Advertising
New Media Luring Money Away From Networks
Kevork Djansezian/Associated Press
Fox, which broadcasts "American Idol," above, sold about $1.8 billion in ad time, compared with $1.6 billion last year, but the overall trend in advance sales is down.
By STUART ELLIOTT
Published: June 28, 2006
ADVANCE advertising sales for the fall television season will probably be down for a second year in a row, reflecting the growing impact of new media outlets on broadcasters.
Estimates are that the five networks will sell $8.9 billion to $9 billion in commercial time ahead of the 2006-7 season, in what is known as the upfront market.
That compares with an estimated $9.1 billion sold in the upfront market last year, before the start of the 2005-6 season, and an estimated $9.3 billion in the upfront market two years ago, ahead of the 2004-5 season.
"I'm surprised it's two years in a row," said Wayne Friedman, West Coast editor at MediaPost Communications, which covers the media business through online (
mediapost.com) and offline publications. "Most of the time, it's the networks holding all the cards."
Along with TV, newspapers and other traditional media are scrambling to adjust as marketers step up efforts to reach consumers in newer ways that include Web sites, podcasts and video-on-demand.
"The broadcast environment remains tough," Debra Schwartz, a media analyst for Credit Suisse, wrote in a report.
The totals are not complete because only three of the five networks — the new CW, Fox Broadcasting and NBC — have completed their sales. Fox, part of the
News Corporation, and CW, owned by the
CBS Corporation and
Time Warner, finished late last week.
NBC, part of the NBC Universal division of the
General Electric Company, finished on Monday.
•The remaining two networks — ABC, owned by the
Walt Disney Company, and CBS — are still negotiating with advertisers and agencies. They are expected to finish by Friday, if not sooner.
"People would like to go off for the Fourth of July and be done," said an executive at one network.
In some recent years, when demand from advertisers was particularly strong, the upfront market was completed by Memorial Day.
In other, less frenetic years, the bargaining continued until around Independence Day. Occasionally, when demand was especially soft, the upfront market muddled through the summer and ended by Labor Day.
For decades, the broadcasters took in more during each upfront market than the one before, except when recessions dampened advertiser demand. That reflected a relentless focus on using mass media to reach consumers quickly.
Now, marketers' desire to explore alternatives, particularly digital media, is leading them to divert ad dollars from television or to add money to their budgets specifically for new media.
That significant change has not escaped the attention of the broadcast networks. They are offering marketers opportunities to buy commercial time or ad space in places away from the TV set.
NBC, for instance, has booked an estimated $50 million in digital revenue separate from the broadcast airwaves, said Randy Falco, president and chief operating officer at the NBC Universal Television Group in New York.
An additional $200 million in commercial time that NBC sold during the upfront market was attached to digital deals, Mr. Falco said. NBC sold an estimated $1.9 billion in commercial time in the upfront market, about even with last year.
"We feel very good about where we are, being flat in a down market," Mr. Falco said.
The NBC total of $1.9 billion includes an estimated $200 million in revenue from its new "Sunday Night Football" broadcasts, and the preshows, which start in September. Some industry analysts are reluctant to count football revenue in the upfront market results along with revenue from entertainment programming. Others, however, willingly include it in a network's total.
Estimates are that when ABC is finished, it will have sold about $2.2 billion in commercial time, an increase from the estimated $2.1 billion it sold during the upfront market last year.
ABC is radically remaking its prime-time schedule for 2006-7, hoping to build on the success of series like "Desperate Housewives," "Grey's Anatomy" and "Lost" with nine new series for the fall (and an additional half-dozen waiting in the wings for midseason).
When CBS is done, estimates call for its total to reach $2.4 billion, about the same as last year. That would give CBS the lead among the broadcasters in total sales for the second year in a row.
CBS fared well in 2005-6 with returning shows like "Without a Trace" and scored with several new series like "Ghost Whisperer," "How I Met Your Mother" and "The Unit."
•Fox sold about $1.8 billion in commercial time, compared with $1.6 billion last year. Fox enjoyed high ratings with mainstay series like "American Idol" and "24" and newcomers like "Prison Break."
"Fox is the champion when it comes to charging a premium to reach the 18-to-49 audience," said Mr. Friedman of MediaPost, referring to the age group most coveted by advertisers.
CW, which is replacing the UPN and WB networks, sold about $650 million in commercial time. Last year, WB sold about $625 million and UPN sold about $250 million.
Because ratings for UPN and WB during the 2005-6 season fell below expectations, few analysts expected CW to do better in the upfront market than matching the WB performance last year.
During the upfront market, networks sell anywhere from 65 percent to 90 percent of the commercial time in the coming season. They hold back the remainder to sell during the season in what is called the scatter market.
"The big question now is really what the scatter market is going to be like," Mr. Friedman said. "Many media buyers are saying they want to wait for the scatter market to evaluate the new-media opportunities the networks are offering."
Given the challenging environment the broadcasters are facing, they may consider it a victory that the upfront market is not much lower than last year's.
"We believe that when the dust settles on the upfront market, total broadcast upfront-dollars results will be somewhere in the middle of bullish and bearish," William Drewry, another analyst for Credit Suisse, wrote in a report.
Or as Mr. Friedman put it: "Considering all the alternatives, that the upfront still has the power to do what it does is not so bad. If I were the networks, I'd take the money and run."
