Ad paybacks pinch Peacock

Low ratings force $500,000 refunds

NBC has quietly begun reimbursing advertisers for fourth-quarter primetime ratings shortfalls, averaging about $500,000 per advertiser, according to media buyers, marking the first time in years a network has taken such a step to compensate marketers for ratings deficiencies.

Buyers said NBC is offering cash back to advertisers looking to get ads on the air before Christmas. Marketers can't get make- goods because the network has none to give. In fact, no broadcast net has much ad inventory left between now and year's end — except for, perhaps, a handful of units the week between Christmas and New Year's, and that doesn't do much for advertisers chasing holiday shoppers.

NBC isn't the only network in make-good trouble. The CW network has been out of sale for several weeks now, and while the network is not giving refunds, it has issued make goods for the past month. CBS, ABC and Fox also are doling out make goods, primarily for the first quarter.

None of the networks would comment.

The nets have blamed ratings softness on the conversion of the upfront sales metric this season from live program ratings to commercial ratings plus three-day DVR viewing (C3). But media agencies contend broadcast primetime ratings are down significantly even when DVR viewing is added in.

They also contend the nets created the problem by carrying over make goods from last season and by overselling scatter inventory at hefty prices rather than holding back more for make goods. "They got greedy, and now they are paying the price," one buyer said.

The nets' problems emerged even before the WGA strike. The walkout has yet to affect programming, as the nets had enough first-run shows to get them through the November sweep, and repeats and replacement programming will not begin in earnest until January.

Among the Big Four networks, NBC has the most serious ad shortfall, as its primetime ratings are down most dramatically. Meanwhile, none of its new series this season have caught on with viewers. Compounding buyers' angst about NBC is the net's plan to add more reality shows. "Celebrity Apprentice" premieres Jan. 3, and "American Gladiators" launches Jan. 6. NBC last week announced a deal with "Ice Road Truckers" creator Thom Beers and BermanBraun, helmed by former network executives Gail Berman (Fox) and Lloyd Braun (ABC), to produce nonscripted programming.

"We're trying to understand NBC's recent moves," Starcom Entertainment exec vp Laura Caraccioli-Davis said. "We are concerned that it might be thinking about adopting a programming strategy like some of its sister cable networks. 'American Gladiators' and even some of the shows they have in development, like 'Knight Rider,' are remakes being dusted off rather than coming up with new creations.

"NBC used to be the upscale, quality network," she added. "We have come to expect quality, iconic programming. Maybe they are searching for the reality hit they don't have, their own 'American Idol.' But too much reality just doesn't play well with advertisers."

NBC program planning president Vince Manze countered that the net will air more scripted shows in the first quarter than it did a year earlier, so the perception that NBC is moving more heavily into reality is wrong. "We will have about 85 hours of original, scripted, first-run programming in the first quarter," Manze said, citing the return of dramas "Law & Order," "Law & Order: Criminal Intent" (which previously aired on NBC's sister cable net USA Network) and "Medium." In February, NBC will premiere midseason drama "Lipstick Jungle." It also has first-run episodes of "Law & Order: SVU," "ER," "Chuck," "Friday Night Lights," "Las Vegas," "Scrubs" and "My Name Is Earl" yet to air.

"Most of our originals will be up against the other networks' repeats, particularly if the writers strike continues into January," he said. "Our plan is to use reality to fill in for scripted shows that may not do so well in repeat.

"We are going to keep putting original reality programming on the air until we come up with our own 'American Idol,' " he added.

Magna Global audience analysis exec vp Steve Sternberg said he saw no problem with NBC airing a reality block on Saturday or even during the week if the production values were high or if it replaced other reality programming. However, "if it replaces midweek scripted hours, it could have a negative impact" on ratings and audience quality, he said.

Reality programs featuring high production values, including Fox's "American Idol," CBS' "Survivor" and "Amazing Race" and ABC's "Dancing With the Stars" and "Extreme Makeover: Home Edition," draw sizable audiences each week. Still, one network exec charged that audiences for those shows are "borrowed" viewers. "A majority of those viewers come in for that show and then leave," the exec said. "That's why there is usually a huge drop-off in audience for the lead-out show, while scripted shows usually flow into one another better."

Said MediaVest senior vp group director Ed Gentner: "No one (advertiser or agency) wants to see too much reality programming on TV. But broadcast television has changed, and reality is part of today's landscape."

NBC, he added, "still has a decent amount of scripted shows on the air, and the network still has value to advertisers. It just can't compare to where it once was. But all networks go through changes."

Gentner pointed to how far ABC has come. "A few years ago, they were in fourth place," he said. "Now they're battling for the top."

John Consoli is a reporter at MediaWeek.