. network had taken a more flexible approach, enabling them to complete significant business at CPM increases of between 3% and 4%. The lower pricing was only available to those adding volume, according to one insider. Marketers that were keeping dollars even and trying instead to enrich their programming mix were being asked to pay higher CPM rates, in some cases upward of 4%.

Other agency executives question if ABC's network sales president, Mike Shaw, has the right strategy, with some claiming that the network is leaving itself open to losing "flexible dollars," given this year's fight for volume.

"He's fared fairly well in scatter because he's been able to package some prime inventory into scatter prices-he can throw a couple units of 'Grey's Anatomy,' 'Desperate Housewives' and 'Lost' and it looks attractive in a package," said a broadcast buyer from a major media agency.

the gamble

But, the buyer cautioned, the scatter market is based on supply and demand-and this year could see a surge in supply if the networks' sellout levels drop, thanks to fewer dollars in the marketplace. An increase in scatter supply without a steep increase in demand would depress pricing.

While agencies are holding back, networks are also likely to limit their available upfront inventory. The gamble is whether the money will show up later-the scatter market has been weak, as agencies reported little or no penalty to buying outside the upfront period last season. However, Disney Chief Financial Officer Tom Staggs said on the company's results call in May that ABC's second- and third-quarter scatter market had been 10% above upfront levels.

Broadcast networks also have in their favor the fact that 2006 is an election year, and an influx of political ads always tightens the scatter market. In another positive sign for the networks, TNS Media Intelligence revised its ad spending forecast last week and predicted network TV would be up 6% compared to 2005.

News Corp.'s president-chief operating officer, Peter Chernin, said June 14 that Fox had sold 70% of its upfront inventory at CPM increases of between 2% to 3%. CBS and NBC, Mr. Chernin also noted, weren't far behind. CBS pricing is reported to be anywhere from low-single digits to negative, while NBC, which, along with Fox, traditionally has the highest CPM costs, at around $30 per 30 seconds, is reducing its rates 5% to 6% in a play for volume.

Rates at the new CW, created by merging the WB and UPN, are said to be flat when compared to last year's WB pricing, and buyers said it is having a tough time establishing bases with marketers that were previously with UPN, which was cheaper than the WB. The CW is believed to be around 60% done. Fox's new entrant, My Network TV, has so far been quiet, with media agencies preferring to deal with the network in tandem with the cable and syndication market.

None of the broadcast networks would comment for this story.

Agencies now begin the process of registering their budgets with the cable groups. Discovery is 50% fully registered, while MTV is 80% registered, according to executives close to talks.

MTV Networks and Turner Broadcasting have already kicked off business. Media agencies traditionally begin with the top-tier entertainment networks, which also include Discovery and A&E Networks. "It will be difficult for cable to get higher than the 3%-4%, which has been set by the networks," said one media buyer.
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