• by Paul Gough , May 3, 2004

To paraphrase Shakespeare, the fault may not be with the upfront, but in ourselves.

The upfront system survived what could have been a near-death experience in last week's Network Upfront Discussion Group meeting. Forty or so representatives from the upfront's constituencies--advertisers, agencies, and the sellers--met for five hours at a posh Manhattan hotel. They debated the two issues in safe legal territory--the upfront's timing and whether there should be an opening and closing bell--and they avoided what has been the driver of much of the discomfort with the upfront over the past two years: Pricing.

But according to interviews with people who attended Thursday's meeting, it quickly became clear that no one had what would have been a way to improve the upfront to the satisfaction of everyone, especially the advertisers. The debate was, by many accounts, vigorous and lively. One ad executive apparently voiced what a witness said were some reservations about the upfront process, only to be told by others that perhaps a different strategy should be employed for better results. One network executive reportedly questioned why the meeting was even taking place.

In the end, it came down to what the networks and others have been saying all along. There are alternatives--if pricey--to moving in the upfront market: Scatter, other television, radio, print, outdoor, and the Internet. It isn't, said one participant, as if the upfront is a necessity for everyone. Advertisers and agencies choose to play in the market, and they have to play by its rules. Those rules include a lot of safeguards for the advertiser, including options and flexibility that protect the advertiser and potentially free inventory for the scatter market.

"There's no arm twisting," said O. Burtch Drake, president of the American Association of Advertising Agencies, a co-sponsor with the Association of National Advertisers of NUDG, in a conference call with reporters Thursday afternoon following the meeting. "This is a totally voluntary activity."

Instead, Drake said, dissatisfaction about the upfront comes down to two factors. A great deal is shock over increasing prices for a declining share of audience. There's also a kind of disconnect on the upfront, where not everyone in the industry really understands what it's all about, Drake said.

"There's an awful lot of misperceptions about the upfront and the process that's involved. There's the feeling that everything happens in a three-day period, and that's not really the case," Drake said. "There's a long and involved process that leads up to the upfront, but the active couple of days when the deals [happen] is simply the endpoint of what has been a long trip."

That's been the contention of a number of agency executives, who say that to discuss the open-all-night nature of the upfront masks the fact that it's only a portion of television buying in the first place. While between 60 percent and 85 percent of a network's inventory is purchased during upfront negotiations, there is still a lot of business done in the calendar year, or even in multi-year deals that can't--for complex reasons--be struck during the upfront.

"Everybody's focused on the upfront, that it's a two-day period," said Jon Mandel, co-chief executive officer of media buying shop MediaCom, who attended the NUDG meeting. "That's just the final transaction. We are doing conversations about what we want and what we need for months upon months before."

Due to legal reasons, NUDG couldn't touch it, but the underlying current behind advertiser dismay over the upfront is pure and simple: The double-digit CPM increases of the past two years.

"People who are reacting to the 24-hour thing and the timing in May, June, or what have you, are really emblematic," said Mandel. "They're reacting to that and yet the issue they have is the higher prices. The fact of the matter is, the higher prices in network television are totally driven by supply and demand."

The free-market nature that is said to rule the upfront is a double-edged sword. In years where there is weak demand--witness three years ago--upfront CPMs fall. When there's a lot of demand for broadcast network prime-time inventory, the prices rise, and it can spill over to alternatives such as cable and syndication.

Mandel said that because of antitrust issues, the cost of media time couldn't be discussed. And the issues that were discussed--timing and the bell--"are merely totems. You have not fixed what the problem is. The problem is only fixed when clients say the price of this media type, be it prime-time television or daytime, is too high and I'm going to put the money into radio, or I'm going to put the money into out-of-home" or other alternatives, Mandel said. But with that being said, Mandel noted that a MediaCom study found that network TV was the one medium that operated under a true supply-and-demand process.

David Verklin, chief executive officer of Carat North America and the catalyst behind NUDG, Friday said that he was pleased that ideas like a closing bell and a calendar year upfront were discussed by so many executives in the industry. He wasn't disappointed by the results.

"It was time for the industry to gather and to take a look at the timing issues. I challenged the industry to get together and to create a dialogue about the upfront timing process," Verklin said. "In a small way, perhaps I helped establish a process for new issues in regard to the business of television to be discussed in the future."

That was one of the key takeaways from two other executives, who asked not to be named. They see positive things from the event just by the very nature of the discussion.

"It was the most productive meeting on the upfront that I have ever attended," said one executive, who said NUDG wasn't a failure at all. That sentiment was echoed by another executive, who was disappointed by media coverage. "It made it sound like nothing happened," the second executive said.

At the same time, Verklin said that he's through, for the time being, as the industry's spokesman.

"I'm done for a while. Let someone else carry the torch for change," Verklin said in an email to MediaDailyNews.