• by Joe Mandese  @mp_joemandese, June 7, 2004

With the 2004-05 broadcast network upfront marketplace about three-quarters complete, two very important developments are becoming eminently clear: The major broadcast networks have indeed seen their share of upfront advertising budgets erode to cable; but the relative price gap between broadcast prime-time inventory and cable is continuing to spread in broadcast's favor.

Despite facing relatively flat demand in terms of upfront ad volume, the Big 4 broadcast networks have seen their prime-time CPMs (cost per thousand) soar at high single-digit rates, with lead network CBS spilling into the double-digits, media buyers acknowledged late last week. CBS is believed to have averaged CPM gains of 10 percent, with Fox and NBC reaping hikes of 7 percent to 8 percent. Even ABC, which was expected to experience relatively moderate demand, fetched CPM gains of 5 percent to 6 percent.

At press time, buyers were uncertain whether the broadcast networks' prime-time upfront volume was flat relatively to last year's $9.3 billion, or whether it was up or down slightly from last year's base, While three of the networks were said to be well sold, NBC got into the game relatively late in the process, making it difficult for some buyers to get a handle on the peacock network's take.

Nonetheless, it is now clear that Madison Avenue held the line on the broadcast networks' expansion, and shifted a considerable share of budgets to cable and syndication. The 2004-05 cable upfront marketing place is expected to expand by more than $500 million and by as much as $800 million, marking the first time since 1997 that a significant upfront share shift has occurred between broadcast and cable.

"Finally, people are starting to vote with their dollars as opposed to a lot of BS before the upfront," noted Peter Gardiner, partner and chief media officer at Deutsch. "Remember, planners have to write plans and then buyers have to go buy them. It's driven strategically."

But given the hefty price increases, it's unclear how much of a market rebuke the 2004-05 upfront was for the Big 4 networks, and whether the volume shift simply reflects a cyclical shift from long-term upfront buying to more of a short-term scatter market strategy. The Big 4 networks are believed to have sold a slightly lower percentage of their prime-time inventory than they have in the past several upfronts, indicating that a greater share of their revenue base will be dependent on the 2004-05 scatter marketplace.

While the relative upfront market shares may change slightly as the so-called "holds" are converted to actual "buys," and as those deals make their way through a series of year-long adjustments that reconcile TV's forward marketplace into actual sales and genuine market shares, media buyers and the cable industry at least are proclaiming the 2004-05 as a year of market correction.