• by Wayne Friedman , August 4, 2005

The upfront TV ad market in June was a cautious affair for advertisers, with spending virtually flat in many areas, but media buyers and network sales executives say advertisers have begun revising their initial upfront ad deals, expanding the amount of ad time they're committing to just weeks before the new fall season is set to begin.

"There has been some rumor to that effect," acknowledged Marc Goldstein, president-CEO of MindShare North America. "Advertisers might be doing it because scatter might be priced higher than the upfront. They might say, 'What's the rationale? Am I going to pay more for it now - or am I going to pay more for it later?'"

Scatter buys are the short-term, quarter-by-quarter markets in which networks sell the portion of their ad time that wasn't sold during the upfront; and, it's usually sold at higher prices. But over the last two seasons, scatter sales have been relatively weak, with ad prices falling well below the deals advertisers negotiated during the upfront. This leads some to believe the 2005-2006 scatter market will finally turn around, with ad prices expected to rise above the deals made in this year's upfront.

Some TV advertisers have already caught the bug.

"We will be adding to our upfront buy," confirmed one veteran media buyer, who represents a technology/communications company. He declined to provide details.

"There is good bit of dollars creeping in," said Mel Berning, executive vice president-advertising sales for A&E Networks. "It's not massive. There tends to be positive adjustments this year where last year they were negative."

June's upfront primetime network ad market came in at about $9 billion, roughly $100 million to $200 million less than a year ago, according to a number of estimates. Primetime ad prices range from 3 percent below the year before for NBC, to 5 percent higher for ABC.

While adjustments to upfront commitments aren't uncommon, they're usually not pervasive. Typically, media buyers strike upfront deals for their clients in June, then spend the summer months presenting the media plans to clients. Just before the season begins these upfront promises are converted from so-called "holds" to actual orders.

Ordinarily, about 1 percent to 2 percent of these upfront holds are dropped before they are firm orders and before the new season commences. The reason: Some advertisers over-promise what they'll buy in June, only to pull back a bit just before the season starts.

Assuming advertisers were to drop 1 percent to 2 percent of the holds they placed during the 2005-06 primetime upfront marketplace, it would translate into between $90 million and $180 million fewer upfront broadcast ad dollars.

But with some national advertisers now expanding their upfront ad buys, many buyers now expect drops in upfront holds to be little, if any this year. Luring many advertisers is the fact that looking in the rear-view mirror of the upfront market, network and cable prices are priced attractively right now.

Cable should benefit here as well. Cable networks were surprised they didn't do better from the cuts TV advertisers made at the broadcast networks. Instead, advertisers also cut back on upfront cable buys, squashing the gains many cable networks were expecting.

Estimates are that cable networks collectively pulled in some $6.3 billion during June's upfront sales activities - about even with last year's revenue. Average CPM gains were around 3 percent. Cable network executives were anticipating gains of 10 percent or more in both upfront revenues and prices before the 2005-06 market started.