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Digital making its move? TV having sluggish upfront

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In what could signal the beginnings of a shift of television ad dollars to the digital side, broadcast networks are seeing only moderate price increases on their commercials. They’re also selling less overall volume of their ads.

On Thursday, the smallest of the major U.S. English-language broadcast networks, the CW, wrapped up its portion of the upfront market, a yearly selling ritual in which major media agencies buy the bulk of TV ad time for the coming season.

According to reports in Adage and Adweek, the CW garnered percentage increases of around 7 percent for the price it charges advertisers to reach 1,000 viewers, a metric labeled “CPM.” The other major networks, ABC, CBS Fox and NBC, are also looking at single-digit increases. CBS is leading the Big Four pack — which still has inventory left to sell — at around 9 percent.

Also read: Report – Broadcast networks will get 8% higher CPMs at upfront this year

That level of price increase is in line with expectations of around 8 percent overall. But it’s down significantly from the 12 percent the networks averaged last year.

Also read: How Netflix really did save the CW

More troubling for broadcasters, according to the ad trades, CW sold only 75 percent of its commercial inventory for the coming season, as opposed to nearly 80 percent last year. This puts total dollar volume for the network — jointly owned by CBS Corp. and Time Warner Inc. — at around $400 million to $420 million, flat with last year.

So if the other networks also report flat dollar volumes, as is expected, what will it mean? According to analysts, the willingness of advertisers to concede to price increases suggests they still see broadcast TV as a unique tool to reach a mass audience.

“Network TV remains a fixed starting point for TV plans, and will continue to serve this purpose for as long as it satisfies goals better than any alternative that may be tried,” wrote Pivotal research analyst Brian Wieser to investors. “Neither cable TV nor online video, nor other media yet provides sufficient credibility to accomplish this goal for the largest brands, even as incremental shares of marketers’ budgets shift to new platforms.”

Of course, that last part of Wieser’s statement is key. The fact that advertisers are unwilling to increase their total commitment to the sector suggests they’re holding back dollars for new digital video alternatives, which were aggressively showcased for advertisers earlier this spring by companies including Google and Yahoo at a series presentations called the NewFront.

7 Responses to “Digital making its move? TV having sluggish upfront”

  1. Upfront sales only represent a portion of each broadcast networks total advertising revenue. You cannot draw any conclusions about the health (or illness) of network TV from Upfront results. The inventory available throughout the year in a scatter market, combined with actual ratings compared to upfront estimates, can be a huge windfall to a broadcast network. Digital is making inroads for sure as marketers have always “followed the eyeballs” with their media activity….but the proof isn’t being found in Upfront spending.

    • Nielsen families also only represent a portion of the overall and much, much larger addressable audience, and yet that’s never kept TV sales from making broad claims about statistical certainties in the guise of “GRPs.” Online video advertising is (1) much more effective in branding and performance, (2) exact in its measurement, and (3) provides immediate and actionable feedback to the advertiser. Point being that I find the above comment about 75% of inventory sold not being an accurate barometer for the overall TV ad sales market even less accurate than the ways TV audiences have been statistically “measured” over the years. TV is now called online video.

      • You probably need to have lived through some TV selling seasons to understand my comment. I would say that 75% of inventory is a high number when you take all TV time into account. Broadcast primetime upfront revenues appear to be flat year to year….some say sluggish, others say flat in a difficult economy. Not sure about other day parts. Cable TV appears to be up. Syndication TBD. Still believe it is hard to make any claim about its health when this story was written, based on the info in hand.
        Online video advertising certainly has its place in any marketer’s media plan. But really, Javier… “exact in its measurement?” how so? because you can count the number of viewers? But then what? household data…demographic data….how granular is “exact”? “Actionable feedback”? how so….by the 1.7% click through rates on video advertising….that sends a viewer to a website? and then what?
        I believe online video has delivered on several fronts in its attempt to establish itself as a force for advertisers…..the ease of viewing is terrific….the quality of the stream is outstanding….and the many issues between content owners and distributors (outside of a few who think they should get everything for free) seems to have figured itself out. Where online video still falls short is demographic granularity and interactivity.
        Lastly, I have never heard ANYONE call TV online video. Its all video.

    • Certainly, at a bazaar in which three-fourths of inventory is brokered, we can form some hypotheses. But it was wise, I agree, to switch my headline from the original “Television is so dead! It’s so over!!!”