• by Wayne Friedman , April 26, 2006

Will TV's upfront be up and away, or down and out? The early indication from buyers is down, but not necessarily out.

Upfront dollars will land somewhere in the $8.7 billion to $8.8 billion for the broadcast prime-time part of the upfront, according to an informal survey of TV buying executives. This would be slightly down 1 percent to 2 percent versus a year ago, or $100 million or $200 million versus a year ago.

"The upfront won't equal that of year ago," said Donna Speciale, president of U.S. broadcast and programming for MediaVest USA. "People will be holding back to have more flexibility. Not because budgets will be down. Some of the upfront dollars will go into digital platforms. Other clients will take a wait for [mid-season] opportunities."

Broadcast networks' adult 18-49 gross ratings points will be flat or slightly down 1 percent to 2 percent, while cable ratings points will grow at about the same levels. But broadcast network numbers will drop more steeply next year, analysts estimate. With the lost of UPN ratings, the entire network supply of 18-49 ratings points will contract 4 percent in the 2006-2007 broadcast season.

Networks will still look to improve their program pricing picture. The expectation is that cost-per-thousand viewer (CPM) prime-time pricing will inch up 1 percent to 3 percent, with perhaps as much as 4 percent going for Fox or ABC.

"That'll mean the networks have to average 5 percent CPM increases just to raise the [overall] volume by 1 percent," said one media executive. "That probably won't happen." Many predict a marketplace similar to that of a year ago--one where the broadcast network sales volume lost steam to the tune of $100 million to $200 million.

That said, these are predictions--estimates. "Anyone who tells you they know the market really doesn't know yet," said one TV selling executive. Spokespersons at NBC, ABC, and CBS didn't return phone calls for comment. Jon Nesvig, president of advertising sales for Fox Broadcasting Co., said in a statement: "Based on this year's success, we think we'll be well-positioned in this year's Upfront. Research still pinpoints television as the most important sales driver for most products."

Last year, the big dramatic story was NBC. Its upfront market landed with a thud--$1.9 billion--down a whopping $900 million from the year before. A resurgent ABC grew $500 million and moved up to $2.1 billion. CBS added $400 million to total $2.6 billion. Fox settled in at $1.6 billion--about the same as in 2004. The WB was at $675 million--also the same versus a year before. UPN grew a bit--some $25 million to $375 million.

New broadcast networks, The CW and MyNetworkTV, will have a tightening effect on this marketplace. While the CW replaces the WB with the same number of national commercial minutes per hour (around 22 minutes), MyNetworkTV will shrink the national supply. Instead of UPN's 22 minutes an hour, MyNetworkTV will only sell 11 minutes.

Traditional indicators lean to a softer market. The second-quarter scatter market in prime time is virtually unchanged versus upfront pricing. Typically, second-quarter activity mimics the pace and strength of the new upfront market that starts in late May.

Broader macroeconomic indicators give network sales planning executives some hope that the upfront market will be stronger than expected: The stock market is up, consumer confidence is high, and unemployment is low.

ABC, which pushed the market last year with 5 percent price hikes, will again look to take the lead. ABC is 6 percent higher in 18-49 prime-time ratings--which gives it a strong ratings position. Fox and CBS will also make a strong case for bigger price increases than the marketplace as a whole.

The target for ABC, Fox, and CBS, is NBC--which is still the network (CPM) price leader in 18-49. Last year, both ABC and CBS were selling prime-time shows that were at 12 percent to 15 percent discount to NBC, according to media executives. This year, media analysts are guessing that price discount may have been cut in half--to 6 percent to 8 percent.

Whither CBS? Like ABC, it also could make gains at the expense of NBC. This year CBS seems to be taking a low profile. "They have been very quiet," said one veteran media buyer. "They usually speak up this time of year." Over the past several seasons, Les Moonves, chairman of CBS Corp., or Mel Karmazin, president/COO of Viacom Inc., have always set the bar high--usually with public statements--that CBS will be pushing for at least 10 percent CPM increases.

Fox is also at a discount against NBC's 18-49 prices. But the big move for Fox will be in grabbing more 18-34 advertising dollars. "Fox is in the best position for an increase," said the New York media buying executive. "The UPN money could find itself going to Fox. Fox could get 5 percent increases."

What's left for NBC? Media executives say NBC can only do one thing--go after share, and nothing but share. To do this, networks typically don't hike CPMs as high. Some, in fact, cut or maintain pricing relative to the market as a whole.

The optimists? "NBC could get 2 percent to 3 percent increase," says another executive. "But it depends where ABC is. If ABC looks to get, say, 7 percent increases, NBC could ask for 2 percent to 3 percent. But NBC has to play low if ABC plays low." NBC's ratings are down some 9 percent.

One thing is for sure--NBC won't sit back like it did last year and wait to move in the upfront marketplace. NBC executives don't want to go back to its General Electric executive superiors and give them more bad news--certainly not a repeat of its massive $900 million fall off in its 2005 upfront revenues versus that of 2004.

Even with a quick-moving strategy, NBC might be off $100 million or $200 million, say media buying executives, as advertisers' look to keep their NBC CPMs at--or below--NBC's 2005 prices.

All this could be good for cable.

"Last year, marketers got a deal from CBS and ABC--because they were priced at a discount to NBC," said one veteran cable advertising sales executive. "There won't be those kinds of deals again this year. "Buyers will look to cable to grab some of those savings."

The usual first in advertisers--the automotive and the movie companies--will seem to set the pace for the broadcast networks. But this year, those two categories have question marks all their own--especially automotive marketing. The automotive industry struggles because domestic sales from General Motors, Ford Motor, and DaimlerChrysler are hurting. That might mean low media dollars this year for traditional TV.