Thursday, July 16, 2009

Will Price Rollbacks by ABC, CBS, Fox Jump-start Stalled Upfront?

by Brian Steinberg
http://adage.com

Top Networks Offer 'Obligatory' Declines, but Buyers Want 'Something Deeper'

NEW YORK (AdAge.com) -- The three best-performing broadcast networks have begun offering price rollbacks, the latest sign that both sides in this year's protracted upfront negotiations are slowly drawing closer on terms.

According to media buyers, ABC, Fox and CBS have begun offering slight declines in the cost of reaching 1,000 viewers, or CPM, a common measure in upfront discussions.

Those declines appear to be in the range of 1% to 3%, according to executives familiar with the talks. Buyers said News Corp.'s Fox is not going as negative as its rivals, citing top-draw programming such as "American Idol" and the network's Sunday-night animation lineup.

The buyers also said CBS has been trying to keep from rolling back prices, citing its ability to increase ratings in important categories in the recently completed season.

All three networks, which finished the year with stronger ratings than rivals NBC and the CW, declined to comment on the status of their negotiations. NBC has been said to be offering mid- to high-single-digit percentage decreases in CPM.

CBS and ABC have been telling buyers they don't consider pacts with NBC something they need to match, according to people familiar with the situation. With a coming fall season that includes five nights of a Jay Leno-hosted talk show that is not expected to bring in the ratings of a traditional hourlong drama, NBC has fewer prime-time ratings points to sell. That said, NBC has made some gains in the market with its cable channels, according to buyers, and some theorize that rivals worry that sitting on the sidelines for too long could give those cable outlets a chance to steal ad dollars.

The broadcast networks typically sell 70% to 80% of their advertising inventory for the fall season during upfront talks, but the roiled economy has prompted concerns from advertisers that have forced prolonged bargaining. Typically upfront talks finish in mid-June, but buyers said little business is being finalized, as advertisers press for significant rollbacks in pricing, and the overall volume of ad commitments is down.

It's unclear whether the networks' willingness to offer rollbacks will result in a quicker pace to the proceedings. The figures are "obligatory negative numbers," said one buying executive. "We're looking for something deeper than that."

The longer the palaver over pricing, however, the direr the situation becomes. If the two sides can't come to an agreement, will there be ads to support "Grey's Anatomy," "House," "CSI" and the rest of the nation's best-loved shows come the fall?

Around mid-August, media buyers say, there's a very real concern that upfront negotiations will not be able to be completed in time for the fall season. Already buyers are starting to envision a "total scatter market" for the fourth quarter, in which advertisers pay for time on an as-needed basis at a price the marketplace will bear. First- and second-quarter ad berths would be negotiated in advance, they said.

TV networks are said to be anxious not to dismiss the future value of their ad time, and have been touting the fact that an improving economy would raise prices in the fourth, first and second quarters. Advertisers, meanwhile, have taken the position that an economic recovery won't be in sight until well into 2010, and are emphasizing an inability to increase ad spending while consumers are unable to countenance price increases.

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