Commentary
Higher Prices, Less Inventory: Surprises At The Upfront?
- by Wayne Friedman , Staff Writer, March 6, 2009
And with broadcast ratings probably down 13% for the year, pricing will go in a head-shaking direction: "Up," says one daring, look-me-in-the-eye media executive.
Excuse me. But aren't we in a recession?
To a certain extent, broadcast erosion will again play into the hands of some networks -- at least when it comes to their traditional yardstick -- the cost per thousand viewers (CPMs).
Traditional TV media math suggests if the networks sell about at the same levels of a year ago, and the above conditions of ratings and volume come true, CPMs could rise to an if-you-can-believe-it 7% to 8%.
That doesn't seem possible -- in this economy, in this particular industry. But then again, TV's upfront advertising markets never usually pay much attention to other "markets" -- like the stock market. So why not consider it?
Volume will most assuredly be down, with some suggesting automotives will cut upfront budgets by 20%. Financial service advertising willl also make big cuts; maybe retail, as well. But overall these categories won't pull the entire plug on the market, say executives.
Digital video revenue? There is some expectation revenue is going to flow back into traditional TV, as media buyers are tried of waiting for true apples-to-apples program metric comparisons of what they get from network television.
What CBS, with year-to-year flat ratings among 18-49 viewers, will do will be a clue to what really happens during the upfront.
Earlier this week, CBS CEO Les Moonves made noises the network might sell less inventory in the upfront this year -- in an effort to prop up pricing. Moonves believes he can sell the rest of the inventory in what he expects to be a strong scatter market, one where TV sellers look to get higher prices than with the upfront, sometime next season.
In making this move, Moonves has some history behind him.
It was in spring 2001, right in the middle of another soft economic time, that Moonves' former boss at CBS, Mel Karmazin, made the then-daring move to sell only 55% to 60% of the network's upfront inventory. (Typically a network sells around 75% to 80% of its inventory during the upfront selling period.)
Nail-biting time then ensued for CBS, who had bet the house that higher scatter prices would be the result. The gamble paid off. But in retrospect, it wasn't much of a gamble. Weak upfront markets are almost always followed by strong scatter markets.
Is this another in an occasional series of weak TV upfronts -- or will this more hurtful-than-usual recession play major havoc with TV ad markets?
Wayne Friedman is West Coast Editor of MediaPost. You can reach Wayne at wayne@mediapost.com.
This is hardly 2001, nor is it 1981-82. The risk for CBS is high. What if the economy is still falling in September? I saw today the best comparative analysis offered about this recession in an AP article from Yahoo:
"The 1982 downturn was driven primarily by the desire to rid the economy of inflation. To battle a decade-long bout of high inflation, then-Federal Reserve Chairman Paul Volcker, now an economic adviser to President Barack Obama, pushed interest rates up to levels not seen since the Civil War. The approach tamed inflation, but not without suffering....
"...There's little hope of any gain from the pain. Falling housing and stock prices have undermined household wealth. People are worried about losing their jobs, their homes and their retirement savings all at a time when health care is weighing down income.
"'In the 1980s, it was clear to people that the inflation rate was going to come way down and it did,' Niskanen said. 'There was a sense that we were going through a tough time for a while as a price of getting inflation down and that things would come back up. Today, they can't see any gain from what's going on.'"
Perhaps network TV will see it's bubble burst this year.