Annual TV affair a nail-biter

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Take a front-row seat for TV's annual big-time musical--the mighty upfront advertising market. Take your time getting comfortable, though. The show will start slowly, maybe even be delayed. Advertisers are not singing in their usual strong voices.

For the last several years, the upfront would have started by now--with syndication taking the lead by the end of May. But, as of press time, there's been little action. The weakness in the ad market, uncertainty over budgets by advertisers and the possibility of Hollywood strikes have led virtually all parties to sit on the sidelines.

Wild swings in the TV ad market at the beginning of the season also call into question the whole existence of the upfront. In addition, the mechanics are out of control--millions in "holds on orders" were dropped at the start of last season. That's unprecedented.

What's in store for this year? Advertising Age Los Angeles Bureau Chief Wayne Friedman talked to some major experts--Mike Shaw, president of advertising sales and marketing for ABC-TV Network; Larry Blasius, senior VP-director of national broadcast for True North Communications' TN Media; Jed Petrick, president-chief operating officer of the WB; Dave Cassaro, exec VP-advertising sales for E! Entertainment Television; John Muszynski, exec VP-chief broadcast investment officer at Bcom3 Group's Starcom Worldwide; and Andrew Donchin, senior VP-director of national broadcast for Aegis Group's Carat USA. The roundtable discussion was conducted before the producers and writers union tentatively settled on a contact. An edited transcript follows:

Advertising Age: I'd like to ask all of your impressions concerning the potential of strikes, and what they could mean for the business, and the plans you have.

Jed Petrick: You saw the product that our program department's been working on since last July because of the strike. We're doing the same thing that our friends are doing who create a lot of original programming, working as hard as they can to put together the best strike-proof shows that we can. The next challenge we would have is to estimate it properly. Again, we're trying to help [advertisers and agencies] meet goals, and if we can estimate it conservatively and properly, then we ought to have enough inventory to hold back to make certain that what you think you got, you get.

Mike Shaw: I agree with basically everything Jed just said. We've got a lot of plans, and I can actually sit here today and tell you more about our strike plans than I can about what our schedule's going to be that we announce on May 15. We haven't even done those screenings yet, and we're not in a position to tell you other than directionally what we're going to do with the new schedule.

But I can tell you on the strike schedule, the ABC-TV network will be 100% first run. We've had six, eight, nine months to look at the situation, plan for the situation in the event that a strike does occur. We'll go out, and we're going to sell you the announced schedule. And we'll put into place caveats that in the event that that schedule does not premiere on the date announced, we will have an arrangement with [agencies] all based on the strike schedule that I believe you'll be able to take to your clients.

Dave Cassaro: Speaking from the cable perspective, I guess a lot of folks on the cable side have been sitting around saying, "There are all these contingency plans that I'm not clearly familiar with." But a lot of people speculate that whatever contingency plans take place--if it's more "Millionaires," more "Datelines"--more reality stuff, there is the potential for ratings to be lower.

Where do those ratings go? A lot of us in cable like to hope that it would come over to the cable side. So with a few more rating points continuing to migrate over to cable, we view it as a little bit of an opportunity. At our company, it's sort of business as usual because we don't rely on union writers to make our original content, so we would hope the dollars that continue to move from broadcast to cable and possibly accelerate at least in the fourth quarter.

Mr. Petrick: You know, I think at the WB, where we've got a lot of emerging TV stations, small stations are just starting to get their feet going. I'm not rooting for the strike nor is anyone in our company, but it could be a little bit of a boom for us. As Dave points out, there may be some viewership migrating in their direction. That's the kind of thing that you need at the WB, and it's the exact same thing that happened at Fox back in 1989.

AA: So, from the buying side, do you think if the strike happens, viewers will shift to other media, and will you be inclined to push your clients' money in other directions like cable, like syndication, like local TV?

Larry Blasius: Yes.

Andrew Donchin: It all still boils down to supply and demand, and I have clients that need to be on the air, so we need to get the supply. I've been encouraged late in the past week, seeing both in the trades and just talking to people, that the strike may not happen, there's some very positive news that maybe this isn't the economy to have a strike. We still need our [target rating points] and that means shifting money from networks because they're going to have less TRPs--to cable, or shift the money on the network to less effective dayparts like news or daytime.

Mr. Blasius: I sort of wonder, though, whether in fact a lot of clients aren't saying to themselves let's wait the strike out, if in fact it happens, and Andy's point, we need to be on the air, and there are certain threshold TRP levels.

But the question becomes whether marketers consciously cut back on the threshold levels to see what happens. If in fact there is a strike, and if it goes into fourth quarter, there will certainly be some migration. Cable's probably going to be a big beneficiary of the migration from network TV. But again, the question is are marketers who really are reliant on prime-time TV for the sake of argument going to migrate to cable when they don't necessarily view what they get in cable as being quite the same thing as they get in prime-time TV.

Mr. Cassaro: There's no question, just ratings' size alone. You look at geography and targetability.

Mr. Blasius: I'm not playing Mike there, either.

Mr. Cassaro: I understand that. But, if there is a disruption in the force that's called prime time, and some of the rating points are migrating. There is already a migration from broadcast into cable; I think it just picks up the pace by a couple of miles per hour. I'm not saying there's a quantum leap, and I don't say that advertisers are all of a sudden going to put all their money into cable and forget prime time.

Mr. Blasius: It could migrate across dayparts within network TV. For the sake of argument, prime time loses $50 million. That's a drop in the bucket in prime-time TV, but if you put it into evening news, that's a big number. If you put it into late-night TV, that's a big number. So cable, yes, will definitely benefit from it, but certainly there could be within those same walls that kind of migration as well.

Mr. Cassaro: Sure, but there's also the trickle-down effect. So if X dollars--$50 million, that number's probably a little light--but if a big number moved from prime time into other broadcast network dayparts, that's going to either displace or start moving people down the food chain. That's just the way it works.

John Muszynski: We're missing something here, though. The consumer or the viewer, they don't understand the difference between cable, syndication and network. So, they're going to react in fourth quarter--whether there's a strike or not--to whatever the options are available to them. And if NBC has 31 original episodes of "Law & Order," no one's going to know that there is a strike contingency plan, and they're going to decide if they want to watch "Law & Order" or not. And if there's something on cable that's appealing to them, they're going to move there.

We see it now. On Thursday nights, when "Survivor" comes out, the cable share goes down. Why is that? Because everyone decides they're going to watch network TV. We're getting all hung up on which vehicle the money's going to go to. The viewer is going to find the best option available to him. We've gone on record--Starcom went on record two months ago--believing that we feel that cooler heads will prevail and there will be no strike.

AA: In the meantime, what do you buy? If the strike happens, do you have two estimates? Do you go and buy the schedule you think you have and then adjust it later?

Mr. Muszynski: This marketplace allows us some privileges that we haven't had in the past, which is we don't have to rush forward. We don't have to do this prior to May 1. Let's find out if there's going to be a strike.

Mr. Blasius: We have absolutely no control over whether the strike happens or not.

Mr. Donchin: But it would be nice to know what you're negotiating, what actual shows you're actually going to have scheduled. If I buy a schedule on ABC and I don't have "The Practice"--which I bought--how do I make that good? That's a good question. So, with John's point, it would be great if we could wait this out and know what we're dealing with. But if we can't, we're doing a negotiation without knowing there's a strike or not.

AA: The next question plays into what you were saying about the marketplace. The marketplace isn't as strong as it has been in the past. Maybe it's weak. How does that play into it? You say you can wait. That's for sure. How do you factor that in? The marketplace has been the weakest probably in 10 years.

Mr. Cassaro: Wait a minute. You say that the marketplace is the weakest it's been in 10 years?

AA: In terms of what the estimated increase is going to be in the market.

Mr. Cassaro: If you look at it as an increase basis, you're right. If you look at it in pure dollars let's put this into perspective. What was the size of the upfront market 10 years ago and what was the size of it over the last three years average? I would venture a guess that it's at least double. So in sheer volume, it's bigger. Advertising--TV advertising--has always outpaced everything going on in the economy. And that will probably continue to be the case.

AA: How is the current marketplace? Is it weak? How would you characterize it right now?

Mr. Petrick: The marketplace is the same as it is every year. For the people with the goods, it's good. And if you don't have the goods, it's not as good. I'm very fortunate to work at a network that's got a unique product. We had our largest scatter market ever in dollar volume in the fourth quarter, and we exceeded it in the first quarter. We've upheld the integrity of our upfront pricing all year long, and that's a great thing to be able to say, and we're really proud of that. So for us things have been good.

AA: OK. Same thing for you, Mike?

Mr. Shaw: As far as the current marketplace, ABC's been fine the entire year. We have not experienced pricing that I hear has happened in the marketplace. Our scatter has met or exceeded our budgeting, which we did last July, so from the standpoint of straight pricing, we've been in fine shape. It's not certainly what it was a year ago. And to the degree that the market has softened that started about the second week of September. I don't think anybody saw it coming to the degree that the slowdown occurred.

You had a confluence of a number of things that all came to a head at the same time, and I think since that point in time going forward, nobody in this room has been able to predict what this market is. I don't think most of the guys across the table can tell you what their clients are going to do in July, August and September or next year. I find that today, this is probably the least amount of information that we've been able to gather in years. And I think there's a great degree of uncertainty.

Having said that, I go to Detroit, and it's interesting that two of the three automakers in Detroit right now aren't having great years, yet the auto industry is on a pace of 17.4 million unit [sales] based on the January-February-March statistics. [That] would be the second highest amount in history. So how do you account? Is it all pricing; has it all been rebates? What's driven that figure? And what I found in the last six weeks talking to a lot of advertisers is that there's really very little category story. It's really company-by-company.

AA: Larry, do you see the same thing that Mike does? The least information you could possibly know? Do you know what your client's going to do?

Mr. Blasius: To Mike's point, it's probably as little information as we've ever had before. A lot of companies are playing it very close to the vest, as they should. There's a lot of uncertainty in the larger economy; forget our small part of the overall economy. I honestly don't have a feel at this point for the levels that we're looking at in terms of overall spending going forward, which is unique at this particular point in time.

AA: It appears as though from a lot of estimates that the upfront could be down in overall dollars vs. last year. That hasn't happened in 10 years. Correct me if I'm wrong. One thing that seems to have changed was what happened last year just before the start of the fourth quarter. It seemed the estimates say that some $200 million to $400 million in "holds" [on orders] were dropped. Now I was told "holds" are sacrosanct. But they didn't seem to be in the fourth quarter. Now, if you're going to drop these "holds" and the fourth quarter is supposed to be 100% firm, what's the point of some of these upfronts, then?

Mr. Cassaro: You have to consider is that you had such a rush to the marketplace. It was a stampede last year. There was a lot of panic buying and sellers suckering up as fast as they can. You have a marketplace like that and there's going to be some attrition. And there are some people who aren't necessarily playing by the old rules anymore. A "hold" used to be sacrosanct, and people don't play that way anymore.

Mr. Blasius: "Holds" are sacrosanct as they ever were. A lot of people made a lot of decisions in the upfront, which they believed were to be the case going forward. And quite frankly with the velocity or the pace at which things fell out of bed in the general economy, I think what was done in the heat of the night in May [of last year] may have been dramatically different from what the landscape was for individual clients come August, when actual packages were being sold. Holds are as sacrosanct, we operate with as much integrity as we always did. I don't think people consciously drop holds to take advantage of marketplaces that may have softened in the meantime.

Mr. Petrick: Everybody does the best they can with the information they have at the time.

Mr. Muszynski: But what's driv-ing this whole thing, and it's all in one big pot so to speak, and that is that Wall Street's pressure has really changed the way we do business. If you go back 10 years ago, our clients are managing their budgets year to year. And then it started moving to quarter to quarter, and then it became month to month, and I know I've got some clients, they're managing their budgets week to week.

Mr. Blasius: Day to day.

Mr. Muszynski: Right. So it's a function of Wall Street's pressure that's really started this. Additionally, some of the blame for dropped holds has to be thrown onto your side of the desk for the pressures of packaging things and demanding certain things because of the way the marketplace is. [Because it's] definitely in your favor that "if you don't help me with this particular show, you got no deal. I'll just go give it to somebody else. If you don't help me with fourth-quarter money, I'm moving somewhere else."

Some people who don't have a real good control of their clients, or don't have a real good feeling for themselves, will buckle in and say, "Fine, yes, I'll do that." And in the back of their heads, they're going, "I can always cut it back later." And unfortunately, I believe that happened.

Now I didn't participate that way. I feel like I got burned. I played by the rules, and I got screwed because all of a sudden people are adding dollars in I don't think existed. I don't even think the market was as strong as we all thought it was in May. It almost became like a kids market, where there's all this artificial money in negotiations, but by the time it goes to order, all the phony money goes away. But that phony money raised prices.

Mr. Blasius: It propped up the marketplace when we actually did the deals.

Mr. Shaw: But you know, I have to make a little exception, John. Whose phony money was it? I don't recall coming to Starcom, or really any of the three of you, and saying I've got to have X. We negotiated like we always negotiated. I don't really feel on ABC's behalf that I went to individual agencies or clients and pressured dollars the way you just described it. Coming out of a marketplace that you knew was going to be strong because you were in the same scatter market along with us for the nine months previous to the upfront. We all read the market the same way. We all believed it was that, so I think it's tough to say that through network pressure, clients felt compelled to overspend.

Mr. Muszynski: I don't necessarily say it's network pressure.

Mr. Shaw: Supplier pressure.

Mr. Muszynski: It happened a lot more than you realized. [For instance, a supplier might say] "What I'm going to need is some Internet money to get this done." My point is I'd like to say we all had our integrity at the utmost level and we did all the stuff, but at the end of the day, did all of us really participate that way?

Mr. Petrick: I can think of a few instances, John, where fourth-quarter money that we asked to be moved forward--at the drop of the hat--and was approved at the agency side was cut back. It was to their advantage to move it. It wasn't pressure. It wasn't leveled as pressure. We have cut a lot of money back at WB last year. That's two years running for us. I don't think that's the case this year.

Mr. Muszynski: I wouldn't say the example I gave was take this or leave it.

Mr. Petrick: If I could, it wasn't young [media] people who were making those decisions either, young [media] people who were unsure of themselves. It was fairly senior people who were making decisions like that. Not one of you in this room. Not that you're not senior.

Mr. Blasius: We can second-guess everything we did for whatever, but the reality is that we did what we had to do at the point of time at which we had to do it. Things change in life. So I'm not sure that anything we did [last] May is relevant at this point. I think we learned from it. We ought to get all of our respective houses in order in terms of how we're going to do business going forward. And the more clarity we can bring to all of our negotiations, I think we're better off doing it.

Mr. Petrick: John alluded to how last year was like a kids upfront. A kids upfront has been a lot more unruly.

Mr. Blasius: It has the feel of the kids upfront--what happened to the kids marketplace two or three years ago seems to be happening to the general marketplace, I think. Last year was an insane year. It was silly in many ways that we were moving that kind of volume in that kind of way.

Mr. Cassaro: I just like to go back to the comment Wayne made before about the market being weak. "Weak" is a relative term. And if last year was insane, which it was, it's the equivalent of someone having 61 home runs and having a world record breaking year, [and then] only having 60 or 59. That's not weak. Your comment was just outright not true.

Mr. Blasius: Well, if last year was 61, I guess this year would be what, like 29 home runs or something? The velocity of how we did business last year has negative repercussions both for our sides in terms of the speed at which we have to make some decisions. Did you necessarily ballpark the marketplace, or did you get everything you should have in the marketplace, each and every one of you guys? I'm not sure you did. Did we necessarily get to the bottom of where we should have with each and every supplier? Maybe not. But it sort of recommends that we slow things down and do things more deliberately.

Mr. Petrick: What makes that happen for you?

Mr. Blasius: It's not going to be me in a vacuum. It's not going to be one of you in a vacuum.

Mr. Shaw: There's been a migration to the business being done more on a 52-week basis. You've seen certainly on Disney's behalf, and I believe you could say the same thing at Viacom and Turner.

Mr. Donchin: Last year wasn't like that. Last year was "Here's a number, take it or we'll sell it to somebody else."

Mr. Shaw: I don't remember it being quite that confrontational.

Mr. Donchin: Not quite confrontational, but just rushed.

Mr. Shaw: But "Take it or I'll take it to somebody else" is confrontational. That's a confrontational statement. I don't really feel like we had too many of those deals. Certainly, there was aggressive pricing. We all believed there was more money in the marketplace working than there turned out to be. But that's a real straight supply and demand equation, and if the demand for our product, which is basically fixed, guys. It's not print. We're not making additional pages at the Thanksgiving issue here. We were asked to create plans based on this amount of dollars, which we did so. To accommodate those plans and wishes, the pricing became what we're able to charge, but at the same time deliver those GRPs.

AA: This is the whole point we talked about last year, which actually makes more sense to talk about this year--whether it makes sense to continue to have an upfront market.

Mr. Shaw: As we migrate toward more [cross-media] deals that definitely involve more conversation and lead time, you'll see the money move out of the upfront into that marketplace. There'll be a less reliance going forward on the upfront per se because we'll have carved out dollars and come to arrangements prior to that.

Mr. Blasius: That raises a question to me, which is that arguably what you guys do or do not do is still your report card to Wall Street. And if you're doing more and more deals outside of the upfront, what's that say in terms of your report card to Wall Street after you finished doing business?

Mr. Petrick: AOL Time Warner just released their earnings for the first quarter; its stock jumped 5 points. [That] had nothing to do with the upfront whatsoever.

Mr. Shaw: I think the more important number is the total number at the end of our fiscal [year].

Mr. Petrick: Fifty-two week gain.

Mr. Shaw: That's the only number I focus on.

AA: But stocks do move when the upfront happens. I'm not saying all the time, but some times.

Mr. Shaw: We're not doing the upfront for stock purposes.

AA: No, I know that. I'm saying there's a connection.

Mr. Blasius: And they're doing it for stock purposes.

Mr. Shaw: It wouldn't be my intent then to not do integrated deals before the upfront because of the strike.

Mr. Blasius: At the end of the day, whether we like it or not, whether you are doing it for stock purposes or not, it's still a barometer of how well you did in the market and how well Disney is doing to Wall Street when you report your numbers in terms of total sales.

Mr. Petrick: At the WB we are at $600 million.

Mr. Blasius: I'm not questioning your motives. All I'm saying is that it has developed as being an indicator of how well Disney is going to do going forward.

Mr. Shaw: We've got analysts looking at the ratings each week--which seem to be a lot more of a driver based on the stock price in terms of how our performance is rather than the dollars we've booked in the upfront. Although, I take your point. It's certainly a factor.

Mr. Petrick: When you say that, do you mean then that we would always want this megavolume in the upfront market to be in two days because it's a Wall Street issue? Is that what you mean by that?

Mr. Blasius: Whether you like it or not, whether we like it or not, there is still a certain reliance on reported sales figures, and it's basically for prime-time [advertising sales]. That's the one that gets the most attention. That's your report card to Wall Street in terms of how viable the network business is.

Mr. Petrick: You know it's interesting again because John alluded to the kids market and how prime time became like kids. If you look at the trades right now, it's a 52-week business today. Wayne wrote a story this week about how it was not as brisk as in the past. It's not become an event any longer. And there's no noise about it.

Mr. Muszynski: Let's take a look at over the last four years what Nickelodeon did. And we all bitched and moaned and screamed, but the fact of the matter is they did very little of their business in the traditional upfront. They were done in most cases prior to the upfront.

They did multiyear deals, and not to say that we liked doing it, but they obviously took a strategy that I don't want to sell this much in the upfront. The upfront is going to be the same five years from now as it is today, or as it was five years ago. I still think it's going to have its place. It's just both of our dependence on it will be reduced as we move forward. Because there will be more of the--I hate to use the word--integrated deals. But the integrated deals, or the bundled deals, there will be more of those as we move forward, and it's going to chew up some of the money.

If you do a major integrated deal with somebody, it's going to tie up a greater share of your dollars, which means the remaining dollars you have left can be even more selective where you need to and still deliver your overall plans. So is it best to do that in the upfront or is it best to do that prior to the upfront or is that best to do that ...'

AA: And don't those deals take six months to a year to pull together?

Mr. Muszynski: Depends on who you're doing them with.

AA: Also one thing we talked about last year; how do you move $8 billion in two days? Maybe you guys should slow down and take a look at what Viacom President-Chief Operating Officer Mel Karmazin was saying--sell less in the upfront. Maybe sell only 55% of your inventory in the upfront.

Mr. Blasius: That's a pretty slippery slope; Mel's a traveling man.

AA: What do you think about that? Is that the direction you guys are talking about?

Mr. Blasius: Mel was a very bright guy, and he was a salesman, and at some point in his life, he understands how marketplaces work. If he's got a plan, fine.

AA: What you're all saying is it doesn't make sense to move that kind of money in a two-day time frame in the upfront. You're saying the budgets change week to week, sometimes day to day. Why don't you just wait?

Mr. Blasius: We've been having this conversation for 15 years but we're still doing it.

Mr. Donchin: We kept saying that there has to be a new way of doing it, and every year it's back to the same old model.

Mr. Muszynski: It all comes down to supply and demand. And if there's not a lot of demand, or not as much demand as there was in prior years, and the supply is fairly fixed, you can have a little bit more time and a little bit more comfort in waiting and trying to find out exactly what your schedule is and exactly where your units are.

Mr. Blasius: I can't risk my competitor across the street at his place or his place doing a deal and me not doing a deal. We're too competitive.

AA: So there'll always be an upfront?

Mr. Muszynski: It sounds like it.

Mr. Blasius: There will always be an upfront in some form. As to whether it retains the same character it has now, I don't know.

Mr. Cassaro: There's another dynamic that has happened historically in the marketplace, and it's kind of the alternate-year success-or-failure syndrome. One year you have a white-hot upfront and a lousy scatter marketplace, or less than spectacular scatter marketplace, and then the next year, you have a less than spectacular upfront and a runaway scatter marketplace. For example, late night is hot one year; people plan away from it the next year. So late night goes soft. Year after year you see this happening.

The prime time or the big upfront marketplace will also evolve because there are other supply and demand issues. Fragmentation is a big issue for everybody. All these little cable piranhas are eating away at everybody's audience.

AA: Especially the mature networks, right?

Mr. Cassaro: Well, Lifetime would argue that point, but you look at the number of choices that are out there. More choices is probably a better thing if you're on the buying side. And if you're a supplier, it's more competition. So how does that affect the upfront marketplace? I suggest it would just evolve and be a little different. I don't see why we don't just do this in the fourth quarter and do calendar year deals so we could enjoy the good weather in the spring.

Mr. Shaw: The problem with that, when it comes to prime time, is those new schedules come out in September, and if we were to do the upfront on a calendar year basis, how would you account for programs you can't identify that are going to be on the air next October, November, December?

Mr. Petrick: Unless you guys paid a little bit more, and then we could program 52 weeks.

Mr. Blasius: Well, unless you guys decided to roll out programs over the course of a 52-week season. What I'm saying is the announcements don't have to happen in May. The new season doesn't have to start in September.

Mr. Shaw: You'd rather have the new season kick off in January?

Mr. Blasius: I'm not saying one way or the other, but I think you're saying that the upfront has to happen because the schedules are announced in May.

Mr. Shaw: No, I think the upfront occurs because the schedule is in May. There's dollars that'll shift after the last prime-time presentation goes down because you'll see a program you want to be participated in, and I think that has always been the genesis of the timing.

Mr. Blasius: The schedules as they currently exist could change. And that might have a significant impact on our business, it might have no impact on our business.

Mr. Petrick: Hollywood has the same problem because you can't staff all these shows. They all staff at the same time and they all try to gear up and they all try to get ready and they all compete against each other to launch. And it's a mess. Very difficult.

Mr. Blasius: So it's a vicious cycle you can't get beyond?

Mr. Petrick: Well, I think you're seeing it every time you come for a presentation, I'm sure ABC does, I know we do. There's plenty of backup shows or second-season programming that we show you, and it's hard to lump it together. I know we're trying to do that. "Young Americans" is a show we brought out as a summer eight-episode run. We continually look for new programs to break in a down cycle. We're all doing it. Money's tight. Money's difficult for us, too. As a youth-oriented network, I would love to have more original programming out in the summer. That's a goal we're trying to get to.

AA: Larry, aren't they already doing that? They have reality shows that launch all year round it seems like.

Mr. Blasius: Yeah, there has been a perception. Fox TV kind of started it years ago when they started launching summer series. Some of their best shows were launched in June or July. The logic of capturing higher HUT [homes using television] levels completely went against the grain as far as what Fox did, and all the more power to them.

Mr. Petrick: That was Jamie Kellner [Fox president at the time].

AA: How does it work on the buying side now where you have all these reality shows coming out, which are not necessarily tied to upfront deals? Can you commit to these sort of big dollar amounts in non-upfront periods?

Mr. Donchin: First of all a point about the current upfront model is that when everything debuts in September, October, you can't get sampling. And when everyone's competing against one another--last year was a good example with the election, with the World Series and with the Olympics--things were not able to get sampled. So first and second episodes didn't get a good number and maybe people didn't come back, maybe they did. People just can't watch everything. Obviously, if something comes out during the year in reality, we may not [have the money to buy it].

Mr. Muszynski: On a shorter-term basis, we hold money up, hold dollars back to take advantage of opportunities. But the days of getting some incremental money because it's a great property are gone.

Mr. Blasius: That's easily said. I think we all have to do that, but there's just as much possibility that we'll hold money back and then not have the projects available in the marketplace.

Mr. Petrick: I think you should move all upfront every time.

Mr. Blasius: It's in our best interest to go back to the sacrosanct hold order. It's kind of in our best interest collectively--marketers, agency folks, suppliers--to somewhat restore the integrity to the upfront process that may have been somewhat compromised last year.

AA: Another weird occurrence happened last year: Some media sellers told me buyers asked them to renegotiate network upfront costs per thousand after the season had begun. I was wondering are there any protections against this? All this could conceivably happen again, right?

Mr. Petrick:: You know what, Wayne? For all the shake and bake that happened, I can't think of anyone doing it on purpose. One of you guys made the point that come September, the economy had changed and everybody found themselves in slightly different positions than when they bought.

[Some] agencies worked really hard to try to replace the money that was cut from one account in a deal that made sense for another account.

Mr. Shaw: We didn't do any renegotiations.

AA: Have any of you looked at this marketplace. Does it resemble anything similar to 1991? Is it similar to any other sort of market you've seen before?

Mr. Shaw: We've all seen this kind of market before. I've been selling for 24 years. I've been through some pretty good upfronts and some challenging upfronts, and I suspect in the next 10 years the same thing's going to hold true.

Mr. Donchin: I think vs. '91 there's a lot more places for us to spend more money. There's a lot more opportunities, a lot more vendors out there. So I kind of agree with Mike.

Mr. Muszynski: If you go back to '91, and I was still in high school then. [Everyone laughs.] But if you go back to '91, you had a lot fewer legitimate options available to you. What you're going to see this coming year, whether it's in the upfront, whether it's in scatter, whatever it is, you're going to have people being forced to go back to what I think we all started to get away from, and that is selling.

And it's going to all be about ideas. It's not just about: "I have inventory to sell. There's more money out in the marketplace than we can handle, so bring it on."

Now you're going to see who the true salesmen are and the true business builders now. Mike talked about it earlier, Jed talked, we all talked about it. Our job is to build our clients' businesses. And because you can drop your price an extra point or two isn't as important to me as you being able to help me grow my client's business.

Mr. Donchin: And that being the case, I don't think we will spread our money across all the vendors out there. In some ways it's going to be like buying magazines this year. You just don't need to buy too many titles or networks. So I really feel that if we go into an integrated package on the ABC integrated sales or AOL Time Warner or Viacom Plus, that will maybe eat up our money. It's going to make sense to do, but then we won't be able to spread it out among all the other networks out there.

Mr. Blasius: We're using the kids market analogy before, and if you think about what's happened to a lot of marginal suppliers and kids, they're sort of gone by the wayside. They were allowed to survive because--what's that expression?--a rising tide floats all boats. And then when the tide receded, a lot of them just got stuck on an island. Marooned.

We see an awful lot of sales people, and the sales people who I always gravitate towards are the ones who understand our needs business-wise, understand our clients' businesses. And the guys who are just in our offices, talking at us at what their needs are, I just lose it.

Mr. Muszynski: If you go with the assumption that there's less money in the marketplace than there was before. And I know my budgets are all down. If I'm going to participate with everybody that I participated last year with, that means every one of them is going to walk away from the table unhappy because they all want more volume. So do I go in and have everybody not so happy? Or do I cut the list down and make some people happy?

AA: How important will cross-media deals be in the future? I think it was ABC-TV President Alex Wallau who was saying that maybe the ABC Unlimited cross-selling unit could be maybe 1% of the entire TV take in future years. That would be huge.

Mr. Blasius: What qualifies as being a cross-media deal as opposed to one that doesn't?

Mr. Shaw: Just because it includes an Internet component does not mean it's a cross-media platform deal. If they've got an Internet component, or some radio was included, then all of a sudden you've got an integrated deal. That's not what we're speaking to.

Mr. Muszynski: No. That's a bundle deal.

Mr. Shaw: Correct. We've aggregated a platform on a price basis.

Mr. Muszynski: Bundle deals are done based on price. If it's an integrated deal, it's driven by an idea to help us drive our business again and it can go across multiple vehicles. It goes across dayparts, but price is not the No. 1 factor driving it. It's ideas. Most of the deals that I hear of--I would sort of define those or categorize those as bundle deals.

Mr. Shaw: Back to your original question. I think going forward we're going to have a significant percentage of our deals done on that basis. I really believe it's smarter to do business that way. I would like to understand more about my clients that are using our air for their purposes because they view that audience as so important to their effort.

There's something there. There's real value. And that to me is the future. It may even at the beginning be on a brand-by-brand basis. I don't think you can walk into some of the major companies and deal with 30 brands. But you could deal with two or three brands. And a new-product launch, and maybe a relaunch of a product and something that they know they'll be trying to accomplish six, eight months from now, and allow us the time to go back and craft that package speaking to those objectives. I think that's smart. And I know that's a space we want to play in.

Mr. Cassaro: I think Mike's right. And I agree with everything he said. The fact of the matter is these deals come in a lot of different sizes and shapes and flavors.

AA: So what kind of prospects are there for cross-media deals?

Mr. Petrick: At the [Association of National Advertisers], someone on a panel estimated that within a few years, 40% of all transactions would be these large conceptual big-idea deals.

AA: For AOL Time Warner, I bet that number's probably what you're looking at.

Mr. Petrick: Ring that bell, baby. I'd say over the last three years, we've seen your clients open up their doors to bring us into the equation. I think it's a good thing. Blase said his job's not to make us happy. Our job is to make you happy and our job is to make your clients happy.

Mr. Blasius: Both of us are in the service business. I think something we forget [is] we're both here to service our clients.

Mr. Donchin: If it does enable my clients to get better return on investment, and enables us not to be there at 4 in the morning trying to cut deals, when you really have no other pieces of the puzzle, I'm all for it. And I know my clients will be all for it, too.

AA: Do you think that's a realistic number? Forty percent?

Mr. Muszynski: Then you might as well kiss the upfront goodbye. There won't be one.

AA: Is there any thought about who goes first this year? Usually syndication goes, then network and then cable.

Mr. Muszynski: I didn't talk about it when it came up, but I don't understand why they've got to go at different times. Why do they? What happens?

Mr. Cassaro: John, the way you're set up, maybe I don't know.

Mr. Muszynski: Maybe that's a competitive advantage of mine.

Mr. Cassaro: It might be. But that's a lot of bodies buying at the same time.

Mr. Muszynski: But the fact is if you do syndication first, and just using that as an example, and then you do cable, and then you do network, what happens when you get to network--since now you know the information you did at network--you would've done something different in syndication, and you would've done something different in cable.

Mr. Donchin: I agree with John. If everything could go together it would be fantastic.

Mr. Petrick: You end up buying the things that you think are important first.

Mr. Blasius: I sort of know your setup, John, but I don't even think you're equipped to do that at this particular point in time. We may be moving that way.

Mr. Muszynski: I'm not saying do all the other media forms. From the TV world, I think they should go fairly simultaneously.

Mr. Blasius: I would argue that in many ways, we're doing that now.

Mr. Muszynski: I agree. But I have heard people who always want to compartmentalize it.

Mr. Blasius:: That's a leftover from how the business was.

Mr. Muszynski: We used to do each daypart on the network side by itself.

AA:: Does that benefit you if you all go together?

Mr. Cassaro: Me as a standalone little cable network? It doesn't hurt. You know what happens is you have a limited number of advertisers who are buying syndication--far more limited than cable or broadcast. [There's] a short list of significant players. Then you have arguably six broadcast networks that are competing at the same time, and then you have how many ad-supported cable networks? The more choices, the easier it is to negotiate. The [price] gap between cable and broadcast has widened every year.

Mr. Muszynski: It depends on who you're talking about.

Mr. Cassaro: I'm just speaking in general, on a macro level, John. The gap between cable and broadcast [prices] has widened for a long time, so much so that the gap between broadcast and cable is nearly 50%. Now, there's something wrong with the price value equation there.

Mr. Shaw: Why? Why is there something wrong with the price value equation?

Mr. Cassaro: The reality is you're paying more and getting less in broadcast.

Mr. Shaw: How so, Dave? I was just looking at the top 25 cable networks in basic and prime time. They did a 0.36 adult 18-to-49-year-old demographic rating. ABC, NBC, CBS and Fox are doing a 4.4. That's less than one-tenth the delivery in prime time on those four networks. So, at a 50% discount, when you're one-tenth the size of the rating, there's no story there.

We're all in 97%-98%-99% of the homes in the country; all for the most part, large part, all have first-run programming. I think that's a red herring.

Mr. Cassaro: There's overdelivery in [smaller] C and D counties in the broadcast-only homes.

Mr. Shaw: I guess we probably over- or underdeliver the top 10 that you're missing in all the cable markets.

Mr. Cassaro: No, you're overdelivering C and D counties.

Mr. Shaw: Top 10 markets in the country. Take a look at the cable delivery. It's awful compared to your indexing across the rest of the country. So I'd say the price value, at 50% of the network CPM, if I was selling, I'd just take my 50% and try and book as many dollars as I can because I think this year, with limited dollars, people will look to upgrade their mix. I believe upgrading the mix means trying to get more dollars down on the network. So, I'm not so sure if I was selling basic cable up against network prime this year, I would go with the price value argument. I don't believe it exists.

Mr. Cassaro: That's where you and I disagree, Mike. That's fine. You can sit there all day long, and the fact of the matter is as the prices separate, you guys continue to add commercials--higher commercial load--in network prime time.

Mr. Shaw: That's not true. If you take a look at the last [American Association of Advertising Agencies] study, ABC had less commercials than a year ago.

Mr. Cassaro: OK. And if you believe the Four A's, which historically has not been exactly accurate, the fact of the matter is that broadcast prime time--not just ABC--has added a lot more commercials over the last five years. Is that true, or is that not true?

Mr. Shaw: The last five years? I don't have the figure in front of me.

Mr. Cassaro: It's absolutely true. What's the average commercial load in prime time in network now as compared to five years [ago]? Do you guys know?

Mr. Shaw: But aren't we comparing network to cable? What's the average commercial load in prime time vs. cable?

Mr. Cassaro: It's almost exactly the same as prime time.

Mr. Shaw: And you guys deliver for the top 25 markets at a 0.36 rating. Why is that worth more than 50% of a 4.4? I don't get that. I don't see it.

AA:: Is cable worth more?

Mr. Blasius: It's not a yes or no answer. It's not that black and white.

Mr. Donchin: It's not just on price.

Mr. Shaw: It's not on distribution. It's not on content.

Mr. Petrick: There's room for both in everybody's media plan, but I do agree with Mike that there's going to be a flight to quality, and I think you're going to find people upgrading their mixes.

Mr. Blasius: That's a sweeping generalization that all cable is not quality.

Mr. Petrick: I didn't say it wasn't. Hang with me. I said there will be money that moves to cable, just like it always has. But I think there'll be a flight to quality on the network side for a ratings perspective and original first-run programming. It's going to keep the stem flowing away from us, and instead bolster people's media plan. Now, that doesn't mean for everybody and every client.

As I look at the three of you, I see one guy shaking his head, another guy just saying hmm and the third guy arguing, debating. So it doesn't mean it's the same for everybody.

Mr. Blasius: One man's ceiling--as some wise young songwriter once said--one man's ceiling is another man's floor. There's truth to what Mike says, there's truth to what Dave says. There is an incredible amount of quality in cable TV. There are also a lot of pockets of less quality in cable.

So generalizations are fine, but I just don't think they necessarily address the real issue, which is John's got specific needs, I do, Andy does. We've all got different ones, and we can find them. We can find them in network TV, we can find them in syndication, we can find them in cable. So stop fighting amongst yourselves. This is not the year to be fighting amongst yourselves. You should [be happy] selling TV as opposed to print or radio or outdoor or whatever else.

AA: Does the same hold true for syndication--about quality and price?

Mr. Shaw: Well, the quality, the top first-run vehicles in syndication--"Wheel of Fortune," "Jeopardy!," "Oprah," "Live With Regis"--are all quality vehicles that have been on the air for years. And the other top vehicles in syndication are all off-net. If you take a look at the adult 18-49 ratings, those are basically dominated by the off-net: "Friends," "Seinfeld," "Drew Carey," "Third Rock."

Mr. Muszynski: That's about it.

Mr. Shaw: The problem with syndication is limited avails. There's just not that much inventory available for purchase. And while once you get past the top 10 vehicles, you get into some of the other issues: distribution, time periods--that might adjust the value of those impressions, and that certainly occurs. But the top 10, top 15 vehicles in syndication, well-priced, great programs and they'll do just fine.

AA: But maybe there are not enough of them?

Mr. Shaw: There's never enough of the top-rated vehicles no matter what you're selling.

AA: In terms of off-network stuff, they are the proven performers vs. the first-run stuff.

Mr. Muszynski: See, I take the exception that because if it was on a network at one time it does not mean it's going to be successful in syndication. And in fact, if you look at the last two years, there are more off-network disasters than there are successes.

What makes a successful show is its distribution lineup. And there are only so many prime access clearances. And there are only so many good late-night clearances. So if you've already got six or seven off-net shows, and the top first-run stuff that Mike mentioned, then after that, where are you getting clearances for these shows? No matter how good the show is, if you don't have the lineup, you're not gone to make it.

AA: Finally, the type of programming out there, you've seen a lot of reality stuff. I guess that's going to continue for the near term. Is that good for advertisers? Is that good for the sellers out there? It's obviously good for you guys 'cause it seems like lower cost.

Mr. Petrick: It's getting more and more expensive. It's not as inexpensive as one would perceive it to be.

Mr. Muszynski: Isn't the question of is it good for the viewer?

AA:: For some of the reality stuff, the edgy stuff like "Temptation Island," I heard a lot of advertisers don't want to buy it, don't want to get near it. It seems like those reality shows have to push. Is that a problem with reality shows?

Mr. Petrick: We put a show on in February, a backdoor pilot, a one-off called "Kiss the Bride." And it was the exact antithesis. It was sweet, it was warm, it was about couples proposing to each other and then going through a little contest. It was the exact opposite of "Temptation Island," and it did incredibly well for us in the Monday 9:00 time period. So you don't have to have a ...

AA: "Boot Camp"? "Temptation Island"?

Mr. Petrick: Reality is kind of a broad term, and it's maybe a negative paintbrush that people put on things because it's not.

Mr. Shaw: Is "Millionaire" reality?

AA: Is Howard Stern reality? Does it depend on what's out there?

Mr. Cassaro: It's scripted vs. non-scripted I guess. But you know everything is very cyclical business. Westerns, game shows, variety shows.

Mr. Shaw: They also seem to be dominated by the younger demos, too. Take a look at "The Mole." It was the youngest-skewing program on ABC's prime time this season. Take a look at "Survivor." It's the youngest-skewing program on CBS. If you take a look at who's dominating right now with NBC, it's the 18-to-34-year-olds that are. It's kind of surprising that the younger demographics are actually the ones that--when shows are first launched--are the ones that come to those programs more so than any other demographic.

Mr. Cassaro: They'll also be the first to desert them.

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