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UPFRONT: Flat Is the New Up

The View From Advertisers: Spending Less

In the ad bazaar of the TV marketplace known as the upfronts, flat may be the new up.

The television industry heads into the upfront selling season battered by a number of troubling market forces, including continued viewer fragmentation, depressed primetime ratings, increasing DVR penetration and a national recession.

Last year, the broadcast networks wrote an estimated $9 billion-plus in upfront business; this year, many buyers expect spending to be flat at best, and that may be a good thing in the current environment. Others are even less sanguine, with some observers predicting spending to be down by as much as 14%, according to at least one Wall Street analyst.

The falloff in live viewing in primetime has been precipitous this season. CBS is down 8%, while Fox and ABC are down double-digits, 11% and 15%, respectively. Fourth-place NBC is flat. Buyers expect the networks to ask for CPM [cost per thousand] inflation increases, but this season's poor ratings may make higher ticket prices hard to justify.

"It certainly puts a negative spin on the opening of the upfront," said one executive at a major media-buying agency. "I don't foresee many [buyers] feeling that they have to immediately come in and meet the network price-increase demands."

Last year at this time, the change from live program ratings to average commercial ratings plus three days of DVR playback (C3)—the first metric change in 40 years—spurred posturing and hand-wringing, with some buyers vowing not to write business on anything but live program ratings. But when media-buying and planning agency Group M and NBC Universal announced the first major upfront deal, to the tune of nearly $1 billion, the majority of it written on C3, the dominos began to fall.

And while all deals are done on a client-by-client basis, the new metric provided greater accountability for advertisers and networks facing an increasingly on-demand viewer model in a world where DVR penetration is at 20% and growing.


The new digital reality has stimulated greater cooperation between buyers and networks working to keep viewers engaged in not just the shows but commercial messages. Advertisers reacted positively to NBC's early upfront last month (which the network dubbed an "infront") in part because it presented an opportunity to collaborate on product integration and non-traditional sponsorship opportunities that are imperative in the post-millennial entertainment arena. For example, the networks and advertisers have realized the limitations of embedded pre-roll (oftentimes creative designed for linear television) on their video players. This year, there will be more conversations about digital opportunities that actually fit the space, including interactive creative.

"Clearly, TV is going to be the driver for most deals done by the advertising industry," says Chris Allen, VP-director at media buying giant Starcom. "But we want to be sure to build synergies and leverage across multi-platforms when we make buys. I think people are having a harder time doing this than they care to admit. But we're all getting closer."

Overall television advertising declined by 1.7 % in 2007 to $65 billion, according to TNS Media Research. Network television still gets the biggest piece of the TV ad pie, but spending is down 1.5%, according to Nielsen Monitor-Plus. The mobile market and online space may have siphoned some of those ad dollars. Internet advertising was up 18.9%, according to Nielsen. And cable continues to attract more spending, posting a 2.2% increase last year. Many buyers expect cable, which had its best summer ratings-wise last year, to continue to build momentum in the market.

Companies hard-hit by the economic slowdown are cutting marketing budgets. The Wall Street crisis has put a crimp in the financial services sector. And automotive companies, which account for a healthy chunk of TV ad spending, showed deep declines in advertising spending in 2007, and that trend is expected to continue this year.

But network primetime is still the only way to reach wide swaths of consumers essential to brand building and product launches. "TV is still a primary driver," says Andrew Donchin, director of national broadcast for Carat. "It's still doing a bunch of the heavy lifting. Often in tough times, advertisers gravitate back toward what they know works for them, and what they know works for them is television. I think television has experienced a resurgence, actually. Advertisers are realizing that TV is still an important part of any campaign."


During an economic recession, locking in the price-wise deals of the upfront may be an imperative. With all the challenges facing the industry (only the latest being the possibility of another strike, this time by the Screen Actors Guild), a bull market may seem counterintuitive. But that is the paradox of media fragmentation.

"It tightens up inventory," said Brad Adgate, senior VP for research at Horizon Media. "You have to buy more commercials to make your media requirement. The more you buy, the less inventory, and that drives prices up."

Online and mobile advertising, where the brand recall can be as high as 80%, nonetheless reaches a fraction of the consumers that linear television does. Higher CPM rates in the digital space have not given the networks a revenue stream to rival the traditional 30-second spot.

These days, the new market reality seems to be, pay more, get less. "It's like what the airlines have done with no-frills," adds Adgate. "People are still flying. You don't get a seven-course lunch; you get a bag of peanuts. But you still have to go to L.A."

The View From Networks: Fewer Pilots, Fewer Parties

After a fall that featured few launches finding traction, a writers' strike and ratings that as a whole were depressed—and depressing—things will look noticeably different this week: Fewer people, fewer pilots, fewer parties.

The entire process has been scaled back as networks cut costs—and save time—by deciding on shows without as many full pilots. Networks have to set schedules based on presentation tapes (often multiple scenes shot on film) or without anything shot at all. Most of the presentations will be scaled-down affairs, and gone are some of the parties, with networks like CBS and ABC dropping their traditional shindigs altogether.

It follows logic that fewer people are making the trip to New York. Network and studios alike are approving the travel for far less people than in years past. "It's a weird mood —it's just less of an event," says a network executive who declined to be named.

And with all the challenges in the industry as the broadcast networks try to figure out where the viewers have gone—and if they are coming back—network executives seem far less concerned about what the competition is up to. "The week before upfronts, you are always running out of every meeting and calling everyone you know asking what they have heard," says one network programming chief. "This year, you're just not as worried about the other guys."

But the shows must go on, and NBC will kick things off on Monday, May 12. Gone is the ritzy song and dance at Radio City Music Hall, instead replaced by just a party that will feature a multimedia, interactive showcasing of the NBC Universal properties.

The network announced its fall schedule—and in fact a 52-week schedule—back on April 2. So advertisers already know that coming out of the Olympics in August, NBC will have a rookie slate that includes the Knight Rider remake, dramas Crusoe and My Own Worst Enemy and comedy import Kath & Kim.

As always with NBC announcing its schedule first, network executives will sit back and watch what unfolds the rest of the week. Once the other networks have announced their fall lineups, the network will then decide if it wants to move some pieces around before the new season begins, as it often does.

ABC follows the next day at Lincoln Center as always, but outside of late-night franchise Jimmy Kimmel's customary warmup act, the show will be talent-free.

The network will pitch a schedule heavy on returning favorites, though the Thursday at 10 pm real estate out of Grey's Anatomy is up for grabs. One possibility in that spot is Life on Mars, a BBC sci-fi drama adaptation which may or may not include original executive producer David E. Kelley, who is said to be unhappy with the finances.


While ABC will not have a post-show party, The CW will pick up the slack with a Tuesday-night affair. Touted as a party with a presentation embedded within, the network will look to dust itself off after a year that befuddled observers both within and outside the network. Last year's introduction of Gossip Girl and Reaper gave the network great post-upfront buzz, but audiences didn't follow. This year's hot CW topic is a Beverly Hills 90210 remake, though the network has yet to shoot a single frame of film.

On May 14, CBS plays at Carnegie Hall again. Last year the network pushed a new crop meant to attract buzz, with shows such as Vampire drama Moonlight and couple-swapping Swingtown. Moonlight has survived on Friday nights and Swingtown still hasn't aired, so the network still is looking for fresh blood with its still-formidable slate of crime dramas not getting any younger.

On May 15, a network may finally puff out its chest a little when Fox takes the stage. Down noticeably less than its competitors in the May sweeps, the network will tout its strong returning schedule. It also will continue its annual attempt to strengthen its fall lineup as it enters year two of fewer baseball playoff games. Last year, the network held its top rookie, Terminator: Sarah Connor Chronicles, until midseason. This year, it probably won't wait past the fall to introduce one of its top candidates, J.J. Abrams sci-fi drama, Fringe.