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Buyers Balk as NBCU Tries to Use 'Modern Family' to Facilitate Upfront Deals Across All Platforms

As the official first week of upfront negotiations comes to
a close, it seems unlikely that any significant deals will be concluded before
the Memorial Day holiday weekend, buyers and the networks say.

But that's not due to a lack of effort by NBCUniversal ad
sales president Linda Yaccarino, who has been trying for several weeks to
motivate media agencies to do early upfront package deals across all of the
media company's platforms, using USA Network's acquisition of off-network
rights to ABC hit sitcom Modern Family as a carrot.

While it has not led to any deals being consummated yet, the
fact that NBC is out there trying to be an early upfront deal player has been
noticed by the other broadcast networks. While none expressed concern, one
agency exec said the last thing the competing broadcast networks want to see is
NBC do an early deal that takes a significant amount of dollars out of the
marketplace and also allows NBC to establish an opening rate for upfront

"The media agencies, at least at this point, all believe Modern
is not as valuable as Linda is trying to make it," said one agency
executive. "It's not priced at a level where any agency has wanted to begin
pouring money into NBCU or USA. But I understand the strategy. If you start
with low prices, it's hard to raise them. But if you start high, you can always
come down."

According to media buyers who did not want to speak for
attribution, NBCU is looking to get high cost-per-thousand pricing for units in
Modern Family, but those agencies willing to pay the hefty prices would
get some better deals on other programming across the NBCU portfolio.

Buyers say Yaccarino is not looking to just sell Modern
units for USA Network in a vacuum, but to use the series to draw
dollars into programming at all of the NBCU cable networks, as well as to NBC.

An NBCU spokesperson said no one at the company, including
Yaccarino, would be commenting on upfront negotiations at this time.

USA is expected to televise about 18 half-hour episodes per
week of Modern Family on multiple nights in fourth quarter, following
its premiere on Sept. 24. That's a lot of ad inventory to cover.

USA Network will use Modern Family to launch some of
its new original sitcoms, but agency execs say Yaccarino has been touting to
them that buying time in the series will help them reach a younger, more
affluent 18-49 audience.

Modern Family on ABC averaged 9.5 million viewers
this season and a 3.5 18-49 audience, ranking it the second most-watched comedy
on television in both viewers and in the demo, behind CBS' The Big BangTheory
which is the leader in both categories.

NBCU's cross-platform strategy also includes using Modern
and the nine hours a week it will air on USA as a location for
advertisers to pick up some of the 18-49 rating points they have encountered
this season with shortfalls in the demo on both broadcast and many of the cable

While some media buyers say NBCU, at least in its early
pitches to agencies, has been looking for "broadcast level pricing" for ad
units in Modern Family, other sources familiar with the situation say
Yaccarino has been asking for ad pricing that is similar to what Turner's TBS
network gets for its off-net sitcom The Big Bang Theory. And Yaccarino
would know what the pricing is, because she sold it to media buyers in the 2011
upfront when she was executive VP, chief operating officer of ad sales and
marketing and acquisitions at Turner Entertainment. She left Turner six months
later to join NBCU as head of digital and cable ad sales before assuming her
current role overseeing all NBCU advertising in September 2012.

The off-net episodes of Big Bang on TBS draw some of
the strongest viewership and 18-49 numbers for all of cable. The series airs
multiple times on multiple nights, but its Wednesday 10 p.m. and 10:30 p.m.
telecasts have recently drawn between 2.8 and 3.1 million viewers and a 1.2 to
1.4 18-49 rating. So it's easy to see why Yaccarino wants to get the highest
pricing possible for Modern Family.

Chris McCumber, copresident of USA Network, has pointed to
research that shows just 8% crossover between USA viewers and viewers who watch
Modern Family on ABC, meaning there is a significant new audience base
for marketers to tap into. And from USA's point of view, Modern Family
will be replacing the much lower-rated, and older-skewing Law & Order:
on most nights, as that series transitions off the network. So USA is
clearly going to get a sizable ratings boost across many of its nights.

One buyer alluded that it might be cheaper for agencies to
buy units in Modern Family through syndication, which is being sold by
20th Television on behalf of the studio Twentieth Century Fox
Television which owns the series.

However, other sources say the pricing NBCU has been asking
for Modern Family might actually be cheaper than buying it via
syndication, particularly if package deals are done across all NBCU networks. Plus,
the fact that Modern Family would be airing every night in primetime on
USA enhances its value over a syndication buy.

Primetime for

Modern Family aside, some agency executives think the
ratings-challenged NBC broadcast network portfolio from this season will make
it a difficult upfront negotiations period for Yaccarino and her sales team.

"Linda is on the hot seat," said one media agency executive.
"This is her first time selling both broadcast and cable together. She made a
lot of changes in the sales structure there, and spent a lot of money bringing
in new people. She has to bring in a lot of ad volume to justify all her

A competing network sales exec said, "Linda is going to try
everything and anything in this upfront as she has a ton of pressure on her to
deliver in her first year in this role. From the buyers I spoke to, they say
they won't be paying high rates for Modern Family on USA. But I'm sure
her price will come down and she'll eventually sell the inventory."

Others say upfront time is when the participants from both
sides, along with the media, put a microscope on the negotiations.

"This whole Modern Family thing shouldn't
be gripping the marketplace," said one media industry observer. "But I can see
that with broadcast, and even with some cable network demo ratings down, why
NBCU would be trying to push Modern Family as a place for clients to
recover some of those 18-49 viewers."