Broadcast network sales executives are annoyed at all the
media reports that have characterized the primetime upfront sales results for
the 2012-13 season as disappointing. While none want to speak for attribution
and risk offending the reporters who cover them, sales execs from the networks
believe a flat volume upfront that brings in more than $9 billion across the
five English-language networks, as well as price increases in the current
economic marketplace ranging from 6-9%, should not be categorized as "disappointing,"
or in any other negative terms.
They also believe that a good portion of the media outlets
covering the upfronts tend to want to simplify the outcome of the negotiations
as "one side winning" and "one side losing" rather than realizing that both
sides need to walk away winning something -- and in this upfront did just that.
One sales exec pointed out that just because a network opens
negotiations asking for a 15% cost-per-thousand (CPM) price hike for primetime
ad inventory doesn't mean that's the number the network expects to get. So,
theorizing that a network had a disappointing upfront when it asked for 15% and
settled for 8-9% is not based in logic.
"I just don't understand the media portraying an upfront
where volume is the same as the year before and rate hikes are mid-to-upper
single-digits as being disappointing," said one executive. "In negotiations,
you can't start with a real number. If we went to the agencies and said, we
want 6% to start, they wouldn't just agree and pay it, they would want to
bargain that down. So the starting point is always higher, and after you
negotiate and include all aspects of the marketplace, you come up with a
number."
The executive added, "If we took in less dollar volume than
last year and sold at negative CPMs or only a one or two percent increase, you
could say it was disappointing. But you can't compare this year to last year
when a couple of networks got double-digit increases. Last year was not the
norm."
A sales exec from another network agreed, pointing out that
last year, many more advertisers put more money into the upfront and then found
that scatter pricing as this season went forward did not rise as high above upfront
pricing as it did the year before. So this time around, some advertisers
decided to hold some dollar volume back. And on top of that, the networks also
wanted to hedge their bets a little and in some cases, sold a little less
inventory.
"The way advertisers buy TV inventory today has changed," this
sales exec said. "They are making their marketing decisions, their promotions
and new product introductions closer to the time they want to advertise rather
than six months in advance. If they believe scatter pricing will not be that
much higher than upfront pricing, they will take a chance and hold back some
dollars. This year, beginning around March, scatter pricing started dropping
from 20 percent above upfront pricing to around 10 percent. There were some
agencies for some clients where budgets were up and others where budgets were
down."
But network execs agree that the negotiations also
involved a balancing act on both sides, with the agencies not committing to too
much inventory at a price their clients might be able to get later in the
season, and networks not overselling inventory if they thought scatter pricing would
be higher. They opine that because of all the strategy that goes on behind the
scenes, it's too simplistic to read an upfront outcome like you would a
winning-losing sporting event.
"We are very pleased, not at all disappointed, with the
volume of advertising sold and the pricing," one network exec said. Another
added, "Last year's upfront may have been overpriced. But just because it was,
doesn't mean you can look at this year and say it was disappointing."
While most media outlets have said the broadcast upfront is
done, the networks say that's not the case for most. "There are still hundreds
of millions of dollars working in the [broadcast] upfront," a sales exec said. "A
few agencies are still finishing up broadcast network deals and there are some
clients besides General Motors that are waiting and won't do their buying
until July or August. Nothing is really final until holds go to orders and
usually more money keeps coming in until then. That's why we don't like to
acknowledge any specific dollar volume numbers."
One dynamic that has made the negotiations a little more
difficult for the broadcast networks, the sales execs say, is that the agencies
are no longer submitting budgets all at the same time, but instead staggering
them. This makes it more difficult for the networks to "count the house" and
see how much money is going to be placed with each network.
And what has been the impact
of General Motors talking tough on pricing and holding back
dollars, or some networks pushing back and refusing to sell the automaker
inventory?
The broadcast sales execs would not comment on their talks
with GM specifically. But some did try to put GM's actions in perspective.
"GM's ad spending is a significant amount and is important
to the TV marketplace, but no one vendor can impact things by threatening to
withhold dollars," one sales exec said. "Whichever networks didn't do business
with GM yet will eventually find a way to do it so that everyone saves face."
Another network exec added, "GM needs the networks as much
as the networks need GM. But having said that, GM is not the powerhouse it used
to be from an advertising standpoint. It is more old school advertising
compared to what Ford and Chrysler are looking to do beyond just commercials."
