• by Wayne Friedman , July 6, 2005

With 2005-06 upfront advertising sales that are flat at best, it now appears that the television syndication marketplace is undergoing a fundamental shift toward a year-round scatter marketplace. The shift may create greater uncertainty for the syndication ad revenues of the major Hollywood studios, as well as the advertising prices paid big TV advertisers.

"A scatter market is becoming more prevalent," said Howard Levy, executive vp of Buena Vista Television Advertising Sales. "You don't want advertisers coming to you and have to tell them you are sold out. I don't want to be totally open either. If there is inventory for scatter, we can get premiums."

Bob Cesa, executive vp of advertising sales for Twentieth Television and DirecTV, notes that the percentage of syndicators selling their inventory in the upfront has been slowly drifting down: "It was high water market two years ago. Since then it has been going down." Why?

Market forces have a lot to do with it. The scatter market over the last two years has been weak, with some pricing below that of the upfront marketplace. That has advertisers holding back money in the upfront market and buying in scatter.

Traditionally, syndication hasn't benefitted from the scatter market, since the majority of syndication inventory is sold during the upfront. Syndication has less inventory to sell than cable or network. This year, syndicators might sell anywhere from 50% of its inventory in weaker shows to 90% for those shows in demand.

With about 80% of syndication's upfront ad sales completed, sellers say program pricing has ranged from 2 percent below last year's numbers to about 2% above. Total upfront sales volume for the 2005-06 season is expected to be either even with or down slightly from last year's $2.4 billion upfront syndication marketplace.

Positive news?

Syndication ad executives, like cable and network executives, expect a scatter market to develop--and that's why they have kept inventory around for sale for the upcoming season. That withholding of inventory has also kept prices more firm.

Indications are that media buyers could be coming back in the scatter market. "People told us [upfront] money was down, but their sales were good," said Buena Vista's Levy. "You would think that they want to keep some money for scatter."

Some syndicators, such as Buena Vista, witnessed overall revenue hikes because of new shows added to their roster--off-net reruns of "Alias" and "My Wife And Kids." One major studio syndication ad sales executive said money was down for virtually all categories--pharmaceuticals, movies, and retail. This had the executive believing that syndication overall had dropped some money year to year--perhaps in the $100 million range, which would put the business at $2.3 billion.

"About 75% of all syndication money goes into the top 20 shows," said the executive. "If all that revenue was flat, that means the rest of the money was lower than the year before."

Foreign autos and entertainment spending in the form of DVD products and video games were among the few categories that witnessed rising budgets. Said another major studio advertising sales chief: "Overall, syndication didn't bring in new categories or new advertisers." Top shows grabbed some increases in pricing--Sony Pictures Television's "Seinfeld," King World Productions' "The Oprah Winfrey Show," and Warner Bros. Domestic Television Distribution's "Ellen," to name a few.

During 2004's upfront market, syndication--like cable and network--posted gains. Syndication shows reeled in 5% to 8% program price hikes. The year before, 2003, witnessed even better sales conditions.