Media economy
The upfront is about to break. Or not.
By Louisa Ada Seltzer
Jun 29, 2009 - 9:05:46 AM

The timing would seem about right, and indeed there are stories out there that the upfront broadcast market is about to break, perhaps even today.

It would hardly come as a surprise if in fact media buyers and the broadcast networks began finally making deals, it now being over a month since the networks previewed their fall schedules to buyers.

This upfront market has already set a record as the slowest-moving in memory.

In years when the ad economy is booming, as it is not this year, the upfront typically starts off with a bang, finishing up in just several days--and usually weeks before this point in late June.

But all that said, the upfront could stall yet weeks longer.

What's different this year is that the ad economy is hurting as it was not last year or the year before, and ad budgets for network TV are down.

With less money in the marketplace, there's less demand for network ad time. There's then less urgency for buyers to rush in to snap up prime inventory for fear of losing it to someone who got there first. They've got the time to kick tires and negotiate.

There's also the sense among buyers that the networks are feeling vulnerable, or at least ought to be, in the weak ad climate and are more willing to cut deals on pricing than during years where demand is much stronger.

Typically during periods when the ad economy is suffering, sellers are more open to giving buyers price breaks to move inventory, making it a buyer's market.

Earlier this spring, things looked especially bad for the broadcast networks, with reports that spending at this year's upfront would be way down, by perhaps as much as 20 percent

But the fact is, the broadcast networks are not nearly as vulnerable as buyers once thought, and what's holding up this upfront is not buyers holding out for better deals but the broadcast networks holding up for price increases over last year--and refusing to budge.

They're looking for percentage increases in the low single digits.

Several factors are working in the favor of the broadcast networks, and one is demand among advertisers is not nearly as weak as many believed those months ago when the U.S. economy was still in the throes of the banking meltdown.

And even if demand is off some, it's still strong enough to give the networks the edge in negotiations.

They know buyers can move some dollars to cable and syndication but the bulk of ad dollars committed to the networks will still go to the networks, close to $9 billion.

Further, the networks have the option of holding back inventory if they are not getting the prices they're asking.

That inventory can always be sold later in the year in the scatter market, where inventory not sold in the upfront is auctioned off throughout the year. And with the economy slowly improving, it's a reasonable bet that the inventory will fetch better prices as the year wears on.

Time is then on the side of the sellers.

Not so the buyers.

They or their clients are up against deadlines in terms of locking down their fall schedules. As one buyer told Media Life last week, "We’ve got schedules to put on the air in the fall and hopefully we’ll have some places to put them."

The question now, as it has been for weeks, is which side will break first.