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Upfront Update, 10-15-09:  Cable Volume Sinks 12% to $6.73 Billion

Oct. 15: Total Cable Upfront down 12%
Cable’s upfront was down significantly, though it did not drop in total volume as much as broadcast did. The tally for cable was $6.73 billion, down 12% from last year, compared to broadcast’s 22% drop.

Last year, cable pulled $7.65 billion in the upfront. Reasons for the decline include reduced client budgets and mid-single-digit declines in CPMs. And, like broadcast, cable nets held back more inventory for the scatter market in the hopes that prices would rise again - a tactic that has borne fruit, as fourth quarter pricing is up by high-single-digits over the upfront, writes Mediaweek.

Analysts believe cable will see a nice lift in ad spending as the economy continues to improve. UBS analyst Michael Morris predicts that cable ad sales will grow 6% in 2010, and that advertising spend will eventually return to historic levels.

Sept. 18: Upfront Dollar Volume Sinks 22%
Total dollar volume for the upfront was down 22% for broadcasters, to $7.2 billion, according to Credit Suisse.

ABC and CBS pulled $1.9 billion, down 24% from last year. NBC was down 21%, to $1.5 billion, while Fox was down 18% to $1.6 billion, reports MediaPost.

The CW slipped 17%, to $300 million.

CPMs were down from last year’s levels, but not by a hugely significant amount. Most were down in the 4% to 5% range.

The problem was reduced demand coupled with the fact that the networks sold considerably less inventory than in recent years. Fox sold 75% of its inventory, while NBC sold 71%, ABC sold 68% and CBS sold just 65%. Networks typically sell 80% to 85% of their inventory during the upfront.

The nets held back inventory in the hopes that the scatter market would be stronger. Credit Suisse predicts scatter CPMs will be up 5% from upfront levels.

Cable fared better in the upfront, down 12% to about $6.7 billion.

August 6: Fox Achieves Revenue Goals, Closes Book on Upfronts

Fox is finished selling upfront inventory, saying Fox Broadcasting has achieved its prime time revenue goal.

The network held back slightly more inventory this year than in years past, in the belief that the scatter market will see higher prices, according to Mediaweek. “...While the overall economic climate was difficult during the first six months of 2009, the short term market for national broadcast time remained strong. With a broader economic recovery seeming to take hold, we are very comfortable in our marketplace positioning for next year,” said Jon Nesvig, Fox Broadcasting ad sales chief.

Fox Broadcasting parent News Corp. revenue fell 11% to $7.7 billion in the quarter ended June 30; the company’s loss was $203 million, down from a $1.1 billion net gain last year. The company saw a $3.4 billion loss for the full year - one of the worst in the company’s history, according to chairman Rupert Murdoch.

Both Murdoch and Nesvig declined to share whether Fox saw increases or decreases in CPM from last year’s upfront. Miller Tabak analyst David Joyce has predicted Fox’s CPMs would be down just 1% from last year.

August 3: Miller Tabak Analyst Offers Optimistic Predictions
Miller Tabak analyst David Joyce predicts the upfront will be down 10% from last year, to $8.3 billion. Networks will sell less inventory - about 70% to 75% of total prime time inventory, compared to 80% to 85% last year.

ABC is expected to be down 12%, with CBS down 12.5%, writes MediaPost. Fox will be down 5%, to $1.85 billion, while NBC will be down 8% to $1.75 billion. CW will lose the most, down 13%, to $330 million.

Joyce is more optimistic than some other Wall Street analysts in terms of his upfront predictions. He says CBS’s and Fox’s CPMs will be down by just 1% from last year’s pricing. ABC will be down between 1% and 2%, while NBC will be down 7%.

Joyce says the cable upfront will be up 2.5%, to $7.85 billion.

Meanwhile, the syndication upfront marketplace is about 25% sold, according to The Hollywood Reporter. Syndicators are selling at CPM rates down by 1% to 2% for top-tier shows, and down between 7% and 9% for second-tier shows. As always, demand for Oprah, The Ellen DeGeneres Show, Live with Regis and Kathy Lee, Two and a Half Men, The Office, and Family Guy is high.

July 30: Upfront Moves as Economy Seems to Strengthen
Fox and the CW are said to be on the verge of completing their upfront deals, with CW’s deals coming at -2% to -3% CPMs compared to last year, and Fox nearly flat, averaging -1% CPMs.

Steady progress is being made at all networks, with Fox and CW expected to finish deals by the end of this week, The Hollywood Reporter writes. NBC is also moving forward at a rapid clip, with many of its deals done in conjunction with its cable nets. The network is said to be averaging a -7% CPM rate compared to last year’s deals.

ABC is still refusing to sell prime time inventory at a loss from last year. CBS is doing deals at nearly flat CPMs, says Miller Tabak analyst David Joyce.

Networks are expected to sell about 70% of their inventory, compared to about 80% to 85% in years past, according to Media Life. Dollar volume will likely be down about 10%, to around $8.3 billion.

The upfront is finally moving due to the fact that the Federal Reserve has indicated the recession is easing, Joyce says. The news likely pushed buyers to pull the trigger this week.

July 27: Price Decreases in the Low- to Mid-Single-Digits
The upfront is moving, and is now somewhere between 25% to 50% finished, according to some reports. The networks are expecting to hold back as much as 30% of their inventory for the scatter market, trice as much as last year, Media Life writes.

The cable upfront is on the move, as well, and is seeing 4% to 8% CPM decreases.

CBS - the only broadcast network that saw its 18-49 audience grow since last year - is pulling the best pricing, down in the low single digits in terms of CPM. NBC is seeing the biggest decreases, particularly for its Jay Leno Show, which is expected to have low ratings.

July 23: NBC Inks One of Upfront’s First Deals

NBC claims it has closed a deal with GroupM - a deal industry watchers have been expecting for weeks. The deal is said to be down about 7% from last year’s upfront pricing, better than the double-digit decreases some analysts were predicting. NBC is the only one of the Big Four networks actively writing business, Variety reports.

NBC Entertainment co-chair Ben Silverman said the network has also signed a deal with McDonald’s for a “marketing relationship” with the Jay Leno Show.

Silverman also said that NBC, as well as other networks, plan to hold back more inventory than in recent years in order to have more to sell in the scatter market. Typically, as much as 85% of inventory is sold during the upfront.

Silverman added that deal-making must pick up soon, as the fall season is just eight weeks away. Brands that wish to be incorporated into shows need to begin making commitments, because new and returning shows will go into production in a matter of weeks.

Silverman expects scatter pricing will rebound for 2010. General Motors and Fiat/Chrysler had sat out upfront negotiations; when they return to buying network time, pricing will be up a “little bit,” Silverman predicts (via Reuters).

July 8: NBC Writes Deals at High-Single-Digit Decreases; Buyers Hold Out for More
NBC, the weakest of the Big 4 broadcast networks with ratings that are continuing to fall, has begun to get upfront deals written - at CPMs down by as much as high-single-digit percentages from last year, according to Media Life.

That has put pressure on the other networks, with buyers demanding prices well below the flat to low-single-digit decreases that ABC and Fox are now asking. CBS, meanwhile, is likely asking - and is expected to get - low-single-digit percentage increases from last year.

Networks have been hit hard by several factors that, combined, are giving buyers the upper hand in negotiations. Unemployment is up again, which indicates the recession may be settling in for a good, long stay, while second quarter ratings show that cable now accounts for over half the prime time audience in the 18-49 demo. And ad budgets are down by more than the networks - thinking more money may materialize later in the market - had hoped.

While last week it looked as though the upfront would begin to move by the end of this week, it now seems as though buyers will continue to hold off, waiting for the prices they want.

July 6: As Economy Shows No Signs of Improvement, Balance Shifts to Buyers

Though the upfront market was still mostly stagnant at the end of last week, with only one major deal rumored - between NBCU and GroupM, with both sides denying that anything had closed - movement is expected in the next few days; buyers are saying the majority of deals will close by the end of the week, writes Media Life.

The networks have said they will not write deals for anything less than low single-digit increases in CPMs, while buyers were demanding decreases in CPMs from last year’s upfront. Recent reports of falling consumer confidence and a rise in unemployment may have shifted the balance toward buyers. For awhile, it looked as though the networks would simply hold onto inventory for later scatter if they couldn’t pull the price increases they wanted, in the expectation that the economy would improve and the scatter market would be up. But if the economy continues its downward spiral, scatter prices could be below upfront prices, which means that holding inventory back is no longer a smart move.

In addition to working on a deal with GroupM, NBC is said to be close to a deal with Interpublic’s Magna. One element that could be slowing down NBC’s negotiations is the new prime time Jay Leno Show. Media buyers are saying they do not want to pay a prime time CPM for the show, which will debut Sept. 14. One buyer told Adweek that agencies are attempting to come up with a price somewhat below shows in the 8pm to 10pm time slot. NBC, for its part, says that while the show is not likely to beat dramas like CBS’s CSI: Miami and The Mentalist, it will still be sold at prime time CPMs.

June 29: Buyers May Gain Flexibility, Fourth-Quarter Options
Buyers are using the slow-moving upfront market to ask for flexibility in fourth-quarter options - and networks are entertaining the idea.

Typically, commitments in the fourth quarter are 100% firm, while buyers can pull back 25% of committed dollars in the first quarter and 50% in the second and third, but in this unprecedented season, buyers are looking for as much flexibility as they can get. One network executive told MediaPost: “Is that something that - when we get into deal-making - that people would entertain? Absolutely.” However, he added, that would be dependent on how much buyers are willing to spend. On the other hand, networks are loathe to set a precedent that they couldn’t go back on in coming years.

Media executives are still saying that total broadcast upfront - based on the budgets registered by media buyers on behalf of their clients - could be down by as much as 20%. But while the upfront is likely to be down significantly, scatter could be strong, as some buyers are likely to hold back dollars to spend in the scatter market in the hopes of inking better deals.

A report last week from Mediaweek indicated that the upfront market was finally ready to move, with GroupM and NBC on the verge of a deal - at CPMs down 7% from last year. But GroupM and NBC deny that anything is about to be inked, saying they are still in negotiations.

June 23: Sellers May Snag Price Increases in Slow-Moving Upfront

In what some are calling the latest-breaking upfront in memory, buyers are only beginning to register their budgets - Magna, for example, reportedly just registered a large chunk of its clients’ budgets - and deals are practically non-existent.

Sellers, who announced their fall schedules a full month ago, are asking for price increases of as much as 4%, and as the upfront drags on, it seems increasingly likely that they’ll get them. As time goes by, buyers lose leverage and the upfront becomes more of a seller’s market, reports Media Life. The networks are apparently content to sell what they can for the prices they’re commanding and to hold back the rest for sale during the scatter market - currently, scatter pricing is up 2% to 3% above last year’s upfront pricing - in the hopes that the economy will improve and prices will jump.

Buyers, meanwhile, are asking for CPM decreases of between 7% and 9% from last year’s levels.

Earlier in the upfront, it was expected that it would be a buyer’s market, and that prices would be down, but now buyers are in the unenviable position of having to go back to clients and admit that prices are, in fact, higher, according to the Media Life article. But no media agency wants to be the first to cave and accept the boost in prices.

The Hollywood Reporter, on the other hand, writes that some ad sales executives - who declined to speak for attribution - say that prices will be down. “We’re not looking at a disaster,” one such executive hedges. “If we have to take it on the chin a little bit in the upfront, we’ll make up for it in scatter.”

Industry watchers are saying the upfront could be down as much as 20% from last year, to between $7 billion and $7.5 billion.

Earlier this month, CBS’s CFO, Fred Reynolds, said the company has seen signs of improvement in the ad market, and that he expected upfront deals to be done in early to mid-July.