Upfonts come to an end Reports suggest 10-12% drop in advertising

Happy Monday to All

I realize this has very little to do with Features but it does give us an indication of what advertises and networks go through in order to see a profit. Creative advertising is on the rise both for the products but also campaigns for the programs. HBO - True Blood had/has an amazing campaign and what is even better is that the writing team has improved. Anyway ... take a read ... Enjoy the week.

Jean-Luc Martin
Producer, Line-Producer, UPM


BROADCASTING & CABLE -- The curtain is finally drawn on the tumultuous broadcast primetime upfront of 2009 and the range of final dollar estimates-based largely on hearsay and back-of-the-envelope calculations rather than network guidance-is as wide as a barn door.

With the networks keeping mum, agencies are putting the figure anywhere between a 10% to 12% drop from last year's $9.2 billion, which leaves the upfront finishing around the $8 billion mark. Other estimates are more aggressive about the decline, with trade MediaWeek suggesting a tally of $7.2 billion and The New York Times estimating $7.8 billion.

Whatever happens in scatter, the missing billion dollars will no doubt affect forward planning inside major media conglomerates looking to reconfigure the network model.

Networks have sold around 70% of their commercial time. On Thursday, CBS Corp. CEO Leslie Moonves said on the company's second-quarter earnings call that the Eye network had sold around 65% of its inventory. One agency executive on Friday suggested some network executives are already planning some payback in the former of higher scatter pricing.

Indeed, this year's upfront was highly acrimonious, with advertisers demanding double-digit rollbacks and getting anywhere between a 1% and 7% discount instead.

Fox and CBS were at the low end of the discounting, with ABC and The CW falling in between and NBC coming in at the low end. NBC had anticipated a lower take this year due to its gamble on putting Jay Leno into the 10 p.m. slot. Drama shows, though more expensive to produce than variety, command higher ad premiums.

Strong integration opportunities helped bring additional dollars to The CW, which is part owned by CBS. Executives familiar with NBC Universal's sales said the company had taken close to $4 billion across the board. ABC was the most secretive of all networks, with the usually talkative sales chief Mike Shaw staying quiet as a church mouse on every aspect of the Disney-owned network's upfront. Fox also gave little away, saying it was satisfied with its take and had concluded talks with advertisers.

Meanwhile, primetime was just part of the story. Networks seemed willing to take much bigger rollbacks outside of the prime territory. Clients saw much higher rollbacks in other dayparts, most notably news and late-night, where CPM rollbacks fell between the mid- to high-single-digits level.

News programming, given the drop in pharmaceutical, financial and auto categories, had to take rollbacks in the mid to high single digits. Late-night also saw CPM rollbacks of mid to high single digits. "They've had ratings contraction, and we expect there'll be more with Jay leaving. Conan will hold the younger end but lose the older viewers, and they've haven't gone over to Letterman," said a buyer, adding that CBS was pushing its late-night properties hard.

Daytime saw discounts in the low single digits since it is a daypart popular with all advertising categories. "The other dayparts show a much truer demand picture than primetime," said one agency buyer.

Networks are already planning to price their scatter airtime at a premium to upfront in expectation of ad comeback. Moonves suggested his company is already seeing a "phenomenal third quarter" scatter market. The telco category, which typically isn't a big upfront player, will add scatter money into the mix, and pharmaceutical, which has been quieter in recent months as the new White House administration took over, may start to see some greater activity. The government's expansion of the Cash for Clunkers program may also provide some additional advertising demand. The Senate Friday added $2 billion to the auto purchase incentive program.

However, if ratings fall again, as they did last season, and networks are forced to give make-goods, then that will suck up additional inventory and put pricing pressure on whatever is left. One broadcast network executive was said to have been so angry with the aggressive stance of advertisers and their clients that he said clients would "get killed" in the scatter market if demand does indeed return.

On Thursday's earnings call, Moonves no doubt panicked some marketers with his news that third-quarter scatter was already up 30% on the year ago period. He suggested that CBS is so heavily sold that it is cutting back content on reality shows to accommodate rising demand. The ever vigilant Sanford Bernstein analyst Michael Nathanson wondered why, if scatter was so buoyant, advertisers hadn't rushed into upfront territory to avoid high scatter premiums. There was no good answer for that thought.

Ultimately, the broadcast networks finished with no real losers. "They did better than the economic model has suggested," said another agency buyer.