Toyota says it won't pay big upfront hikes

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Toyota Motor Corp. USA is the latest automaker to warn that it won't pay big increases in the TV upfront, putting broadcasters on notice that there is widespread discontent from their biggest-spending ad category.

Toyota Division VP-Marketing Jim Lentz said that while the company's ad budget has so far kept pace with media inflation, "it's difficult to say where it will be next year because we're hearing big numbers for the upfront." He said it's doubtful Toyota could keep pace with the projected double-digit increases he's hearing about.

Toyota's blast comes months before the upfronts, when marketers make advance commitments to the following TV season, and just a week after Nissan North America derided sharp increases in TV pricing as "ridiculous."

While to some degree the automakers' statements are a form of posturing, an early negotiating ploy, the automotive industry has relied heavily on profit-draining buyer incentives and can't afford to fork over higher media rates. Because of the intensity of their rivalries, automakers also can't raise prices on their vehicles, said an executive at an agency that handles a major automotive account.

"That translates to a higher level of scrutiny" for the upfront, he said, while predicting that TV ad inventory will be tight because of the Olympics and presidential election.

The auto industry spent $2.7 billion on measured media in the first nine months of 2003, according to TNS Media Intelligence/CMR, but reduced its broadcast TV network outlay to $759 million, from $835 million for the same period in 2002.

`diminishing returns'

Automakers' opinions have been influenced by media coverage of broadcast TV audience declines, the rise in cable TV viewership, and the difficulty networks have reaching young males, the executive said. "Advertisers have to deal with that law of diminishing returns," he said. He predicted more money will be shifted to other media, including cable TV.

Steve Wilhite, VP-marketing at both Nissan and Infiniti, is shopping for a media auditor to monitor its nearly $1 billion budget (AA, Jan. 5). Ian Beavis, senior VP-marketing at Mitsubishi Motors North America, has already said the company will spend less on network TV in 2004 and more in cable and spot TV, because the TV networks "don't deliver enough at the right price."

`greed is not good'

Of the $2.7 billion spent in the first nine months of last year, spending on cable TV was $281 million, up some $28 million from 2002.

Toyota also sounded an alarm a year ago when Mr. Lentz's predecessor, Steve Sturm, warned media outlets, "Greed is not good." Last year's upfront reached a record $9 billion.

Several executives told Advertising Age last week at Detroit's International Auto Show that they plan to increase ad spending in 2004, mostly to handle a slew of new model launches. Among them: General Motors Corp., Chrysler Group, Mazda North America and American Suzuki Motors Corp.

How they will spend the money is the question. "More than ever," said the head of one automaker's media agency, marketers are "looking for alternatives" to broadcast TV.

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