Tuesday, December 30, 2008

TV Retains Marketing Dollars in Hard Times


While newspapers, magazines, radio and local television are all losing advertisers in the recessionary economy, the broadcast networks continue to be an anomaly, with advertisers putting their marketing dollars into national television at levels reminiscent of prosperous economic times.

“American Idol” is an annual ratings juggernaut for Fox. “We’re maintaining our business” said Jon Nesvig of Fox Broadcasting.

“The shoe hasn’t dropped yet,” said Kris Magel, senior vice president and director for national broadcast at Initiative, a media buying agency. The troubled economy “hasn’t hit national television yet,” he said.

It’s not because the four major broadcast networks are delivering more prime-time viewers to advertisers than they did last season; they are not. Cumulatively, they are down 10 percent in actual live viewers, with ABC, NBC and Fox all drawing around a million viewers less each night than they did last season. CBS is the one network that has improved from last season; the network is up 1 percent in viewership.

Among the 18-to-49-year-old audience sought by advertisers, there are also declines. Both ABC and Fox are down 14 percent, while NBC is down 9 percent and CBS is down 3 percent.

So why are advertisers still putting their money into broadcast television? Network sales presidents and executives at various media agencies, who do the ad buying for the major advertisers, said that despite the continued fragmentation of national television viewing, the power of the broadcast networks to reach mass audiences on a nightly basis continued to give them an edge over other media.

“When the economy goes into a recession, marketers are looking at ad platforms that generate the most efficiency, and that is national television,” said Rino Scanzoni, chief investment officer for the media agency conglomerate Group M, where he oversees broadcast TV ad spending of close to $3 billion for media agencies Mediaedge:cia, Mindshare and MediaCom. “When ad budgets are strapped, advertisers turn to the tried and true, and national TV has proven that it works in helping them move product in good and bad economic times.”

Mr. Magel of Initiative said, “Broadcast television may be losing ratings, but there is no other medium that has been able to supplant it in a big enough way to negatively impact it at this point.”

Still, as a result of the ratings declines, the broadcast networks have had to give advertisers make-goods — free ads — to make up for failing to deliver the ratings they guaranteed when they sold their ad time to advertisers last May in what is known as the upfront buying period.

The upfront process, unique to the broadcast and cable networks, is another reason advertisers have remained loyal to the TV networks during economic downturns. In the upfront period, advertisers commit a certain amount of advertising dollars to each network for the coming season. And in exchange for those commitments, the networks offer ratings guarantees; if they are not met, the networks must make good on those shortfalls by giving advertisers free ad time.

With three of the four major broadcast networks showing significant ratings declines since the start of the TV season in late September, they have been doling out make-goods, particularly in the month of December. That means they are giving back ad time that they cannot sell in what as known as the scatter ad market. Only CBS is doing well enough in prime time that it has not yet had to give out make-goods, so it has been able to sell more of its remaining ad inventory.

”We have zero make-goods,” said Leslie Moonves, president and chief executive of the CBS Corporation, of his broadcast network’s prime-time performance. “Demand is not what we would like it to be. And scatter pricing is basically flat with what the upfront pricing was.” Last year at this time, it was as much as 40 percent higher.

But Mr. Moonves said that not having had to give make-goods so far this season has put CBS in a better position than the other networks to sell more ad inventory now and in 2009, if advertisers remain interested.

While they are short of available inventory to sell because of make-goods, both ABC and Fox said that heading into the first quarter of 2009, each would be scheduling programming that would raise their ratings and enable them to sell more advertising in the scatter market.

Fox will have its annual ratings juggernaut “American Idol,” while ABC has five new scripted prime-time shows it will introduce from January to March.

“We’re maintaining our business and have not been faced with any type of major cancellations,” said Jon Nesvig, sales president for Fox Broadcasting. “First-quarter upfront retention was over 95 percent, and we’re selling scatter for first quarter at upfront pricing or slightly better. We have not renegotiated any deals. Everybody has many concerns going forward, but we’re hoping for the best.”

Production on new shows for this season was limited because of the writers’ strike last fall, and as a result, ABC had only one new show in the fall. Because of that, Mike Shaw, president of sales at ABC, said he expected that ratings would be challenged, and that ABC tried to reflect that situation in how it sold in the upfront period.

“Right now our scatter pricing is better than what we sold in the upfront, in all day parts,” Mr. Shaw said. ”Cancellations by advertisers are at normal levels. And with most of our new programming not coming till the first quarter, our report card really can’t be written until March.”

NBC, which has no new shows that have made any sort of impact with advertisers, said it was still keeping its head above water.

“As expected in this climate, we’re compensating our advertisers with make-goods,” said Mike Pilot, president of sales and marketing at NBC Universal. ”At the same time we’re still doing business, although at a slower pace. Our clients continue to recognize the value of broadcast television, they’re just spending their money closer to air dates.”

Mr. Magel of Initiative said, “Broadcast television may be losing ratings, but there is no other medium that has been able to supplant it in a big enough way to negatively impact it at this point.”

Most media buyers, who did not want to make any predictions for attribution, said that the broadcast networks might make it through this season, which ends in late May, without any major advertiser defections. The impact of the economy on the broadcast networks could be felt in this May’s upfront buying period, when advertisers buy for the 2009-10 TV season, but for now the relationship between national advertisers and the broadcast networks is like any traditional TV season.

“We’re all waiting for the broadcast TV marketplace to slow down,” said Mr. Magel. “We all believe at some point it will. But right now the money keeps flowing —it’s perplexing, but it’s reality.”

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