• by Wayne Friedman , May 14, 2007

Major TV marketers may be leaning toward a metric of commercial ratings with three days of DVR playback, but this won't change the strength or weakness of the upfront revenue in the market for TV programmers.

"The change of currency will not affect the overall demand of TV this year," says Tim Spengler, chief activation officer for Initiative North America.

A number of major buyers believe the market could be down in volume from 2% to 5%--anywhere from around $175 million to $435 million of a year ago. That could sink last year's estimated $8.7 billion for the six networks to around $8.1 billion. Most positive prognosticators, such as Merrill Lynch, say business could be up 3% for the four networks, to $8 billion.

Regarding commercial ratings versus program ratings, Initiative's Spengler says: "It's Celsius versus Fahrenheit. It's two different ways to measure. It's still the same temperature outside."

If average commercial ratings become a major player this year among the broadcast networks, most buyers believe the networks will net out close to what they get via traditional average program ratings.

"If Fox's "Cops" gets, say, $100,000 based on a 3 average program rating, and now gets $100,000 for a 2 average commercial rating, it's still $100,000," said Geoff Robison, senior vice president of national broadcast for Santa Monica, Calif.-based Palisades Media Group. "To Fox, it doesn't matter--it's the same amount."

So then why will the upfront drop? Steve Farella, president/CEO of New York media buying company TargetCast TCM, says it all comes back to last year's big issue: New digital platforms looking to grab an ever-larger piece of the pie.

"There is no question that sellers will be getting less money for non-digital traditional media for the next ten years," he says. "Our clients are looking for digital platforms to target their customers." Last year it was estimated that digital revenues drew about $200 million from traditional TV coffers. It might be as high at $500 million.

Digital advertising could account for most of the loss in revenue for traditional TV outlets. In addition, advertisers will increasingly be looking to hold back money for those mid-year special TV deals or long-term integrated marketing agreements.

All that isn't necessarily bad news for the networks, because they own many big Internet sites where, for example, broadcast TV shows are streamed--which means they could get a large piece of these dollars.

Last year, some estimate that traditional TV broadcast outlets lost around 5% in total volume versus the year before. A number of media agency executives believe it might be higher this year.

Initiative Media's Spengler says: "We anticipate less money will be planned into national TV this year."

TargetCast's Farella believes the drop may be somewhat less--possibly dropping 2% to 3%--because the economy is somewhat stronger than a year ago, and because of the relatively stronger scatter market.

"Overall, client budgets are moderately better than last year," he says. "The negative it is that networks still have to deal with their old media."

This marketplace will still be subject to typical conditions--such as broadcast erosion. On the surface, some live ratings are down anywhere from 10% to 12%.

But analysts say adding back in DVR viewership helps bring down erosion levels to a more manageable 5% or so. Even then it's complicated, because Nielsen changed methodology somewhat, starting a year ago when DVR ratings were included.

For the upcoming year, Robison says, it would be better if both average program ratings and average commercial ratings existed together for whole year so media agency buyers could analyze the difference between the two sets of metrics.

For example, for next year, say an advertiser buys "Lost" for a guaranteed 5 program rating among 18-49 viewers. But another advertiser buys the show at a 4 commercial rating. Say the program rating actually does a 4.5--but the commercial rating actually stays at a 4 rating.

After a year of examining the differences, Robison says TV advertisers could then make a determination for a better deal.