• by Wayne Friedman , June 20, 2007

ABC may be going last in the upfront. But will it have the last laugh?

With the marketplace seemingly stronger than expected--at least in terms of the cost-per-thousand viewer prices (CPMs)--the network may be getting the best CPMs increases of any network, according to some executives.

What exactly are those increases? Deals at eye-popping double-digit 10% plus price hikes. "I heard that ABC got an upfront deal at 12%," said a media executive.

Double-digit increase gains haven't been seen in years. But the question is, how many will ink deals at that rate--all, a majority or just some? ABC might claim higher increases, depending on a client's "base" pricing from a year ago.

ABC worked this past weekend to get ready. The net has been actively making deals with the expectation of completing its sales process by the end of the week.

Media estimates are that ABC has completed 60% of its expected upfront deals so far. Executives close to ABC say the network is tracking more than last year's $2.3 billion in prime time and $3.0 billion for all dayparts. Late night, news and early-morning programming for all the networks might be even stronger than prime-time increases, say executives.

Fox has already finished its deal-making, inking around $1.87 billion, improving about 5% in its overall revenue numbers of a year ago.

CBS and NBC have completed a majority--70% to 75%--of their respective upfront sales deals. NBC expects to also pull in about $1.8 billion and $1.9 billion, about the same as a year ago. CBS will look to better its $2.2 billion of a year ago. Its CW network will take up media buyers' activities for the rest of the week, with the mini-network looking to get past its $650 million total of a year ago.

High rates for ABC this upfront would seemingly make sense--if Fox and CBS booked deals in the 8% to 9% range late last week and over the weekend. ABC is still sold at a bit of a discount to Fox and NBC when it comes to the average 18-49 viewer CPM prices. An ABC spokeswoman had no comment about any upfront moves.

Media executives say the networks are benefiting from a strong scatter marketplace that is spilling over into the upfront process. Strong categories with improved upfront dollars are coming from retail, pharmaceutical, financial and insurance.

One certainty: ABC President of Advertising Sales Mike Shaw's efforts to move the business to include DVR playback ratings finally came to fruition this upfront--albeit a year later than expected. TV deals will now be judged and guaranteed against commercial ratings plus three days of DVR playback, which is becoming known as "C3."

That said, some agencies want to stick with live program ratings for this upfront, such as Horizon Media. But that decision has some downside. "They are asking for higher pricing," said Aaron Cohen, senior vice president and director of national broadcast for the agency.

Here's how the math works for broadcasters: Broadcast ratings are down 10%. Using the new commercial ratings means the supply shrinks another 5%, to 15%. But adding back in DVR playback brings down the erosion number to 8%. If ABC is getting 10% or more increases, it is ahead of the game.

Media agency executives say upfront dollars for broadcast this year are about flat versus a year ago--this plays out against much stronger CPMs than a year ago, which were the negative, flat or plus 3% range.

Now that the other networks are nearing completion, ABC may be in the driver's seat. Media agencies want to secure whatever remains of broadcast network inventory--inventory that is destined to shrink next year, according to some media executives.

Fewer ratings points during the year will also result in less scatter inventory throughout the year. "Many networks will probably be out of sale," says one executive. The Summer Olympics in Beijing and the U.S. presidential election will tighten up the market even further--taking highly valuable gross ratings points out of the marketplace. All that could be contributing to higher CPMs in prime time.

The flip side is that some media agencies are betting on the continued growth of DVR users in the years to come. Broadcast networks may, in theory, be adding to their pool of gross ratings points. DVR usage, now at 17%, is expected to movie to 25% and beyond in future years. For some media buyers these extra ratings points--more supply --could soften things up in terms of pricing.

In addition, there has already been sizable broadcast erosion this season--anywhere from 10% of more. The tighter supply of ratings points has also pushed CPMs higher.