Early signs are that this year’s upfront market will be strong, but Rino Scanzoni, chief investment officer for media buying giant GroupM, notes that a new cast of characters could affect the market’s dynamics.
“It’s really too early to tell, but if history tells you anything, if scatter prices continue to hold up, you’ll have a very, very healthy upfront because people are going to want to lock in more upfront spending if they can avoid scatter premiums,” says Scanzoni, who oversees about 28% of all of the money spent on television in the U.S.
Scanzoni notes that the upfront is far from a perfect way to predict industry revenue. He’s expecting the usual amount of posturing by both network sales executives and media buyers, but whatever happens in the upfront, GroupM is forecasting that total television revenue will be up 2% to 3% for 2011, which is a lot better than two years ago, when the TV market contracted. Broadcast network television will be up about 2% in 2011 with cable gaining 5% to 6%, GroupM estimates.
How the upfront plays out will be affected by changes at the top in the network sales organizations. In December, Fox tapped Toby Byrne to replace the retired Jon Nesvig, the dean of network sales executives. Comcast announced that when its acquisition of NBC Universal is completed, NBCU’s president of sales Mike Pilot will no longer be with the company. Pilot is being replaced by NBC veteran Marianne Gambelli at the NBC broadcast network and Dave Cassaro, Comcast Networks sales president, on the cable side. And at ABC, Geri Wang is in just her second year as president of sales and marketing.
“Psychology and personalities impact it, there’s no doubt about it,” Scanzoni says. “I’m sure that the new players are going to want to look very good to their management, so they’re going to want to be very careful about what they do.”
Unlike past years, “you don’t have a guy like Jon Nesvig riding herd on one network who could probably have the historical perspective and the job security to do what he thinks is best long-term,” Scanzoni says. “So you have a lot of new players. Everyone is going to be looking at what everyone else is doing. So I think you could have some market paralysis, because people like to follow. You have a lot of new people, and I’m not so sure any of them are really in a position to want to lead. So that could create some interesting dynamics.”
Scanzoni looks at the upfront like a futures market. He thinks advertisers will want to invest more in longterm futures based on what they have experienced in scatter, where prices have been up about 15%. But he says the networks could burst the bubble if they try to push prices more aggressively in the upfront than the modest increase in demand would suggest.
“If the upfront marketplace is slightly overpriced I would prefer that, because then there would be a windfall in the short-term [scatter] market,” the GroupM exec says. “In the end, you can’t control what people want to do and what they’ve promised their companies. The only thing you can do is make a judgment of what the market will bear and determine how best to play your money. And if you’re able to play against the tide, you’ll be able to get a much bigger advantage.”
Marketers and buyers have been able to find lower TV costs by shifting money to cable, where CPM prices have been at least 40% lower than broadcast, but those days may be coming to an end in the next few years, Scanzoni notes.
“If they can’t grow the audience, then obviously you will have a different scenario, you will have a more inflationary scenario,” he says, noting that viewership of the core cable entertainment networks has flattened out recently.
At the same time, cable networks have been able to get broadcast-level pricing for some of their original programming. “I‘d bet that with a lot of the original series, they could actually be getting higher prices,” Scanzoni says. “If you take AMC and a show like Mad Men, if you just look at the price of Mad Men, it probably comes very close to what you would pay for an average program in prime time on a CPM basis. But if you look at AMC’s overall CPM, with their movies and all of that, then obviously that’s a whole different story.”
Of course, the state of the economy will also be a factor in both the upfront market and the overall health of TV advertising this year.
“Consumer spending is still quite limited in terms of growth. We had a good holiday season [in terms of sales], but we still have a 10% unemployment rate,” Scanzoni notes. “Ultimately, you’ve got to be led by the consumer, because the general economy is 70% consumer-driven and the TV economy is 99% consumer-driven. That’s why, looking at 2011, there’s going to be some growth, but I think it’s going to be relatively modest growth.”
Even though many major television advertisers are holding a lot of cash right now and will be looking to grow their revenue this year, a spurt in ad spending is unlikely. “I don’t see a situation where there is going to be explosive [ad spending] growth this year, because there’s not going to be the consumption support behind it to be able to generate the movement of that much product,” Scanzoni says.
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