Media economy
The upfront market will be up. Or not.
By Kevin Downey
Mar 30, 2007, 07:34

When media buyers arrive for the television upfront market in May, they'll have pockets full of clients' dollars and be ready to snap up ad time for the upcoming television season after two soft years.

Or maybe not.

Depending on who's talking, Wall Street analysts or media buyers, spending in the upfront will be up, possibly in mid-single digits. Or it will be flat to down.

While there's always a range of spending estimates going into every upfront, this one amounts to a sharp divide, and a lot of it has to do with how each side is weighing certain factors that will affect pricing.

These factors include the strength of the scatter market, in which ad inventory not sold in the prior upfront is auctioned off. Based on their reading of the scatter market, analysts obviously see strong demand among advertisers.

But also in the mix is just how much of a role new ratings data for delayed viewing will play. Adding ratings for delayed viewing would increase total ad inventory over live-only viewing that is now the currency for negotiating ad prices, pushing up total sales, in theory.

Just yesterday, David Joyce, an analyst with Miller Tabak & Co., told Media Life he expects the broadcast networks to post a 4.7 percent bump in spending, with expenditures set to reach $9.5 billion, or about two fifths of the projected $24 billion total upfront market, which also includes cable, syndication and kids ad time.

Joyce expects some amount of DVR-recorded viewing will be included in the negotiations, increasing the amount of available rating points for sale. It would be the first such upfront to include delayed viewing. Most media people believe full use of delayed viewing data will not take place until next year.

Nielsen only began reporting the data in January, and networks argue it should be used as a currency because so much viewing is now done via recording devices like TiVo, with as much as 20 percent taking place after the initial airing.  Says Joyce: "They will probably [negotiate] on live-plus-same day DVR viewing,” or shows watched within the same day as when the show airs.

Joyce’s forecast comes on the heels of an only slightly less upbeat outlook from Merrill Lynch analyst Jessica Reif Cohen. She expects the networks, cable TV and syndication to each post 3 percent growth, with network TV growing to $8.7 billion. Cohen pegs her forecast to the strong scatter market, which she believes is encouraging buyers to come into the upfront to cut better deals.

But media buyers don’t see it. Principally, they simply don't see the demand among their advertiser clients going into the upfront market.

“I would be surprised to see anything better than flat, based on what our clients are talking about,” says one Midwest buyer. “Our clients are not pulling dollars out of national television but they aren’t growing their budgets like they were several years back.”

Another buyer tells Media Life she broke out laughing when she saw Cohen’s forecast. She especially doesn't see increases for cable ad sales, arguing that there are now so many cable networks to choose from that none is really a must-buy. Buyers have the luxury of walking away from a network if prices aren’t favorable and choosing to buy later in the scatter market.

As for the scatter market, prices aren't as robust as the networks would suggest, says the Midwest buyer. Prices are up but not where it's critical, in primetime.

“The networks try to create a bit of a frenzy in the second quarter marketplace as a way to get people thinking the upfront will be robust,” says the buyer. “In early morning, we have absolutely seen increases in scatter prices over upfront prices. But we haven’t seen that to be the case in primetime or on cable.”

Still, forecasters are giving sellers the upper hand over buyers in negotiations. Joyce thinks each of the broadcast networks will post increases over last year, and he says one reason is that competition from the internet isn’t quite as intense as many buyers had expected it to be.

And no other medium has the power of TV to reach tens of millions of consumers in one shot.

Joyce is projecting a 5.3 percent bump for CBS, to $2.5 billion, pointing to the network’s stable ratings and some possibility that buyers will give it additional credit for strong household ratings, which would extend the network’s reach beyond demographic ratings buyers typically use in negotiations.

Joyce’s forecast is more bullish than Cohen’s largely because of his outlook for CBS, which Cohen expects to be flat.

Joyce expects ABC to see expenditures grow 4.3 percent, to $2.4 billion. He has NBC growing 3.9 percent, to $1.975 billion, and Fox up 5 percent, to $1.89 billion.

He also expects the CW to grow 8.1 percent, to $700 million. Cohen is projecting flat upfront spending on the network at $630 million. Both analysts are projecting a steep decline for MyNetworkTV, which in its first season is already revamping its programming strategy.

“I’m assuming a mix of price increases and volume increases,” says Joyce of the overall upfront. “But [forecasting] is an art, not a science.”