• by David Goetzl  @dgoetzl, May 19, 2006

Upfront week is usually dominated by talk about bold scheduling changes or the most promising new shows coming in September. But this year, it seems there has been less buzz about what's being done to attract advertisers--i.e., "Grey's Anatomy" moving to Thursday or NBC's slew of new dramas--and more about what the advertisers are doing, one in particular.

Johnson & Johnson's announcement that it will sit out the upfront entirely has been a lightning rod for conversation all week--both in casual exchanges at cocktail receptions and in news conferences with network sales executives.

The early-week declaration by J&J--a huge advertiser--that it would delay its upfront participation until August caused some speculation that the overall upfront market could take a revenue hit. But in the last couple of days, that prospect has been minimized.

On Thursday, Fox Sales President Jon Nesvig suggested that J&J may even alter its plan if the market proves to be particularly robust and the company faces being shut out of prime inventory. Nesvig said J&J has indicated "that if things are really happening, they want to be kept abreast, and if they have to move forward they will."

"They prefer to move later, but if they have to (move sooner) they will," he said during a news conference where Fox unveiled its new fall schedule.

A J&J representative did not immediately return a call for comment.

Also, an upfront forecast released Wednesday from Merrill Lynch suggested that J&J's decision to wait until late summer before making deals (to better synchronize television planning with its internal operations cycle) could have an "insignificant" effect on the overall market. The reason is that late summer is when upfront agreements turn into firm commitments--when handshakes morph into dollar exchanges--and if J&J makes its deals around that time, the upfront market could ultimately be unaffected, presuming J&J doesn't drastically reduce spending.

"They are going to participate in the upfront, and timing is the question," Nesvig said.

Some have suggested that J&J's decision to make deals outside the traditional late-spring frenzied bazaar indicates a shift of power from the networks to advertisers, in part because marketers can shift dollars to emerging media. "The most obvious impact of the proliferation of new distribution platforms is increased leverage for advertisers, who now have more options when putting their budgets to work," the Merrill Lynch report said. "All else being equal, this could put pressure on upfront dollars."

Network executives, however, have maintained two things: They're ready to do business outside the condensed upfront, and they have an array of new media options to satisfy advertisers' quest for new platforms.

Regarding upfront tradition--where networks announce new schedules in mid-May, advertisers study the lineups and new shows for a week, and then a flurry of deals take place--network executives say deal-making is increasingly moving to a year-round operation, or at least a more elongated upfront.

"It isn't quite the rush that it used to be," said NBC Universal President-COO Randy Falco.

"The upfront is sort of like the mythical beast that everybody says, 'We announce our schedules and then it happens,'" said Nesvig. "It happens when people get ready to buy--and sometimes that is an extended period, and sometimes it's a very short period."

Merrill Lynch suggested this year's upfront will "finish later than in past years," in part because the wealth of digital offerings networks are selling along with television spots can complicate the process.

Nesvig agrees. "We're having a lot more pieces rather than just prime time," he said. "It takes longer. My anticipation would be it will probably stretch out longer just because of the complications. (But) the upfront doesn't end because we throw a gate down. It usually ends because (News Corp. Chairman-CEO) Rupert wants to report (results to investors), so we've got to (complete it)."

Nesvig said nearly every discussion Fox has had with prospective upfront buyers involves adding a digital element to a deal, along the lines of Burger King's recent sponsorship of downloadable episodes of "24" on MySpace.com and Toyota's attaching itself to "Prison Break" shorts on mobile phones. The goal is to "take the popularity of the content generated by the broad-based network and give them marketing extensions onto other platforms."

"The vast majority of money is going to the broadcast platform, but people are more than ever willing to pay for the other extensions," Nesvig said. "And I think as content providers, the large media companies are in a very strong position to satisfy advertisers' digital needs."

Said Merrill Lynch: "We believe the traditional broadcasters may be better positioned for this market than generally credited."

Even if J&J doesn't buy this upfront, one media agency executive said the actual loss to the broadcast networks won't be near the reported $500 million. He said about $250 million probably goes to cable--where J&J already does calendar-year deals. Additionally, J&J also buys daytime, late night, and, especially, news programming. When everything is subtracted out, the network's prime-time upfront loss from the missing J&J may only amount to $20 million to maybe $50 million.