Commentary

Absolutely, Positively The Last Time I'll Ever Bash The Upfront -- Promise!

Has anyone else noticed something strange going on around here? I could pose that question almost every time I pen a column. In fact, I have many times before. But I usually reserve it for special occasions when contradictions appear to abound in the TV advertising marketplace. And I usually pose it around this time of the year, when the network television upfront is either in full bloom, or on the verge of wrapping up. But the inconsistencies I'm observing this year are more pronounced than ever before, so I've just got to ask it one more time: "Has anyone else noticed something strange going on around here?"

Here's what I've noticed.

1) A year after an especially strong buyer's market forced the major TV networks to cave in on "live" only ratings -- providing Madison Avenue with a rare, almost unheard of, market win -- the networks have magically regained much of their market position, winning back at least a portion of time-shifted viewings (three days of it, anyway), and got relatively strong CPM gains to boot.

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Smarter people than me -- people like Mediaedge:cia's Lyle Schwartz -- have tried to explain this one to me, but I still don't get it. I get the whole "we're in this thing together" thing, but I still don't understand why media buyers gave up the "live" only ground -- even if they gained "average commercial minute ratings" in the process. And I don't understand why their clients allowed it. From my vantage point, they could have gotten those concessions anyway, and for lower CPMs than have been reported for this year's upfront.

Why? The economy isn't any stronger than it was a year ago. The uncertainties are the same. And advertising is losing share of the gross domestic product as marketers move more and more of their budgets either into other forms of marketing, or into forms of media that have not traditionally been measured by the ad industry's economists.

Maybe I'm wrong. And seeing as I've never bought a lick of network TV time, what do I know. But it seems to me that the only thing Madison Avenue had to do to retain its "live" only precedent, to get commercial ratings, and to keep network advertising costs down, was wait. Hold back. And let the networks come to them. But the two sides once again magically came to some kind of accord, struck a balance and allowed business to get done -- on terms that benefited the broadcast networks. Maybe we should let network buyers and sellers negotiate the next Middle East peace accord.

2) The apparent health of the network upfront advertising marketplace is not evident anywhere else, especially not in the current network advertising marketplace. Yeah, I know, I know. Weak upfronts (like last year's) often beget strong scatter markets. And strong scatter markets, in return, beget strong upfront markets. And I know that there was plenty of crowing about strong scatter market conditions heading into this year's upfront, but other than trade press reports and jocular network executive comments, there is no evidence to support that. In fact, the empirical evidence is just the opposite. All of the data the industry uses to benchmark network advertising results say the major broadcast networks are sucking wind. In fact, industry forecaster Bob Coen went so far as to describe it this way during his recent mid-year update on the advertising economy:

"The real surprise is an apparent boycott of the major television networks."

Huh! But what does Bob Coen know? He's only been Madison Avenue's official scorekeeper for half a century. Okay, so Bob was looking in the rearview mirror when he made that observation. In fact, he was looking at the most recent ad sales data for the Big 4 broadcast networks. The data shows combined network ad sales plummeting 5.7% during the first quarter of this year. Yes, that compares with the first quarter of 2006, which was up 13.3%, largely on gains related to the Winter Olympic Games, but the rest of 2006 was either flat or down for the Big 4 networks, and stripping away the so-called Olympic effect, advertisers are beginning to cut back on network TV, because "Their prices have been escalating -- going up about four times the rate of regular inflation," Coen said, adding, "It's not too surprising that the second, third, and fourth quarter have been so dismal for them."

All right, so maybe the current upfront is a harbinger for better things to come. Maybe it's a turning point that's just not evident in the networks' current results. But I've seen that kind of thinking before. It's the same kind of thinking that has contributed to an inflated upfront market scenario more years than not. In fact, up until last year, when the networks put the kibosh on publicly reporting their advertising sales via the Broadcast Cable Financial Management Association, I'd been compiling the networks' actual results vs. their upfront claims. The result over an 18-year period was that the networks claimed average upfront advertising sales gains of more than 11%, but actual network advertising revenues rose only slightly better than 4%. Surely some of the gains were lost to weak scatter conditions, makegoods and cancellation options, but a ratio of nearly three to one means network upfront estimates aren't exactly a predictive science.

I could point to other evidence suggesting the TV advertising marketplace may not be as strong as some might suggest, but the truth is I'm tired of bashing the upfront marketplace, and it's become clear to me that this industry either likes the games it plays with itself, is in major self-denial, or simply doesn't want to fess up to what's really going on. The truth is that the upfront plays an important role for both buyers and sellers -- and even advertisers -- who need to manage unwieldy advertising budgets during a time of incredible uncertainty and economic change. That's the real reason the upfront may be up -- if it actually is.

What interests me most is not the old network upfront advertising game. It's the TV advertising marketplace that appears to be growing on its fringe. And I'm not talking about cable and syndication, which are also up for their own economic reasons, though likely flattening out in terms of their rates of gain and the cost escalation. No, the new fringe "dayparts" I'm talking about are the new forms of television blurring the lines between traditional TV and various new platforms.

That's evident from a second forecast to come out of an Interpublic agency in the past several weeks. Presenting alongside Universal McCann's Bob Coen was Magna Global's Brian Wieser, who many have seen as the logical successor to Coen as the industry's official scorekeeper. Not that Bob's retiring anytime soon. I've also given up on that prediction a long time ago. But Interpublic seemed to be implying something by pitting Coen and Wieser in co-presentations offering respective looks at established and emerging media platforms.

The thing is, most of the platforms Wieser was looking at -- if you exclude search and possibly social networking -- are really just new forms of television. Some of their names suggest that: Advanced Television, video-on-demand, and online video. But I would suggest that other less apparent platforms are also simply new forms of television, like video games and mobile. Yes, people will use those platforms do things other than watch conventional TV programs (though they will also use them to do just that), but much of the advertising they are exposed to will look awfully like conventional TV commercials -- or some version of them.

My point is that when you begin to factor all these emerging "television" platforms into the equation, TV's advertising growth picture doesn't look so bad. In fact, Wieser has these alternative platforms growing at an aggregate rate of about 32% this year and 28% next.

So even if Coen is right, and advertisers have begun boycotting the traditional television networks, the data Wieser offers suggests advertisers are simply reinvesting the money they've saved on traditional buys into other forms of television.

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