By Ken Liebeskind
All eyes in the TV advertising industry are on the upfront market, the springtime bash of buying and selling for the coming season. It starts in mid-May after the networks
announce their programming schedules and lasts a few weeks until much of the advertising for the season is sold, with the remainder to be sold in the scatter market closer to fall.
Just over $8
billion in prime time advertising was sold in last year's upfront, an increase of 12 to 14% in ad rates, according to Erwin Ephron, an advertising consultant. "But it won't happen this year," he says.
"The increases if any will be minor."
"A new market where demand will not exceed supply," is how Ephron characterizes this year's upfront. The slumping economy is responsible for the dip in
demand, which had grown steadily for the past three years.
The economic decline caused ad spending to drop, with network spending up 5.3% for the fourth quarter and 1.3% in December, according to
Competitive Media Reporting. The small gains paint a bleak picture for the coming upfront, because "weak scatter markets have an impact," says Joe Mandese, editor of The Myers Report. Spending has
remained low in the first two quarters this year, which signals lower demand and prices for the upfront, he says.
Jim Gagan, senior vice president and director of media services for
Liggett-Stashower, a Cleveland ad agency, notes that the kids upfront market, held recently, was down. "It's a leading indicator of other day parts," he says. "Kids is one where they don't transfer
monies elsewhere, so it's just been reduced," he says. He foresees similar reductions in prime time during the upfront.
"The TV market is going south," says Bill Miller, senior vice
president/director of national broadcast for CIA USA, a Chicago media buying firm. "Scatter inventory has been priced at or below upfront levels since late last year," he says, which means prices
should remain low for the upfront.
It's a buyer's market now, which gives TV networks two options: they can sell advertising at lower prices during the upfront or wait and try and sell it at
higher prices during the next scatter period. Miller says the situation at each network will be different, with Fox and WB in a good position because they have younger audiences that are more in
demand and a limited inventory. For networks with lots of inventory, "their strategy may be volume," Miller says. He thinks with prices low networks may hold back more of their inventory for the
scatter market, although he says it's too early to say.
Mandese says networks may be forced to sweeten the deal with better terms and conditions, like more cancellation options. "It puts money at
risk for the networks," he says.
It's not just the economy that foreshadows network problems. The pending writers and actors strike may wreak havoc, too. If it occurs, which could happen in a few
months, networks won't have the programs to sell, which will