• by Wayne Friedman , December 13, 2007

Broadcast networks are finally using the option of last resort in dealing with last season's crushing makegood problem: Giving cash back to advertisers.

NBC will hand back $10 million to marketers that need to clear up their end-of-the-year financial books, according to executives. The only other network that is close to giving back cash is CW. Both CW and NBC have had big double-digit rating drops over the past two seasons.

NBC offered this statement:

"This represents an extremely small portion of NBC's business and accommodates the changing needs of our clients' marketing plans. NBC is working with its clients to come up with creative solutions in a new sales environment created by a new business metric and changing consumer behavior." NBC booked about $1.8 billion in upfront advertising revenues for the 2007-2008 broadcast season.

CW executives did not return phone calls by press time.

CBS has said repeatedly that it doesn't have any of these concerns. "We don't have a makegood problem" says a CBS spokeswoman, who reiterated the same statement made recently by Les Moonves, president/CEO of CBS Corp., to investors.

Fox doesn't have a makegood problem, either. That's helped by the fact Fox was the No. 1-rated network a year ago. So far this year, it is the only network to show ratings improvement versus 2006.

ABC wouldn't comment about the makegood or cash-back situation. But one executive with knowledge of the situation says ABC has not given back cash to advertisers.

NBC's problem, according to analysts, started in the first quarter of this year--part of the 2006-2007 TV season. That's when its high-rated "Sunday Night Football" went off the air and its No. 1 show "Heroes" went on hiatus--especially in March and April. This sank NBC ratings down by double digits, and created makegood inventory that was carried into the current 2007-2008 season.

It's not over for NBC. This current fourth quarter has seen its "Sunday Night Football" ratings down by about 10% versus a year ago. Analysts expect if the writers strike continues, it will be first on the list to give more money back to advertisers.

ABC might be next. "ABC has a pretty big rating fallout with their dramas when they go into repeats," says Brad Adgate, senior vice president and corporate research director for Horizon Media.

Fox might have the easiest time of it.

"Fox can probably withstand the work stoppage," says Adgate. "They have "American Idol," reality shows, and other mid-season scripted shows."