The moves put a scare into sellers as the upfront approaches, a season when networks typically posture and make bold predictions about rate increases.
TV sales executives are already being forced to drop prices as much as 5% below upfront levels to offload inventory in the first and second quarter. Network executives usually count on selling such scatter time at higher prices, which puts pressure on advertisers to make early, or upfront, commitments at guaranteed price levels.
P&G exercised options to scale back its upfront commitments for the second straight quarter, this time taking back an estimated $22 million from broadcast and cable TV networks and syndicators. P&G plans to put some of that money back into TV through cheaper scatter buys and branded-entertainment initiatives.
Network executives declined to discuss the moves, but P&G's decision is bound to hurt, psychologically as well as financially. Strong demand for scatter time in the first and second quarters can strengthen the spring upfront, when advertisers buy time for the following TV season. Some networks held inventory out of the upfront last spring, gambling on strong scatter demand and, therefore, higher prices. They lost.
"We are getting some great opportunistic buys right now," said an executive with one major marketer, who wished to remain anonymous. The networks "are all looking for dollars, though they're being quiet about it."
A P&G spokeswoman confirmed the company is "making adjustments," but said overall it will spend more on U.S. TV buys this year.
`a little cloudy'
Doug Seay, senior VP-national broadcast at Publicis & Hal Riney, said the second-quarter outlook for the networks is "a little cloudy. ... The fact that everyone's not screaming about how they're 20% over the upfront [means] it's not going well."
Pharmaceutical giant Pfizer dropped ads for its arthritis drug Celebrex after a request from the Federal Drug Administration. Pfizer spent $10.3 million on network TV on the drug in second quarter of 2004.
Kraft, which is reorienting its marketing approach toward healthier products, also withdrew money, although it is not clear how much. A spokeswoman said, "The options that we are taking are part of the normal ebb and flow of marketing plans for our businesses overall."
She added that there is no correlation between the options and Kraft's announcement last month that it would pull advertising of its kids' products that do not meet specific nutritional guidelines. "Ultimately our ad spending will be essentially the same as we launch new products that fit the new nutritional guidelines. Along the way we may be making some adjustments."
Mitsubishi Motors, which had moved spending out of network TV and into cable, is cutting back its commitments, according to executives close to the company. Mitsubishi denied a Wall Street Journal report that it is shopping for a buyer for its North American operations.
contributing: jack neff, stephanie thompson and jean halliday