"If they are good marketers and have good agencies, they
understand the math," said one network executive. "The supply [of
ratings ] is somewhat diminished and the demand is strong. You're
going to have a double-digit market."
But don't confuse the price hikes for a sign of an industry in
revival. Marketers plunked down between $8.1 billion and $8.7
billion on the five English-language broadcast networks in 2010,
according to Ad Age estimates, far short of the approximately $9.5
billion they committed to six broadcast networks at TV's high-water
moment in 2004.
Executives on both sides of the bargaining table agree the
networks' ability to command higher prices is a result of
intensifying demand for a dwindling availability of ratings points.
The increases don't mean advertisers are adding to their TV
spending, just that they are choosing to put more money down ahead
of time rather than be forced to pay steep premiums in scatter
Advertisers are still crawling out of a post-recession economy
and have a dizzying array of factors to consider. Japan remains in
turmoil, hampering several automakers. Increases in commodity
prices have tamped down the ability of big TV spenders such as
Procter & Gamble, Kimberly-Clark and Unilever to splurge on
"Those are all things that make doing business for many
marketers more expensive, and they've got to be cautious about
long-term outlays of capital, which is what the media upfront
marketplace requires," said Chris Geraci, president-national
broadcast at Omnicom Group's OMD.
There are other reasons for concern. Several ad buyers suggest
the purchase of second-quarter scatter advertising— ad
inventory purchased closer to air date—has begun to cool.
What's more, said one senior media-buying executive, hikes in the
cost of gasoline and raw materials in recent weeks have forced many
large advertisers to take options back for third-quarter TV-ad
purchases so they can put that money back into their operations and
Network executives said they see robust activity from domestic
automakers, who have already started buying ad time in football
broadcasts slated for the fall. They anticipate healthy outlays
from telecommunications marketers and makers of electronic gadgets,
particularly makers of portable tablet computers. Retailers and
movie studios look stable, they suggest.
But there are other question marks. Pharmaceutical advertising
could be lax in the fall, thanks to a recent round of consolidation
among drug companies and a lack of new products in their respective
pipelines. Also worth watching: Pfizer is expected to lose its
patent on popular cholesterol drug Lipitor, which could affect the
millions spent advertising it on TV.
To push back against price increases, ad buyers say they will
raise the idea of moving money to other video options, or using
smaller but reliably-performing second-tier cable outlets to help
build scale. "Because it's been such a strong market for so many
quarters now, we're seeing so much more interest in other sources
of video," said Todd Gordon, senior VP-director of broadcast at
Interpublic Group's Initiative . Those other sources include cinema
or out-of -home screens at gas stations or gyms.
Can blue-chip advertisers get the same reach from those emerging
screens as from TV? Not yet. When the two sides find their happy
medium, the market will move in earnest.