Commentary

A Different TV Upfront Market -- With Same Old Strategy

A future TV business headline in the next couple of weeks: "The upfront market returns to quick overnight deals, high price increases, and laughing TV advertising sales executives."

 

OK, maybe just smiling (or contented) advertising sales executives.

With a rise of 25% in cost-per-thousand viewer prices in the current TV scatter market over last year's upfront, CBS CFO Joe Ianniello says it wouldn't be that hard to anticipate at least 10% or more hikes in prices for the upfront that is due to start in a couple of weeks.

That could be characterized as a very strong market.

While a 10% gain sounds big, TV sellers might tell you it's really only a net gain of 3% over the last two seasons -- given typical 7% declines on many networks a year ago.

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CBS is doing its job, and Ianniello is echoing his boss' comments -- president and chief executive officer, Les Moonves -- of a couple of week ago. That's when Moonves said CBS warrants double-digit price increases -- otherwise, it will hold back ad inventory and wait for even better market conditions. This is the usual song and dance for this time of year.

It's interesting that this is the same key strategy of a year ago, when the market went through one of its rare price rollbacks. CBS and other networks held back ad inventory due to TV marketers overall cutbacks, with the hope that the scatter market would see strong price increases. They got that and more.

But can networks turn the same trick again?

Historically, strong scatter markets are followed by strong upfronts, which in turn are followed by weak scatter markets. The likelihood of the marketplace continuing at the same crazy 25% increases, or even 10% hikes, wouldn't seem to make sense. The only hope for TV sellers is if marketers continue their shorter-term thinking, which means playing more in the scatter markets and less in the longer-term upfront markets.

TV's continued aggressive stance makes sense, given the lost pricing ground of a year ago. Another reason to continue this push: In future years, TV ratings points won't be so plentiful, at least on the traditional TV platform, which still bring in the lion's share of advertising revenue.

Still, returning to old ways might not just be possible for TV sellers: a stronger economy means TV marketers' herd instinct might be hard to slow down.

1 comment about "A Different TV Upfront Market -- With Same Old Strategy".
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  1. John Maher, May 12, 2010 at 3:11 p.m.

    I hate to say it, but I think you're right. Historically the advertising industry has no memory, either short term or long term. And so begins the annual "Dance of Ennui" that is the upfront.

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