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to hold back ad inventory
Media bigs: CBS upfront strategy will likely bomb
By Kevin Downey
If Mel Karmazin has his way, media buyers may not get the pricing breaks they were expecting in this year’s network TV upfront.
The Viacom president is threatening to hold back CBS's ad inventory as a way to diminish supply and keep prices buyers pay in line with last year’s.
But media buyers and analysts think it's a risky strategy at best and one that could well backfire for CBS.
Holding back inventory at the upfront would put CBS at risk of sitting on unsold inventory in an economy that is showing few signs of improving later in the year when the network would hope to jack up prices.
"Karmazin said they’d hold back inventory but what good will it do for them?" quips Erwin Ephron, a media consultant.
"The big buyers are not stupid. They know if the networks are sitting on 30 percent of inventory, they can take their time. It will be a more equal battle this year between sellers and buyers."
Karmazin is clearly trying to prevent a selling rout in which ad prices would tumble.
"The networks’ pricing may be down as much as 10 percent if they try to sell everything," says Michael Russell, a media analyst with Morgan Stanley Dean Witter. "If you want pricing to be flat, you might want to sell less. It depends on how much risk you want to take."
Most analysts and media buyers say that Karmazin’s plan is little more than posturing. Speaking publicly about such plans may be a way to drum up media attention.
"It’s very creative," says Russell. "It’s interesting how out in the open they have been, which means they want the other networks to join them."
Karmazin’s plan is risky because it would work only if the other networks join in, lest they have a field day pulling in ad dollars at CBS’s expense.
It’s something of an OPEC situation in which all the networks would need to cooperate for the plan to work.
So far, the other networks are in wait-and-see mode and none would comment on their plans for this article.
Even CBS does not seem to be fully committed to the plan just yet. A spokesperson for the network says only that holding back inventory is one plan on the table at this point.
"It’s too early to say. Mel [Karmazin] laid out a possibility but it’s a question of whether we get the pricing we want. If we think the pricing is below what we think it should be, we would hold back until it’s up to where we think it should be."
Most buyers say that with the upfronts about a month away, it’s still too early to say what will happen.
"I couldn’t tell you right now whether they’ll do it," says Kris Magel, vice president of national broadcast at Optimedia International U.S.
"The general thinking is that, regardless of what they choose to do, the supply of dollars will not support either strategy. It’s all based on conjecture at this point."
Karmazin has talked about making only 60 percent of CBS’s advertising inventory for the coming year available, compared to the 85 percent or so made available in recent years.
"I think that would be on the low end," says Merrill Lynch media analyst Jessica Reif Cohen. "There’s a risk in doing that because that will leave a lot of inventory available.
"But it depends on what the demand is, and right now, whatever people say is posturing."
No matter what happens, the total take for the networks is expected to go down as much as 10 percent from last year’s $8.2 billion.
Whether that’s because of the reduced volume that CBS has proposed or because the networks make all their inventory available and reduced demand drives prices down remains a question.
"Nobody knows, and we won’t, even as we get right up to the upfront," says Reif Cohen.
April 20, 2001 © 2001 Media Life
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