Big 3 Post Tiny Q4, Results Belie Last Year's Record Upfront Ad Sales

In the first indication that last year's prime-time upfront may not have yielded the major broadcast networks the kind of ad revenue returns the initial media buying frenzy might have indicated, the Big 3 broadcast networks Monday reported only a modest 1.5 percent gain in total prime-time advertising sales for the fourth quarter of 2003, the first full quarter of the 2003-04 upfront sales season.

The revelation, which comes from self-reported data supplied by ABC, CBS, and NBC to the Broadcast Cable Financial Management Association and compiled by Ernst & Young LLP, seems to belie the robust nature of the 2003-04 prime-time upfront sales. Either that--or it suggests the networks may have experienced a far weaker fourth-quarter scatter marketplace than they had previously let on to. While network executives did acknowledge a slowdown in demand for their fourth-quarter scatter inventory, they claimed it would not be a major factor in their revenue picture, because they had only scant advertising units available for the scatter marketplace due to higher-than-normal upfront sell-out levels.



In addition, some networks were forced to dole out an exceptionally higher number of makegood units to compensate advertisers for under-delivering on certain audience guarantees, especially for advertising buys made on young adult men, which experienced a pronounced viewership decline during the fourth quarter.

Upfront cancellation options are not usually a factor for fourth-quarter advertising inventory, because fourth-quarter deals are typically 100 percent firm.

Prime time aside, the Big 3 did relatively better in the fourth quarter with their other dayparts. Total network sales for the quarter climbed 3.1 percent over the fourth quarter of 2002. Late night (+13.1 percent) and early morning news (+11.8 percent) were the strongest dayparts, followed by-surprisingly-kids (+9.2 percent).

The upswing in fourth-quarter kids advertising sales is a particularly interesting development, given that the network kids daypart has consistently eroded over the past several years, and the fact that the major broadcast networks are just now trying to pitch their 2004-05 kids upfront advertising sales.

The strong kids sales gains come as some buyers have begun fretting over an increase in demand for kids advertising inventory and an eroding supply, as a significant share of kids' TV rating points have shifted to outlets with little or no commercial inventory, such as Disney Channel and Noggin.

As tepid as the overall fourth-quarter advertising marketplace was for the Big 3 networks, the full-year 2003 picture was significantly worse, due to tough comparisons with 2002, which included the Winter Olympic Games on NBC.

Full-year sales declined 1.2 percent to $12.292 billion, driven by a 31.2 percent decrease in sports advertising revenues in 2003.

Q4, Full-Year '03 Network TV Ad Spending (In Millions)

--Fourth Quarter-- ----Full-Year----
Ad $ Change Ad $ Change
Prime Time $1,953.2 +1.5% $6,949.9 +8.1%
Late Night $197.7 +13.1% $755.2 +16.5%
A.M. News $223.1 +11.8% $827.8 +13.0%
Daytime $285.1 +3.4% $1,031.1 +4.2%
Kids $16.7 +9.2% $45.3 -10.1%
Sports $676.5 +2.6% $2,071.0 -31.2%
Eve. News $144.6 +0.1% $611.5 +5.4%

Total $3,496.9 +3.1% $12,291.8 -1.2%

Source: Broadcast Cable Financial Management Association based on self-reported data from ABC, CBS and NBC. Prepared by Ernst & Young LLP.
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