Upfronts Preview: Networks Poised to Take in $9B

The WRAP
By John Consoli
Published: May 11, 2010

The Big Four broadcast networks are poised to take in about $9 billion in primetime ad dollars in this year's annual upfronts, which begin Thursday in New York -- mirroring two years ago, and recouping the $2 billion they lost in the middle of last year’s economic downturn.

Indeed, the networks seem likely to rebound with price increases in the 8 percent to 10 percent range --and possibly even be higher depending on the shows and packages.

"There is no gloom and doom about broadcast television advertising this year," one network sales executive told TheWrap. "The media buying community is not talking about price decreases and tough times this year because they know such posturing is not going to help them."

(See accompanying article: "A Very Good Year for Hispanic TV")

Last year, when media buyers took such a hard line on pricing, the networks decided to sell between 10 percent and 15 percent less advertising inventory in the upfront than they had the previous year. As a result, ABC and CBS both took in about $1.9 billion in primetime ad dollars in last year's upfront, while Fox garnered about $1.6 billion, and NBC $1.5 billion. The fifth broadcast network, The CW, sold about $300 million.

This year's totals could reach $2.5 billion each for ABC and CBS, $2 billion for Fox and NBC and about $350 million for The CW.

And advertisers are going to be more aggressive in buying more upfront ad time so the prices will be guaranteed, rather than taking a chance, as they did last year, on the scatter market. (Commercial time not bought in the upfront, where pricing is locked in for the entire season, is sold later in the scatter market.)

When demand continued at the start of the new season last September, prices for scatter ads rose tremendously, with the networks getting price increases of as much as 25 percent.

In fact, about 20 percent more ad dollars are being spent in the scatter market this season, and a lot of that is going to move back into the upfront, the network executive said.

What’s more, buying is expected to be concluded sooner.

Longtime media buyer Larry Novenstern, who most recently oversaw electronic media buying at Optimedia and is now an independent media consultant, believes this year's upfront negotiations could be done as early as mid-June and probably not beyond July 4 -- a month or more sooner than last year.

The network sales exec agreed. "You don't want to be a follower in a seller's market that's going to be strong like this. You want to be out front. The agencies that don't do early deals are going to be in trouble."

Fueling heavy demand is the competition within nearly all the major advertising categories. Ironically, the auto category, which was one of the hardest hit by the cratering economy, has seen many carmakers, like Ford, spend more money over the past year than they have historically. And Toyota most likely will continue to spend more to strengthen its brand to consumers.

In addition, WalMart's massive spending will continue to force other retailers such as Target, Sears and JCPenney to stay competitive. And in the wireless category, Verizon and AT&T will continue their back-and-forth battles.

Competitive battles also will continue in the tech category with Apple and Microsoft; in electronics between Sony, Samsung and LG; in soft drinks between Coke and Pepsi; and in fast food with McDonald's, Wendy's, Chili's, KFC and Applebee's. Even banks and other financial services companies have returned to television in a big way.

"There are competitive and marketing needs in all the major categories that call for the kind of brand building advertising that TV does best, and TV advertising is still the best way to impact large audiences quickly," Jon Nesvig, president of ad sales at Fox Broadcasting, told TheWrap.

"Last year at this time there was no advertiser who said they could look beyond a few weeks or a month to decide where and how to spend their marketing dollars,” another broadcast network executive said. “There was a protracted decision-making process last year. I'm not seeing that attitude right now."

Even at NBC, which took in the smallest amount of upfront dollars last year, inventory is tight.

Individuals familiar with the sales situation there said the entire NBC lineup is more than 85 percent sold of its second-quarter ad inventory through June. And NBC is going to have more expensive commercial time to sell in this upfront without the lower-rated “The Jay Leno Show” eating up five hours of primetime per week.