Ad buyers want flexibility at upfronts

CBS' Moonves predicts pricing will be up

Faced with the worst economy in a generation, and with ad budgets down amid predictions they will sink further as the year progresses, there is little disagreement among ad buyers that they have a lot of leverage heading into this year's upfront television marketplace.

They will be seeking concessions including price rollbacks and significantly greater flexibility on terms and options to pull out of or reduce spending commitments made in the upfront, given the uncertainty of the economy.

The networks, of course, aren't conceding much at this point. CBS CEO Leslie Moonves, however, is the only network executive so far this year to publicly predict that pricing -- at least at his network -- will be up this year. He also indicated last week that it is possible CBS will sell less inventory upfront this year.

Sellers at other networks say it's anybody's guess how pricing will shape up in this year's upfront market, which is still at least three months away. And maybe longer if buyers come to the table with unrealistic expectations, sellers said.

"We're not going to give it away," said the president of one network sales organization who declined to speak for attribution. The executive added that the market could turn into a long waiting game if buyers make unreasonable demands. Some advertisers, year in and year out, need to know upfront that they will have a certain number of impressions in place on certain nights throughout the year. "I don't think agencies can play a 365-day game," he said.

Moonves said essentially the same thing to analysts and investors last week at a Deutsche Bank conference in Palm Beach, Fla. "We're never afraid to play the scatter game," he said.

One top-tier cable sales chief, who also spoke on condition of anonymity, believes cable networks might be in a slightly better position. "There will be flexibility, there will be some concessions, and ultimately there will be a lot more negotiation. But that's not necessarily a bad thing," said the exec. "The broadcast guys are getting pushed (to secure price increases), but the clients are getting pushed even harder, and from every direction. They're going to say, 'I need concessions if I'm going to survive.' And if the broadcasters try to squeeze too hard, a lot of business will come our way."

And the corridor chatter at last week's American Association of Advertising Agencies' Media Conference in New Orleans was focused almost exclusively on the chaos and uncertainty playing itself out in the advertising marketplace and the impact that the recession -- the worst in at least 30 years -- would have on this year's upfront. Michael Mendenhall, senior vp corporate marketing and chief marketing officer of Hewlett-Packard, who addressed the conference Thursday morning, noted that 40% of chief marketing officers in a recent survey believe their budgets will be reduced this year, and they expect a healthy chunk of that reduction to come out of advertising and marketing. (Speaking of 40% drop-offs, attendance at the annual gathering of media buyers and sellers was down that much to 650.)

Some categories are more uncertain than others, said Bob Bernstein, managing director, MC Media and former chief media officer at Interpublic Group's Draftfcb. The travel, financial and auto categories, he said, are very much in flux. And overall, he said, "demand will be down."

Conversations are already ongoing with the networks about the upcoming marketplace, he said. "Flexibility is very top of mind in discussions with vendors," he said. Draftfcb clients spend about $1 billion on ads and the agency is positioning those dollars as "stable," and money that won't evaporate from the marketplace, said Bernstein. The question is what sorts of concessions will networks grant for a share of those dollars, he added.

Clearly, digital elements will help drive some transactions, or at least, that's what some buyers expect in order to get deals done with the networks. Because one consistent message throughout the 4A's conference was that digital can no longer be thought of as something apart from traditional media. "The digital debate is over," declared 4A's president and CEO Nancy Hill.

Most TV networks' digital platforms will come into play as vital bargaining chips in this buyer's market. More than a few buyers and planners brought up digital as one area networks will want to accommodate advertisers if they plan to hold firm on pricing of their traditional inventory.

Broadcast and cable networks "will need to make their deals more attractive through deeper integrations and digital extensions," said Antony Young, CEO of Optimedia U.S., which developed its own Content Power Ratings currency for measuring the residual influence TV shows can have in online platforms. "This is the first year where online will be a much bigger part of the negotiation."

The problem is, the advertising model for the networks' online video plays remains disjointed at this point. At a 4A's panel about digital video, Kevin McGurn, vp of national sales for Hulu, the online video player that's a joint venture between NBC Universal and Fox, noted that audience engagement levels are 50% higher than TV, and ad recall is double that of TV spots. "We are actively trying to pull dollars from the offline world" into online video, said McGurn. But he also added that there's a glut of inventory and that "it's being passed around like at a Turkish bazaar," a reference to the fact that much of the ad time is being sold by third-party ad networks.

Still the question that many advertisers are focused on now is, as MediaCom North American CEO Doug Checkeris put it, "why go long now?" The best answer, in his view, is hugely attractive pricing. And just how ugly is it going to get for the networks in terms of pricing? Responds Checkeris: "If it's not ugly, then we haven't done our jobs."

Michael Burgi and Anthony Crupi contributed to this report.

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