• by Joe Mandese  @mp_joemandese, May 27, 2003

The only thing that seems to be moving faster than the network prime-time upfront are calculations for its tally. Early into the action, trade press reports had the 2003-04 prime-time upfront approaching or exceeding $9 billion. While that would have been impressive growth over 2002-03's $8.14 billion take, the market appears to be growing with each new wrap-up story: $9.2 billion, then $9.3 billion, then $9.4 billion and even $9.5 billion. The latest one to pass my PC screen puts it at $9.8 billion. Do I hear $10 billion.

A long time ago, I gave up on trying to estimate the network upfront based on the sales spin of network executives and the hyperventilated coverage of the trade press, mainly because there is no accountability in these estimates. Literally. The numbers are not audited and until last year when CBS issued a press release stating its upfront take and General Electric included a number for NBC's share in its second quarter 2002 earnings report, there hadn't even been any official corporate acknowledgement of network upfront sales.

For this reason, I've begun using estimates reported by equities researchers who track the stocks of network-owned companies. My rationale: network execs may spin the trade press, but in this era of corporate governance, I can't imagine them distorting revenue figures to investors.

But while I'd recommend Madison Avenue looking to Wall Street for evidence of upfront sales growth, I would not recommend Wall Street - or anyone else, for that matter - looking at the upfront as a barometer of Madison Avenue's health.

Much has been made of what a strong upfront portends for the rest of the advertising economy. If history is the rule that has rarely been the case. Just consider last year, when the2003-03 prime-time upfront marketplace expanded 17%, but total U.S. ad spending is projected to rise only 5.0% in 2003.

In fact, if you look back at the modern history of the network upfront marketplace, you will see hardly any correlation to the rest of the media world, including the full-year network marketplace itself. Over the past 16 years for which Merrill Lynch has published estimates, the network prime-time upfront has grown an average of 10.7%. That's more than twice the average annual rate -- 4.2% -- that the total network ad marketplace has expanded.

Now it may be that the 2003-04 upfront turns out to be a true harbinger of a U.S. advertising expansion. After all, there does appear to be pent-up demand, top U.S. marketers are reporting improved earnings and we are entering and Olympics/election year. These are all the ingredients of a genuine ad expansion, just don't base it on the initial upfront sales frenzy. Too many things can change before final advertising budgets are expressed. Upfront commitments can get dropped before they go to "hold." Portions can get canceled later in the season. And a significant amount of the upfront growth can be diluted by the amortization of those upfront GRPs via makegoods doled out during the actual season.

The truth is we're all rooting for upfront growth - the media, agencies and (ironically) advertisers - because we all believe it is a proxy for underlying growth of our economy. The reality is that it may just be coincidental.

Network Prime-Time Upfronts		Ad Spending Growth Rates (The Following Full Calendar Year)
Year	Growth Rate	Year	Network TV	Consumer Magazines	U.S. Ad Spend	Worldwide Ad Spend
1987-88*	+25.6%	1988	+7.9%	+8.3%	+7.7%	+12.7%
1988-89*	+2.9%	1989	-0.7%	+10.6%	+5.1%	+6.2%
1989-90**	+23.3%	1990	+8.3%	+1.3%	+3.9%	+7.9%
1990-91**	+4.5%	1991	-3.3%	-4.1%	-1.2%	+2.3%
1991-92**	+21.2%	1992	+7.5%	+7.3%	+4.2%	+6.0%
1992-93**	+7.0%	1993	-0.4%	+0.5%	+5.4%	+1.7%
1993-94**	-3.6%	1994	+7.2%	+7.6%	+8.6%	+9.1%
1994-95**	+27.2%	1995	+6.0%	+8.4%	+7.9%	+11.7%
1995-96**	+24.7%	1996	+12.8%	+5.0%	+7.9%	+5.2%
1996-97**	+2.5%	1997	-0.5%	+14.5%	+7.4%	+2.8%
1997-98***	+4.4%	1998	+5.5%	+7.1%	+8.0%	+2.6%
1998-99***	+0.8%	1999	+1.6%	+8.7%	+7.6%	+5.9%
1999-00***	+13.8%	2000	+13.8%	+8.2%	+11.3%	+8.8%
2000-01***	+13.2%	2001	-10.0%	-10.3%	-6.5%	-7.9%
2001-02***	-13.3%	2002	+7.0%	-1.0%	+2.6%	+1.6%
2002-03***	+17.0%	2003 est.	+4.5%	+5.5%	+5.0%	+4.9%
Average	+10.7%		+4.2%	+4.9%	+5.3%	+5.1%

Source: Upfront growth estimates from Merrill Lynch and advertising volume data from Universal McCann. *Three networks (ABC, CBS, NBC). **Four networks (including Fox). **Six networks (including UPN, WB). GDP = gross domestic product. NA = Not available.

Incorporate both angles: the earnings and the impact