• by Wayne Friedman , June 17, 2005

NBC, the laggard broadcast network in what has proved to be a languishing upfront sales season, is expected to announce it has wrapped up its upfront sales at considerably lower levels than some had predicted -- ending up at $1.9 billion in upfront ad commitments for the 2005-06 prime-time season, agency executives tell MediaDailyNews. That's a decline of nearly $800 million from NBC's 2004-05 upfront sales effort, and represents another weak signal not just for NBC, but for what many are now saying is a far weaker television sales marketplace than initial reports suggested. Not just for the cable networks and syndication outfits that are playing clean-up after a flurry of early broadcast deals, but for the overall national TV advertising marketplace.

"I hope you are paying attention to what's going on in the television business. The TV business is as soft as possible. The market is down. TV budgets are down," David Verklin, the outspoken CEO of media buying giant Carat told magazine publishers Thursday during the Association of National Advertisers annual Print Advertising Forum in New York.

Verklin emphasized that the TV ad cutbacks are not a sign of a weak ad demand for media, just for television.

"What's interesting, is my clients budgets aren't down. They're up. TV budgets are down," he said, noting that ad dollars were shifting to other media, especially online, or were being held back as a hedge for a soft TV scatter marketplace during the 2005-06 TV season. "I'll tell you, the budgets from clients are not down, they are up," he said, adding, "Our Internet business is booming."

Verklin implied the shifts were not merely a function of a cyclical weakness in the TV ad marketplace, but part of a fundamental realignment of marketing priorities, and the way marketers and agencies look at television in their media mix.

"In my company, you need to get my approval before you can put more than 50 percent of a budget in television," Verklin said to the applause of the publishing crowd. However, those shifts are not necessarily going into print. Carat, like other big media agencies, is betting heavily on new media, especially online and digital media (see related story in today's MDN. In fact, the agency just closed on three big acquisitions: search agency iProspect, digital technology developer Molecular, and Velocity, a sports and entertainment marketing firm.

In a follow-up interview, Verklin told MDN that many industry observers would be "surprised" when the final upfront tally comes in, and implied that it would not live up to the expectations set by the early flurry of deals on ABC, CBS and Fox. "People have been talking about 6 percent [upfront ad volume growth]. It will probably be more like 3 percent overall," Verklin predicted.

The difference in that growth factor appears to be coming out of NBC, cable and the rest of the television marketplace. A year ago, NBC--the leading broadcast network in terms of upfront revenue and adults 18-49 ratings--tallied up $2.6 billion to $2.7 billion in upfront advertising, according to industry estimates. An NBC spokeswoman said the network had no comment as yet on its upfront advertising deals.

NBC's slow-moving deals--which have overlapped with cable networks' selling process--have given more fuel to the analysis that the broadcast network market has been a tougher spot than previously believed.

Media agency executives now say the broadcast networks might end as low as $9.0 billion--some $200 million to $300 million less than last year's upfront market. The final broadcast network scorecard: CBS $2.4 billion, ABC $2.1 billion, NBC $1.9 billion, Fox $1.6 billion, the WB $675 million, and UPN $375 million.

Carat's Verklin is not the only top agency executive to suggest that the bloom is off the upfront's rose. "There is always so much chatter about the upfront--but it's just one element, and it's never indicative of anything," said Rino Scanzoni, chief investment officer for Mediaedge:cia. "We get too captivated by it where there is too much growth, and when there is 5 percent contraction."

Now more than ever, media buying and selling executives tend to temper their expectations and wait until the end of the year to see how broadcast, cable, and syndication programmers have performed. Before the upfront market began this year, Mike Shaw, president of advertising sales for ABC Television Network, said at a conference hosted by Deutsche Bank Securities: "I know you want to look at the upfront and the upfront results, and declare winners and losers. It's not that easy. It's just a component--albeit the most important--of the entire 52-week process."

Scanzoni said this is especially true of the last couple of broadcast years. Over the last two seasons, the upfront has been relatively strong, only to have the quarter-by-quarter scatter market's program pricing below that of upfront for many networks.

Upfront markets were designed to give advertisers the advantage of buying in large quantities before the broadcast season starts--all to give marketers protection from possible future price hikes.

"Now it's probably a 50-50 bet," said Scanzoni. "The upfront has become less about economics and more about what you want to show the street. It's more the follow-the-leader mentality than about economic principals." - Joe Mandese contributed to this story..