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What Recession? Big 5 Broadcast Networks Set for Upfront Windfall

Ratings are down about 10% for the major broadcast networks this season. But happily for them, the prices for their commercials will be up double-digits this spring

The economy may still in the dumper, and ratings are down about 10 percent, but the demand for broadcast television advertising could be at an all time high.

Advertisers who did not buy enough ad inventory in last year’s upfront market are now paying as much as 30 percent more for the advertising they are buying in the scatter market — despite continued ratings declines.

The upshot: The Big Five network sales executives are anticipating a windfall commitment of ad dollars for the approaching upfront selling season.

Also read: Big 4 Network Ratings Down 10% This Season

Indeed, they're looking at double-digit increases on the cost per thousand ad impressions (CPMs). The huge spike in demand and prices for the five major English-language networks could result in their total upfront take exceeding the $9.2 billion they took in pre-crash 2008.

Who said traditional media is dead?

What’s more, with advertisers needing to spread out their dollars across all networks in prime time, every network is going to reap the benefits — including NBC, fourth among viewers, and the lowest rated but young audience friendly CW Network.

“The TV marketplace is going gangbusters,” one ad-agency buyer, who did not want to speak for attribution, told TheWrap. “The national TV market is growing faster than all other media sectors. National television’s share of the overall media ad dollar pie is growing while most others are declining. And television is strengthened by the digital marketplace, which advertisers can use to reinforce their TV campaigns. The combination of national television and digital is the most powerful combination that has ever existed for advertisers.”

Another media buyer who also requested anonymity said, “Even with ratings down, broadcast networks are still the best immediate mass reach vehicle for advertisers. Our clients are telling us, when they advertise on television, their products sell.”

And unlike in past years — when media buyers were publicly posturing for low expectations — this year they are being simply quiet in public, while privately conceding to TheWrap that the networks today can pretty much write their own checks.

“If they’ve done the math, they understand how strong the marketplace is and that this is the year there will be double-digit price increases,” said one network sales executive. “We may open our discussions looking for increases north of 15 percent — and the agencies are going to have to adapt their plans and be flexible.”

So with a backdrop like that heading into the current upfront, the only real questions to be answered are, how quickly will buying be completed and how high will the ad rate increases be?

Last year the upfront negotiations for the five big networks took about three weeks to complete, the average rate increases were between 8-9 percent, and the total ad take was about $8.5 billion for prime time.

Both sides believe that negotiations could again be that quick — and most likely the average price cumulative price hike could be about 12 percent. If that happens, the cumulative take for the nets could easily surpass the record 2008 upfront.

And it’s not really going to be the ratings of each network that dictate who gets a significant amount of ad dollars.

While buyers say hit shows still matter, there are not that many blockbusters on television any more. Fox’s “American Idol” and ABC’s “Dancing With the Stars” are two shows that those networks can use to put together more lucrative ad packages. CBS has the most consistent and stable schedule with seven of the Top 10 most watched shows in terms of total viewers, and buyers say Fox can use “Glee” and its Sunday animation block (watched by hard-to-reach young men) to lure dollars. ABC has “Modern Family” as a draw.

Then there's last-place NBC, where bargains-galore can be had.

“NBC will still get their share of ad dollars because the major media agencies each have a couple of billions dollars each to put down for their clients and they need programming time all of the Big Four broadcast networks to do that.”

As the most cost-efficient of the four biggest networks right now, NBC is also welcomed by buyers to balance the cost of their ad packages for each client. “If NBC was left out, our packages with the other networks would cost too much,” one buyer told TheWrap. “We need NBC and continue to hope that they will come up with some new hits.”

The CW, which primarily targets an 18-34 audience, is still looked at by, most media buyers as the best place to reach a younger audience for clients that want to target that.

“The CW is still in the envious position of reaching a large number of young eyeballs,“ one media buyer told TheWrap. “And their convergence of broadcast and digital, where they are showing all of their shows on the internet and selling ad packages for both, has worked well for the advertisers.”

In development meetings with advertisers last month, CW executives pointed out that 94 percent of the commercials that ran in their full-episode streamed shows online this season, were watched to completion by the viewers. And 93 percent of the viewers watching the CW shows online were new viewers who did not see the episode on television.

And, as one buyer told TheWrap, “We need the CW as an alternative buying source to MTV, to give them a little competition for young viewer ad dollars.”

With most agencies not having received official budgets for next season from their clients yet, the jury is still out on just how much money advertisers will specifically want to spend in this year’s broadcast upfront. But most media agency buyers agree that very few advertisers are going to want to take a chance with next season’s scatter market and get burned with 30 percent increases like they did this season.

However the specifics play out, expect the broadcast networks to walk away from this year’s upfront negotiations with their pockets maybe fuller than they’ve been from any upfront in history.

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