Buyer's market may bash upfront

When CBS presented its new prime time schedule to advertisers two weeks ago, network sales President Joe Abruzzese said he expected to wrap up the upfront sales market in three days just like last year. With one big difference: those three days would be in August instead of May.

Abruzzese was joking. Or at least half joking. But the fact is that a year ago the upfront was wrapped up in time for buyers and sellers to relax over a long Memorial Day weekend after a week of marathon negotiating sessions.
This year, buyers and sellers could relax too-because the upfront hadn't begun and isn't expected to get underway for another week or two. Buyers say they aren't in a big hurry this year and that the market could stretch well into July.

Both sides say it's a buyers market this year and both sides also say advertisers will spend less up front this year. Where buyers and sellers differ is on how much less money there will be and whether or not there will be price reductions on a cost-per-thousand-viewers (CPM's) basis. Buyers say there will be price cuts, sellers say there won't be.

Speaking to Morgan Stanley investors and analysts last week, sources say John Muszynski, who oversees $2.7 billion in TV ad spending for Starcom, predicted a 20% drop in total upfront ad dollars compared to a year ago. If that prediction turns out to be true, that would translate to between roughly $6.4 and $6.5 billion, compared to the $8-plus billion in spending commitments recorded a year ago, and the roughly $7 billion in 1999.

But network executives caution that last year's true upfront number dropped significantly later in the year when advertisers exercised options to get out of as much as $500 million in spending commitments. That dropped the upfront number to somewhere in the $7.7 billion to $7.8 billion-range they say. And they are hopeful that there won't be a drop of more than 5% to10%-or between $7.02 billion and $7.4 billion. But Muszynski reported one network executive told him last week that his network is bracing for an 18% drop in its upfront take compared to last year.

At Starcom, he reported that client budgets are down about 20% for TV network, 29% for cable TV and a whopping 51% for syndication, compared to a year ago.

"Without question for the first time in a while the buyers will have a little bit of an advantage," in the upfront market, sources quoted Muszynski as saying. "I think the consensus is most buyers are looking for price rollbacks compared to a year ago for the same goods." He also reportedly said that advertisers are looking for upgrades in the quality programming packaged for sale in the upfront and for better added value opportunities such as contests, sweepstakes, product placement, in-store merchandising tie-ins, sponsorships and the like.

But perhaps most of all advertisers are looking for greater flexibility for their network spending commitments, Muszynski said. "He said advertiser budgets are being managed on a much more short-term basis," said one source that heard his comments.

Muszynski reportedly said CBS is best positioned for the coming upfront market, given that network's ratings increases this season and strong development for next season. Relative to its size, the WB is in the second best position and should do quite well, he said, while Fox, though something of a "wild card" is number two in terms of upfront positioning among the big four.

After Fox, NBC and ABC are neck and neck, each with their own problems. ABC's biggest problem was its huge drop off in ratings among adults 18-49, the most important demographic in terms of ad sales. "But their new program lineup is better than expected," he said.

"NBC is in a tough position," Muszynski said, more for how it sold last year than what its new schedule looks like. "They really gouged some people and many of those advertisers have not forgotten." Sources said he talked of a "revenge factor" that advertisers will bring to their negotiations with the Peacock network.

Asked for comment, the network declined to address Muszynski's remarks directly, saying only that it continues to lead in adults 18-49 "and we're confident that our advertisers will see the benefit of that."

Starcom hasn't done any upfront deals yet and network sources say that no other major agencies or advertisers have stepped up either. "They're hiding their money for now," said a source at one of the big four of the network advertisers. "We're not begging for any money. We know its' there. We know its ours. It's going to be a much more gradual market this year. - Steve McClellan