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Cancelled Orders Muddy the Upfront Waters

You couldn't blame television and advertising executives for reaching for the Excedrin last week.

Faced with a May 1 deadline to exercise their third-quarter options, a number of advertisers cancelled orders, while others tried to extend their options in deference to the continuing labor negotiations between the Writers Guild of America and the Association of Motion Picture and Television Producers.

This round of cancellations of last year's upfront advertiser commitments was less severe than the one that came earlier in 2001, most of the networks contacted last week agreed. But the cancellations were still greater than those made at this point in prior years.

"A lot of clients have put in for extensions due to the strike," one network executive said.

As of press time, negotiations between the writers and studios were ongoing.

Some network executives believe significant further cutbacks of third-quarter commitments could cast a pall over this spring's 2001-2002 upfront market.

Lifetime Television executive vice president of ad sales Lynn Picard said last Thursday that "a few clients wanted extensions until the end of [last] week." The network granted those requests.

Picard said she'd heard that some networks suffered from cancellation rates as high as 15 percent from marketers who sought relief from year-ago upfront commitments.

"We're a lot less than that, because we're doing so well," Picard added. Lifetime was the top-rated basic-cable network for both the first quarter and April, per Nielsen Media Research.

Fox Family Worldwide executive vice president of ad sales Barbara Bekkedahl said only that "third-quarter cuts in [the] adult [upfront] are more significant than last year."

Added ESPN/ABC Sports president of customer marketing and sales Ed Erhardt: "We're well-insulated from options frenzy. We hear options are being taken elsewhere, but it's not that big a 'hit' for us."

Network ad-sales executives and Wall Street analysts have wondered for months if major clients would seek further relief from their 2000-2001 upfront buys. Earlier this year, General Motors Corp., Procter & Gamble Co. and others cut hundreds of millions of dollars from upfront deals made last spring.

Back in April, Discovery Networks U.S. executive vice president of ad sales Bill McGowan estimated that marketers earlier this year slashed some $300 million from cable's year-ago upfront and $400 million from their broadcast outlays.

During last Thursday's "BigTalk" question-and-answer session on TVinsite.com (the Web portal of Cahners Television Group), MediaCom Worldwide co-managing director Jon Mandel said the effect of third-quarter options was still unfolding in the marketplace.

"The short answer is we don't have answers yet," he said.

Thus far, the 2001-02 upfront has yet to break in any material way. Picard said Lifetime has held plenty of discussions, but hasn't inked any business. A year ago at this time, she said, the network had cut some deals.

Because of all the uncertainty about the economy and the strikes, "it's going to be a protracted upfront," Discovery's

McGowan predicted last week. On the buying end, MediaCom officials expected the market to drag beyond Labor Day, particularly if the threatened writers' and actors' strikes occur.

Erhardt felt a lengthier upfront could work to the benefit of ESPN and ABC Sports, since it takes far longer to negotiate cross-platform deals.

Key ad-agency buyers at Initiative Media Worldwide and Carat USA last week hinted they may hold back for the scatter market, should upfront pricing surpass their expectations. But McGowan cautioned that scatter has proven more expensive than the upfront in all but two of the past 15 years.

McGowan reiterated his prediction that cable's upfront will grow by $500 million at last week's "Upfront Summit" cosponsored by Electronic Media
and Advertising Age. He also forecast that the broadcasters' take would drop by the same amount.

Mandel took issue with that forecast: "What Bill forgot is that he points out how cable ratings are up, says the cable dollars will be up, and didn't do the math to realize that his numbers would project a 4-percent CPM [cost-per-thousand] decrease in cable."

A more cautious Turner Entertainment Group president of sales and marketing Joe Uva would say only that he's "guardedly optimistic" about cable's upfront growth.