Cynopsis Media presents:
Good morning. It's Wednesday, May 19, 2010, and this is the final installment of this five-part series about the 2010 Upfront season.
The Broadcast Upfront 2010: by Daisy Whitney
What a difference a year makes.
With the pomp and circumstance of the broadcast upfronts now officially underway this week, the networks are eager to learn if the red-hot scatter buying will carry over into the upfront. All signs point to yes and that's a marked change from a year ago when broadcasters entered one of the toughest upfront markets ever.
But as the economy and consumer spending have improved over the last several months, marketers have cracked open their wallets to the tune of double digit increases in scatter late last year and into this year. Both agencies and networks expect the money from marketers to keep flowing due to the pent-up demand. After reining in spending in 2009, marketers are rushing back, needing to regain market share for their brands.
"Last year it was a matter of survival and people were pulling in and there was a lot of competition and price discounting and now with the economy improving again there is a need to rebuild these brands and establish some different positioning," said Jon Nesvig, President/Sales at Fox Broadcasting.
That's why he expects ad dollars to rise over last year as brands reinvest in their marketing. Other networks agree.
Flexibility Versus Price
Scatter spending has been north of 25% since the start of the year and that's a strong position for entering the upfront, said CBS CEO Les Moonves during the company's earnings call earlier this month.
Media buyers echo the enthusiasm. "This is very much a case of history repeating itself and when you have consecutive quarters of scatter premiums then do the math and it makes sense the upfront will be up," said Shari Cohen, Executive Director/The Exchange at Mindshare. "When there is scatter momentum you see people redirecting to the upfront."
That's because pricing is better in the upfront than in scatter. The upfront is effectively a futures market in which advertisers make bigger long-term commitments in exchange for better pricing. Now that marketers have more visibility into how business will shake out through the rest of the year they can make bigger commitments. In short, they're ready to redirect dollars into the upfront market, Cohen said.
If history is a good teacher, then the lessons from the last two recessions - in 2000-2001 and 1992-1993 - suggest pricing could bounce back by double digits.
"Advertisers that spent during the downturn were able to take share away from those that didn't and now some are fighting to gain that share back and that can drive a quick recovery in the media market post recession," said Mike Pilot, President/Sales and Marketing at NBC Universal. "The recovery looks very similar to the two previous recessions."
However, broadcasters should be aware of a few potential potholes. While upfront pricing is better than the premiums of scatter spending, some marketers became accustomed to and like the flexibility that scatter buying affords, Pilot said.
"Last year when they couldn't participate in the upfront they bought closer to air date and some companies found a benefit to flexibility. They could hold longer and spend ad money on one campaign or another," Pilot said.
Networks too may hold back inventory if upfront pricing isn't strong.
"The last upfront marketplace wasn't that terrific, so we only sold around 65% of the inventory that we had," Moonves said. "We anticipate selling more of that this year, but only if the pricing is up a decent amount to equal what we have been getting in scatter. Otherwise, we will be happy to sell less and wait for our schedule, which we believe will be strong once again."
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Auto, Finance Ticking Up
The two sectors hardest hit by the recession are coming back strong. Financial services and automotive have invested heavily in the scatter market and are expected to be big spenders in the upfront. Nesvig said he's seen strength in auto advertising as unit sales and volume rise for car makers. Now many auto makers need to either rebuild their brands or their momentum through marketing.
Technology should also be a healthy category, especially given the competition in the software and handset market from the likes of Microsoft and Apple. Retail is also expected to spend money as many retailers need to reestablish their competition positions. The same is true for sit-down restaurants that took a back seat to the more economical quick-serve restaurants over the last year.
Despite the overall robustness, broadcasters still face long-term challenges in shrinking ratings and fragmenting audiences as viewers shift to other mediums.
"There is a lot of fragmentation and options right now," Cohen said. Still, it's important to remember the recession isn't that far back in the rearview mirror. "The dark clouds haven't fully dissipated. Yes, we are in a different position than a year ago, but we aren't in the clear yet."
Other concerns include commercial ratings, competition from emerging technology and the gradual migration to online viewing, said Don Seaman, VP/Director of Communication and Analysis at MPG. "Clients have to be concerned with C3 and who's watching online and now there is talk of expanding C3 to include what's online. We need to be careful that what we are buying is reflective of what the actual commercials are getting. When it comes to online viewing, some networks are adding more inventory. CW, for instance, has doubled the ad load in its online programs," he said.
Even so, broadcast networks can still aggregate audiences better than anyone.
"Certainly the competitive environment continues to be challenging for all, but there are still significant differences in rating size for broadcast and real value in immediate reach and overall effectiveness," Nesvig said.
That strength is reflected in the CPMs and dollars that flowed to the market in scatter and will likely continue through the upfront, Pilot said.
While networks have played their cards close to the best when it comes to what's been greenlit, MPG said all together, the five broadcast networks have 90 new programs that might end up on the new fall schedule.
This 5-part series of Upfront 2010 Special Editions are available to read or download on the Cynopsis website in our special UPFRONT OVERVIEW section. By week's end, all of the Cynopsis 2010 Upfront segments contained within our regular daily editions will also be recapped in their entirety in this Upfront Over section.
Daisy Whitney for Cynopsis
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