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upfront, think flat
Least for now. Jitters keep expectations in limbo.
By Kevin Downey
It may seem like the network television upfront can only go up from last year’s abysmal $6.93 billion, but media buyers think it may be heading in another direction: flat.
Of course, the upfront is still months away and anything can change.
At this point, though, few buyers are expecting much in the way of a rebound after last year’s 13.7 percent drop from the previous year’s record $8.1 billion.
Most say the continued uncertainty about where the economy is heading has forced advertisers into a wait-and-see mode and will keep them there until something changes.
As a result, most advertisers are unwilling to commit to big budgets for the upfront, which typically hits in late spring and accounts for about three-fourths of the coming year’s ad-spending.
"We’ll have an idea of what the upfront will look like in March, but right now it seems like it will be flat to last year," says Bill Cella, chairman of Magna Global USA.
Another New York broadcast negotiator agrees.
"To look ahead to the upfront, it will be a mirror of last year," he says. "It’s going to be rough because I don’t see anything changing to turn the market around."
Moreover, the nearly $1 billion spent on Super Bowl and Olympic advertising this year has diverted at least some of the money that advertisers might have set aside for upfront spending.
"The Olympics have an effect when you consider the out-of-pocket for some of these guys is $20, $30 or $40 million," he says. "By our estimation, about a third of that is incremental but about two-thirds comes from regular budgets."
The outlook for a sluggish upfront follows most industry ad-spending forecasts for 2002.
CMR recently projected a 2 percent increase for network TV in 2002 but predicted that a rebound won’t take place until sometime in the third quarter, well after the upfront normally begins. Last year’s upfront, however, was delayed because of the weak economy.
Universal McCann’s Bob Coen has projected that network TV spending will go up by about 3.5 percent this year.
Although most forecasters and buyers are anticipating a rebound from last year’s deflated levels, most say that current market conditions are little changed.
Prices now partially reflect the networks giving away commercial spots to make up for ratings shortfalls, says Erwin Ephron, media consultant at Ephron, Papazian & Ephron.
"I’m sure that the scatter pricing is pacing a little bit above the upfront, but it’s a matter of how much inventory is available. There is a massive amount of units to make good."
An even bigger issue, he says, is the fact that advertisers are increasingly questioning the importance of television for their marketing strategies.
"Clients are beginning to sense the decreasing cost-effectiveness of television," says Ephron.
"It’s not really a question of pricing anymore. There is over-commercialization, which makes television a little less effective because it kills viewer involvement."
Advertising prices generally go up in the scatter market by 15 to 20 percent. Although media buyers and sellers rarely agree on what prices are actually being paid, the consensus has been that rates in the scatter market have been pacing flat with the upfront or, in some cases, below upfront levels.
A few of the networks have said they are getting modest increases, though.
"You’re still hearing the advertising agencies jockeying for more price discounting but you’re seeing some price stabilization," says Michael Russell, an analyst with Morgan Stanley Dean Witter.
"It’s a weird time because January went pretty well and February is all about the Olympics. March is looking flat to slightly up, but people are still uncertain about late March and early April."
Roughly one out of every four advertising dollars spent on network TV is placed in the scatter market, which occurs each quarter.
By most accounts the scatter market was hurt in the fourth quarter at least in part because the networks had to give away commercial spots to advertisers that were displaced by commercial-free coverage of the terrorist attacks late in the third quarter.
Most media buyers say the scatter market has yet to pick up dramatically.
"The lingering impact of Sept. 11 is uncertainty," says one media buyer.
"If there is one thing that Wall Street hates, it’s the same thing that this market hates: uncertainty. The softening we’re seeing is corporate uncertainty, meaning they’ll wait to see what happens. So far there is no reason to tell our clients anything but ‘take your time.’"
The upfront market usually gets an unofficial kickoff in March, when the networks give media buyers a preview of programs in development.
Those presentations have been canceled this year in a move that reflects the ongoing weakness in the advertising marketplace.
"The fact that they can cancel them mostly proves how unimportant they are," says Ephron.
February 11, 2002 © 2002 Media Life
-Kevin Downey is a staff writer for Media Life.
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