Just about everyone says that the 2011 upfront ad sales season that kicks off this week will be a record-setter. Barclays Capital analyst Anthony DiClemente expects advertisers to commit about $9.2 billion for prime time spots at ABC, CBS, Fox, and NBC in the season that begins this fall. That’s up 7.5% vs. last year and will beat 2008’s record $8.8 billion. He also says this will be the first year buyers will spend an equal amount on all of cable, up 15.3%. But don’t fool youself into thinking that this has much to do with the quality of the sitcoms, dramas, and reality shows that execs will unveil to ad buyers this week at the networks’ unconscionably extravagant presentations.
Once buyers recover from the networks’ childish efforts to dazzle them with celebrities, shrimp, and booze, they’ll begin their mundane deal-making for clients who need to be sure that they’ll have airtime to help them move product. But companies don’t want to make the same mistake that a lot of them made last year by postponing ad buys in the hope of landing a better deal in the scatter market. Many who waited had to pay as much as 40% more for spots in the first quarter of 2011. Auto makers, TV’s biggest advertisers, can’t afford to sit on the sidelines. They hope to sell about 13 million cars this year. That would be up 13% from last year, but still short of the 16 million that was the norm before the economy collapsed. Wireless phone companies, another big advertiser, also plan to advertise heavily to gin up consumer enthusiasm for their pricey new 4G smartphones. Electronics manufacturers will do the same for their new iPad-wannabe tablet computers and 3D TV sets. And insurance companies led by GEICO, All State, Aflac, and Progressive – eager to attract young policy buyers — will continue to try to cast themselves as edgy and fun instead of merciless greed-hogs.
Most advertisers will grit their teeth as they make these deals. They know that the size of network television’s live audience, and therefore the number of people who may actually watch the ads, diminishes every time someone rents a DVR or discovers an online service such as Hulu and Netflix. Advertisers will spend heavily on network TV because they don’t have much choice. There simply isn’t another medium that reaches a mass audience as effectively. That won’t last long – digital media including social network sites such as Facebook may soon be able to do the job for less. Not yet, though.
But remember: Advertisers can and often do back out of their upfront commitments. That could become a big problem if the economy suffers a relapse. In that sense, CBS chief Les Moonves’ decisions regarding Two And A Half Menmay be less important to his company’s prospects than whether President Obama and House Speaker John Boehner can reach an agreement to increase the federal debt ceiling. Other uncertainties also could change the landscape. For example: How much will Japanese auto and consumer electronics makers cut production if the country faces rolling blackouts following its earthquake and tsunami? Will T-Mobile slash its ad spending as it waits to see whether federal regulators allow AT&T to acquire it? Will Big Pharma companies cut ad purchases as patents expire over the next year for blockbuster drugs including Plavix, Lipitor, Seroquel, and Concerta? And what will the networks air if the NFL and NBA seasons are scuttled due to contract disputes between owners and players?