Frisky scatter market, even with disruptions

'To be fair, upfront pricing is usually considerably lower than scatter. So, in that sense, you can say it’s softer. But the important thing is that we are getting at least, if not above, upfront prices.'

Frisky scatter market,
even with disruptions

Fourth-quarter prices holding at upfront levels

By Kevin Downey

   In what has of late become a topsy-turvy media world where nothing goes as expected, there is yet more surprising news, in of all places the scatter market.
   It is alive and not doing as poorly as many expected.
   Rather than sinking after last month's terrorist attacks, it is holding even with the third quarter, with ad prices running about even with prices set in the summer’s network-TV upfront market.
   Credit goes to a combination of steady, if not robust, advertiser demand and a reduced amount of available inventory.
   In a healthy ad year, scatter prices come in at a 15 to 20 percent premium over upfront prices, which is to say that this quarter's scatter prices are down by those percentages.
   Yet many analysts had expected much deeper declines in light of industry-wide projections for the ongoing ad sales slump stretching into at least the latter half of 2002.
   "I don’t think prices are up from the upfront but I don’t think they’re down," says one network negotiator. "But you don’t really know until you get further into the market."
    A spokesman for CBS, which held back more inventory than usual during the upfront in hopes of a strong scatter market, says: "Our prices are about flat or a little bit above upfront pricing.
   "To be fair, upfront pricing is usually considerably lower than scatter. So, in that sense, you can say it’s softer. But the important thing is that we are getting at least, if not above, upfront prices."
   The reason for the relatively strong pricing has more to do with the reduction in inventory than it does with advertiser demand.
   Some of the roughly 20 percent of ad time left unsold after the upfront is being snapped up by make-goods, which is ad time the networks are giving to advertisers that were displaced by nearly a week’s worth of commercial-free coverage of the terrorist attacks.
   Inventory is also lower simply because there are fewer rating points available for advertisers to purchase, reflecting a slump in viewership.
   The six major broadcast networks have had a 13 percent decline in ratings in the first two weeks of the fall season compared to the same time period last year.
   That may be due to viewers migrating to the cable news networks for updates on military strikes and the anthrax scare.
    "When ratings are down, it artificially tightens up the marketplace," says Tom DeCabia, executive vice president of Advanswers PhD.
    "Depending on what you are guaranteed, the networks would have to take out units to make good to the advertisers that are being under-delivered."
   While the networks gain no revenues from make-goods, there is some good that comes to them.
    By keeping scatter prices from falling below upfront prices, they are able to maintain the integrity of the upfront market, when advertisers make commitments for the coming four quarters.
   In plain language, that means they don't have to face great numbers of irate advertisers who bought early and in volume, thinking they were getting price breaks, only to see even lower prices in the open market.
   But that also means the networks end up with less ad inventory that can be sold to generate current revenues, versus make-goods, and that translates into reduced total ad volume for the quarter, which in turn plays right into projections for ad spending declines.
   The Myers Reports recently projected that ad spending on the networks would fall 6 percent this year, to below $16 billion, with an additional 9 percent decline in 2002, to just over $14.5 billion.
   The networks might benefit, however, from what some see as a possible uptick in ad spending from retailers competing for consumer dollars this holiday season.
   Retail is the second largest advertising category, with over $10 billion in annual ad expenditures.
   The National Retail Federation has projected a 2.2 percent increase in consumer spending for the fourth quarter. While that’s down from an earlier forecast of 4 percent, it’s one of a very few positive signs that advertisers will be chasing consumers with money to spend.
   To help things along, the NRF president and chief executive, Tracy Mullin, has encouraged President Bush and Congress to go ahead with an economic stimulus package following the terrorist attacks and the subsequent economic downturn, in a letter sent earlier this month.
   Mullin said that retail spending accounts for about two-thirds of the gross national product and that tax relief could lead to more consumer spending.

-Kevin Downey is a staff writer for Media Life.

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