Scary scatter market takes toll on giants

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As is the case with comedy and explosive ordnance disposal, in the television marketplace, timing is everything.

That's a lesson many marketers that buy national airtime on a calendar-year basis have had to choke down in the latter part of 2007 as a mercurial scatter market has upfront abstainers paying a dear price for sitting out the big dance.

After bailing on the upfront in 2006, Johnson & Johnson again declined to participate this year, opting instead to begin placing its 2008 TV money at the end of the summer. According to a number of national TV ad sales executives, J&J's calendar-year play was a misstep inasmuch as the company's decision to actively shut itself out of early guarantees makes it especially vulnerable to the volatility of the scatter economy.

"Typically, the calendar-year guys can do well for themselves, but this year, even people who got their money down early are paying 50% over upfront pricing in scatter," said one network ad sales boss on condition of anonymity. "With demand being what it is now, you could ask for 70%-75% over … although if you're smart, you're not going that high because you don't want to alienate a big client like that."

J&J is not alone in wagering on a calendar-year investment; in 2006, the consumer-pharmaceutical giant was joined on the upfront sidelines by Coca-Cola, which ultimately reduced its cable spend by 35% while nearly quadrupling its online investment. This year, Bank of America opted out of the upfront as well, along with a clutch of smaller marketers like Serta.

Media buyers believe that the vicissitudes of marketing new products and the surge in nontraditional spending will drive some clients to hop on and off the upfront carousel at will.

"Our ultimate goal is to do what's best for our clients," said Shari Cohen, co-president of national broadcast at MindShare. "This business changes every day, and it's our job to figure out how to deliver ideas and innovate while getting the best price."

Last year, Cohen's client Unilever made noise about foregoing the upfront, arguing that the old way of doing business was perhaps no longer a good fit. This year, the client reversed field, taking part in the zeitgeist-defining $800 million GroupM/NBC Universal upfront deal that included time on NBC's broadcast and cable networks.

"Every year, something different comes up, and we just have to be really smart about what's coming on the horizon," Cohen said.

Broadcast trends suggest that nailing down dollars in the upfront is still the safest bet. "We have seen very few instances in recent history where you have benefited from playing the short-term game," said John Miles, MediaCom's director of investments. "I can understand the need for flexibility, but if you need maximum reach, you're going to want to get your money down. The supply side has been a challenge because in the past few years, ratings have been on the decline."

One cable ad sales chief maintains that the primary stumbling block for J&J and the other abstainers is less a matter of network price- gouging than a dearth of opportunity.

"Clients that buy on a calendar-year basis aren't held to the same standard, and J&J established that this was the way they're going to do business from now on," he said. "So we kind of protect them because they're our partners. The problem is there's no place for them to put their money, and we're turning down half of what they want to spend."

J&J buyer Universal McCann did not return calls for comment.

It's a supply issue that isn't merely limited to primetime. Sell-outs in early morning, late-night and news are legion, and the C3 conversion has pulled out even more ratings points. Factor in the potential ramifications of a long-term writers strike and that picture isn't going to change anytime soon.

"It was a big mistake to sit it out, but live and learn," said the network sales boss. "Sometimes you get the bear and sometimes the bear gets you. Last year, they ate bear meat; this year, it seems they got mauled pretty good."

Anthony Crupi is a reporter for MediaWeek.
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