As this year’s broadcast network upfront market just wrapped up, we can see the force that’s been driving sales: Fear. ABC, CBS, CW, Fox and NBC seem to believe that the economy will weaken. They’re selling as much of their primetime ad inventory for the 2011-2012 season as they can before it does. Although there are no official figures for the upfront market, word has it that most of the networks are selling about 80% of their inventory this year — up from an average of about 77% last year and 67% the year before. And advertisers are paying higher prices for network TV time because they’re still afraid that alternative platforms, including digital, aren’t potent enough to move product.
The five English-language broadcast networks did well enough to boast about how effectively they played their hands. Their collective ad dollar haul was $9.1 billion-$9.2 billion, up from $8.5 billion last year. Unit CPM prices were up about 14% for CBS, 11% for ABC and CW, 10% for Fox, and 9% for NBC. That’s pretty good considering that their ratings were down across the board in the season that ended in May, and TV audiences are growing older. But for the most part, the price increases were “smaller than what people were writing about four to six weeks ago,” says Jordan Levin, former CEO of the WB Network who now runs talent management company Generate. For instance, the projections for the total volume of ad sales by the five broadcast nets were hovering around $9.5 billion.
CBS is widely perceived as the season’s big winner even though its 14% price increase is short of its original goal of 18%. Even in private, CBS executives insisted that it was a reasonable target — not just a negotiating ploy — considering that scatter prices were running as much as 40% higher than last year’s upfront rates. CBS Corp CEO Les Moonves told an investor conference in March that if CBS didn’t receive “a substantial increase” in prices in this year’s upfront, then “we’ll sell nothing. … We’ll sell it all in scatter.” But that was just bluster in a period of slowing job growth and rising gas prices. “We’re not going to see increases in scatter in the 40% range with the economy looking like this,” says Miller Tabak analyst David Joyce.
The fact that CBS was able to raise CPMs by 14% did leave some market watchers wondering whether Fox was too eager to cut deals ahead of its rivals and should have held out for higher ad prices. But it’s hard to make a direct comparison with the other networks: Fox’s upfront deals did not include one of its most high-profile new shows — Simon Cowell’s The X Factor, which has separate sponsorship deals including one with Chevrolet.
Meanwhile, observers say that — except for CW — the upfront market was largely unaffected by the networks’ efforts to raise prices by offering to run TV ads on digital platforms too. “Integrated marketing deals take time to work out,” Levin says.
Now that the broadcast selling season has wrapped up, advertisers will turn their attention to cable networks. Executives say that recent deals make them optimistic that cable’s unit prices will begin to approach those of the broadcast networks. But cable doesn’t have that cachet just yet. Cable network scatter prices early this year were just 20% ahead of what they charged in last year’s upfronts. And executives say that if economic indicators continue to deteriorate then — unlike with the broadcast networks — some major buyers may hold out for better deals later in the year.