TV Upfront

Does a Shadow Loom Over the Upfront?

Tuning In: Possible Hiccups With Auto, Retail, Suggests Analyst

By Published on .

TV networks rubbing their hands together in anticipation of a spectacular upfront may want to stop for just a few moments.

It's true, the recent market for "scatter" advertising, or ad inventory sold just prior to air time, has been as healthy as an Olympic skier. Typically, that means the upfront (the time of year when most TV networks try to sell about three-quarters of their ad inventory for the coming fall season) should go great guns, as more advertisers seek to lock in prices, fearing that ad costs will continue to increase as the economy works its way out of recessionary doldrums.

Last year, the five English-language broadcast networks collected an estimated $8.1 billion to $8.7 billion in ad commitments, according to estimates from Advertising Age, eking out a small gain over 2009's estimated $7.8 billion to $8.1 billion. This year could prove even more dynamic.

Every silver lining, however, has a cloud. Recent events could threaten to tamp down upfront activity, suggested Barcalys Capital analyst Anthony DiClemente in a research note issued today. The analyst sees trouble brewing among several important advertising categories.

Among auto advertisers, upheaval in Japan has put pressure not only on Japanese automakers, but also on auto companies that import parts from the country. Indeed, ad buyers and TV-network executives tell Advertising Age that Japanese and U.S. car companies have made requests to move some of their ad purchases into the third quarter from the second quarter. At local TV stations, some car advertisers have pressed to cancel or rework ad buys set to run more immediately, these executives said.

Other ripples mar the upfront waters. Mr. DiClemente suggested the recently announced merger of AT&T and T-Mobile could result in a consolidated ad budget, spelling a "reduction of a couple hundred million dollars in ad spend annually." We think the analyst is thinking long-term here, because most big mergers tend to result in a hot burst of ad spending as the two companies try to tout their new identity, capabilities and products not only to investors but to a fickle consumer base. Some of this spending can take place while corporations wait for regulators to weigh in on the deal, and a lot of it tends to happen in the months just after a pact closes.

In the long run, Mr. DiClemente will likely be correct. But TV networks will fight for the ad cash that's likely to spill in the early days of this combination. According to Barclays, AT&T and T-Mobile spent a combined $2.7 billion on advertising last year.

And then there's Big Food, where an entire industry must cope with a hike in the prices of basic commodities. To make economics work, the analyst theorized, "For the fiscal year, it appears that more food companies plan to cut advertising than to raise it."

Retail is also not immune. "Some retailers have indicated that advertising is a potential lever to help offset input cost inflation," the analyst wrote in his research note, suggesting that marketers off personal-care products and restaurant companies could dampen ad spend if inflationary pressures weigh too heavily.

No one thinks this year's upfront is going to be anything but healthy. If Mr. DiClemente's emerging ideas gather more traction, however, the TV marketplace might be in danger of catching the flu.

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Tuning In is an ongoing series of commentaries by Ad Age TV Editor Brian Steinberg on the TV schedule, the ads it carries and changes within the industry. Follow him on Twitter.

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