• by Amy , June 3, 2005

Stressing a "methodical" approach to its negotiations, CBS Thursday announced it would wrap up its prime-time upfront ad sales by this afternoon, raking in between $2.5 and $2.6 billion, an increase of up to 10 percent over the $2.35 billion it took in during its prime-time upfront sales last year. It was the second major network to announce a surge in its prime-time upfront sales. It was also the second to indicate that the overall prime-time marketplace would be flat, suggesting that something's not adding up in this year's network upfront calculations.

On Tuesday, ABC boasted of a 31 percent gain, with upfront 2005-06 prime-time sales of $2.1 billion ($2.7 billion if you include prime-time sports). Both ABC and CBS are claiming CPM gains of 4 percent to 6 percent over what they sold their prime-time ad inventory for during the 2004-05 upfront, dousing media buyers' claims that 2005-06 would be relatively flat and would see only modest price increases if any.

Meanwhile, executives at Fox, WB, and UPN are projecting sales and CPM gains. And even with NBC expected to lose some prime-time market share it now looks like the 2005-06 prime-time upfront will rise by about 3 percent - not exactly the flat market both buyers and sellers have been posturing.

Meanwhile, a top Wall Street analyst, Merrill Lynch's Lauren Rich Fine, Thursday reaffirmed her outlook of "no ad momentum" for the 2005-06 upfront, noting that there is now "some concern that the lack of momentum could reduce enthusiasm for the cable upfront market."

If this seems like a lot of mixed signals, it likely because all of the sales claims are just that: claims. And that even in the post-Sarbanes Oxley world of corporate financial governance there is no requirement for CEOs of CFOs to certify their upfront sales claims. That's because the upfront is not necessarily an indicator of actual revenue, cash flow, or shareholder equity. They're only an indication of what advertisers have "committed" to spend. Actual sales can fluctuate dramatically based on how well upfront deals "firm up" once they go to "hold," how marketers exercise so-called cancellation options during the actual TV season, how well the networks' scatter market sales perform for their remaining ad inventory, and how much of that inventory they have to use for so-called "audience deficiency units" if their shows do not meet their ratings guarantees.

In other words, it now appears that the 2005-06 network upfront prime-time marketplace will be up, mainly because the networks say it will be.

Based on current calculations for network upfront ad sales claims and expectations, Merrill Lynch's Fine Thursday released a projection of network market shares, which show a significant shift toward ABC (up 5.2 percentage points to 24.6 percent of the upfront market), and CBS (up 2.1 points to 30.6 percent), and away from Fox (minus 0.3 points to 17.9 percent), and especially NBC (minus 7.1 points to 26.8 percent).

If accurate, that's an amazing erosion of market position for the one must-see TV network, and signals a fundamental restructuring of the broadcast network marketplace.

Of course, the upfront isn't quite over, and a certain amount of revisionism is inevitable before networks, media buyers, analysts and the press call it an official wrap.

For her part, CBS President of Network Ad Sales JoAnn Ross doesn't believe ABC's early sales momentum hurt CBS ability to make its upfront sales goals.

"We were all in the marketplace at the same time and they chose to go quick and very conceptual with clients, while we chose to be more methodical. We're very happy with where we are. We've written a lot of volume-- more volume than we have in recent memory."

The swiftness of the upfront market is not surprising given the surging demand from marketers, Ross said.

"Demand is coming from couple of places," she said. "The fact that we're the only network that exhibited growth across all the key major demos this year is one reason the market is moving so quickly. Although [ABC] had 'Desperate Housewives' and 'Lost,' we had growth on every night of the schedule. We have two hit comedies coming on Monday night, and buyers and advertisers seemed to respond to that. And lastly, NBC is no longer the dominant network."

The seemingly robust quality of the upfront hasn't been diminished by news from TNS/Media Intelligence this week that the first quarter of 2005 experienced the slowest growth since the end of 2003.

"I can't say slowing ad growth isn't a concern, but right now, all concerns are being allayed by the fact that the market has moved so quickly and that we've written so much business in the upfront," Ross said. "But it's too early to say whether the upfront as a whole will be relatively flat or not. We're not sure yet, because we don't know how much business NBC will write."

Sources said that Fox is expected to write $1.6 billion by Monday and also garner CPM increases of between 4 and 6 percent.

As for CBS's deals on cancellation options, Ross said that its policies had not changed from previous years.

"As far as I know, we haven't had any change on cancellation options," she said. "Maybe others have. We've been busy working on expansion options."