• by David Kaplan , June 2, 2005

As the proverbial dust settled on ABC's Memorial Day upfront sales rally media buyers and analysts predicted that this week's negotiations will be a little tougher on CBS, UPN, Fox, the WB, and NBC, which has apparently been holding off. Analysts had been predicting a flat upfront, with ad sales dollars coming in at about the same level as the $9.1 billion from last year's upfront.

"ABC was generally considered to finish at under $2 billion in ad sales--so, because they sold more inventory, the finite amount of ad dollars out there is likely to result in some networks losing out, and that includes cable and syndication as well," said one media buyer. "But everyone's scrambling to do deals. The only guys not moving right now are the people at NBC."

ABC claims to have reaped CPM increases of between 4 percent and 6 percent for its 2005-06 upfront ad deals, and that may set the tone for the other broadcast networks, said Raymond Lee Katz, an analyst at Bear, Stearns. "Other nets are negotiating CPM increases ranging from 2 percent to 5 percent, which means 2005/2006 increases could average lower than 4 percent versus our prior expectations for 5 percent," he said.

Bear, Stearns is now expecting CPM increases of 4.5 percent at CBS versus prior expectations for 7 percent, Katz added. "We still think the upfront market will be up year-over-year, albeit 1 percent versus prior estimates of 2.3 percent--unless the NBC sell-out percent drops below 70 percent. We think the selling process could be over in 5 to 10 days."

As to whether it's NBC's--or media buyers'--intention to hold off on writing business, since the network finished in last place this past season, media buyers say it's both sides of the negotiating table that are taking a wait-and-see approach.

"NBC has needed to see where the market was going to settle out before they realized where their price point is going to be," said Ray Warren, managing director at OMD USA. "It's not a bad tactic if you're NBC. If you're vulnerable, why stick your chin out?"

As for ABC's upfront strategy, Warren--a former top ad sales executive at the network--echoed other buyers' sentiments that the network played its cards perfectly, especially in regard to its announcement that it completed its upfront business.

"You have to announce it so that people who are trying to buy from you really believe you," Warren said. "Once you're done and someone's late to the party, they're not going to get it unless it's been declared that the party's over. If, for example, I'm ABC and I tell a Marc Goldstein [the CEO of WPP's MindShare], 'Look, ABC is done; we're not writing any more business,' and he says, 'Ah, c'mon, you gotta get me in, you gotta get me in,' you're in a bind. But if you announce that you're done, it tends to throw a little cold water on those requests. They have to announce it to kind of stop the market."

Another media buyer added: "The advantage was to go out there, and it was really brilliant--to go out there and say 'We've got the hits, we've got a reasonable price, based on where we see the dollars in the market--we're open for business. And they had it all going for them: great schedule, good development, and as a matter of fact, they did have reasonable pricing."