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Upfront Suspense

This year's upfront sales market is turning into a cliffhanger. With the annual bazaar for networks and advertisers only two weeks away, nearly a fifth of the networks' clients have yet to act. The last-minute spending by those advertisers—or lack of it—will mean the difference between a record year and a disappointing one.

Buyers and sellers alike still predict that this year's market will be robust, with near record levels of spending: $17 billion or more on broadcast network, cable, and syndication. But, with 20% of the spending estimates still not ready, it's hard to know for sure.

Advertisers are playing a calculated game of chance. Once the spending starts, the market will likely go in a flash because buyers always fear not being able to buy the ad schedule they've planned if they hesitate too long.

The broadcast market is expected to be finished by Memorial Day; the cable upfront, with dozens of networks, will play out through June.

Last year, advertisers spent a record $9.3 billion on the six broadcast networks in the upfront market, when buyers spend most of their ad budget for the new season. They spent another $5.6 billion or so on cable and a little more than $2 billion on syndication.

A survey of more than 150 leading marketers by the Association of National Advertisers in March suggests that this year's TV ad market will be strong. Only 17% of respondents said they expect to spend less money on television; 38% expect to spend more; 45% expect to spend the same amount. Even if the market is flat, tying last year's record $17 billion, the networks could still claim victory.

As programmers finish assembling schedules and the remaining ad-spending estimates come in, here are four factors that will drive this year's sales market.

Beating TiVo

Starting this year, advertisers will hawk products on network shows in unprecedented ways to thwart TiVo zappers.

Ad wonks call it "product-integration advertising." Product placements in network shows are more ubiquitous, but now storylines will be written into comedy and drama scripts that subtly promote pain relievers, soft drinks, cars, and much more.

"A lot of clients are looking for that 'big idea' for special sponsorship opportunities," says a senior network sales executive. "We have dozens of people coming to us wanting to do this. So we're looking at scripted series—both comedies and dramas."

Some networks are working with writers and producers ahead of time if a client wants something written into a script.

Steve Grubbs, chief executive of PHD North America, says clients are increasingly attracted to integrated deals, especially as they evolve in quality. "We will absolutely see more of it," he says. "You have to do it in an environment that supports the brand message, essence, and personality. It can't be blatant." Grubbs cites two examples of how it was done right this season: the integration strategies used by Home Depot on Survivor
and Old Navy on American Idol.

More Money for Cable

Even the cable guys admit privately that the chances of a predicted $1 billion shift from broadcast to cable are nil. Still, buyers estimate that it might be about half that: around $500 million. Both buyers and sellers say cable's biggest gains may come from new advertisers in the market or from returning advertisers' spending more money this year than last.

"New incremental money coming into the market will be spent on cable," says David Levy, president of entertainment sales for Turner. "Advertisers are really looking for alternatives."

True enough, says PHD's Grubbs. And what they really want is an alternative to a third year of "double-double-digit [broadcast] network inflation and frustration with that." While they will probably get that relief regardless, buyers will hedge their bets with more cable, says Grubbs. "In fact, there is a lot more quality programming on cable and more buzz shows on cable than in the past."

Jon Mandel, chief negotiating officer at MediaCom, agrees that cable is getting most of the new money, along with other alternative media. "Cable, online, and syndication are stealing the growth dollars at a faster rate than the broadcast dollars."

Who's the lead Dog?

For years, NBC has led the upfront market in total dollars and, for the most part, price hikes. This year, CBS will narrow the gap, likely gaining the single biggest gain in total dollars and producing the biggest price increases. NBC, which collected $2.9 billion in last year's market, is still expected to take the biggest share of the upfront pie this year. But its lead over CBS will be smaller than the $700 million gap last year.

"For the first time in a while, the lead position is actually up for grabs," says Ray Warren, managing director, OMD. "With Friends
and Frasier
going, that's an awful big hole. NBC's argument is, they have Apprentice." The real question, he says, is whether The Apprentice
will have the same success as American Idol
going forward.

"I think CBS has a pretty good story," says Grubbs, citing the network's strong Thursday schedule and successful first-season shows like CSI: Miami. In fact, he says, without The Apprentice, the leadership contest would be over. "If not for Apprentice, I think CBS would have market leadership," he says. But that's okay by him: "The fact that there is not a dominant market leader works in our better interest."

For its part, Fox had a very rough start this season but rebounded with American Idol
in the second half. Last-place ABC, with a brand-new executive team, is in rebuilding mode, as it has been for the past three years.

Lower price hikes

The bad news for networks is that they won't get 15% more from advertisers this year.

Still, there will be price increases—probably somewhere between 5% and 7%.

"Last year, we suffered from the fact that the scatter market was so strong that advertisers had major incentives to buy upfront," says Grubbs. "Buyers overbought upfront to protect themselves."