It’s been a month since the broadcast networks previewed next fall’s programs to media buyers in New York, and still the $9 billion upfront hasn’t budged, making this the slowest-moving upfront in memory.
One might think, considering the weak ad market, that media buyers are sweating the networks out, kicking tires and haggling prices down at their leisure. Weak ad markets typically work to the advantage of buyers.
But that's not the case.
This year it's the networks sweating out the buyers, and as in past years when the ad economy was strong, they're looking for price increases and show no sign of backing off.
The networks are asking for price increases ranging as high as 4 percent over last year’s rates, and they’ll probably get them or come real close.
It's a sellers' market, in short, and with each day that passes, buyers are losing leverage in negotiations.
Both sides know that advertisers have earmarked several billion dollars for network TV’s high-rated programs. Buyers can shift some of that money to cable or syndication, but the bulk will still go to broadcast, and at some point the buyers are going to have to give in and accept price increases.
By contrast, the networks can hold off, selling in the upfront what they can get the best prices for and setting aside the rest of their ad inventory for sale in the scatter market, gambling that they can fetch better prices throughout the year as the ad economy improves.
One promising sign is that current scatter prices are trending up 2 percent to 3 percent over last year’s upfront prices.
And from a seller's perspective, what matters at the end of the year is not what share of inventory was sold at the upfront versus scatter--typically 75 percent or 80 percent --but what that inventory sold for.
As one network negotiator explains it, "The number of dollars involved is independent of what the networks can do with pricing. The dollar volume up or down doesn’t impact prices.”
This all leaves buyers in somewhat of a pickle.
Some weeks back the widely held assumption was that in this weak ad market there would be fewer dollars in the upfront and that prices would be lower.
Now buyers have to go back to their clients and explain that in fact prices are going to be up.
Another snag holding up this upfront is that none of the big agencies wants to be the first to give in to the price increases.
The fact is that ad budgets, the total number of dollars advertisers are committed to spending in the upfront, are indeed down. But they are not down all that much, and there’s still enough demand for the networks to raise prices.
“This is the latest evolving upfront in memory,” says David Joyce, an analyst with Miller Tabak. “First steps are being taken--some budgets are being registered. But there’s still a wide gulf in pricing.”
The big question is when the upfront will finally break.
Buyers say discussions with the networks are continuing, and the networks are easing ever so slightly on pricing from the 5 percent increases they opened talks with.
“We’ve got schedules to put on the air in the fall and hopefully we’ll have some places to put them,” says one buyer. “I’m confident we’ll get through this impasse.”
