The Wall Street Journal reports advertisers are getting cheaper rates in the upfront fray than a year ago for the coming TV season. Both sides had been locked in a tug-of-war over prices since May. But now each of the four have cut rates by single-digit percentages in at least some deals, according to the story.
Lower rates are a blow to broadcast networks, which are suffering from a broader slowdown in ad spending, declining ratings and the fallout from troubles in the automobile industry, one of the biggest purchasers of TV advertising.
If the lower rates hold as deal making continues, it would mark the first time since 2001 that all four networks have agreed to widespread cuts from the previous season’s rates.
Some advertisers are staying out of the upfront. Hewlett-Packard, for instance, has decided not to participate after making upfront commitments last year, according to the story. Instead, the computer maker will take its chances by buying in the scatter market.
Some broadcast-network execs have said in recent months they might choose to sell less ad inventory in the upfront, rather than lock in lower ad rates for the whole year.
“They’re going to have to make the bet that the economy will improve and that advertisers will have to come back. There’s some risk in that strategy,” Jessica Reif Cohen, Banc of America Securities-Merrill Lynch analyst, told the paper.
The four biggest networks pulled in $7.5 billion in upfront commitments last year, according to Reif Cohen.
Although buyers and sellers say it is too early in the process to know what the market will look like, one buyer predicted the amount of money in this year’s marketplace is down about 20%.
“We think the market will be down at least 10% to 15%, if not more,” said Reif Cohen.
CBS is the only one of the big four to post an increase in the average number of 18- to 49-year-olds in prime-time this season, according to Nielsen. Fox, while also seeing declines, still has the greatest average number of such viewers.
But buyers say CBS and Fox, as well as ABC, have done deals with rates in the range of 3% lower than a year ago.
NBC, whose prime-time lineup is in fourth place, has been signing deals with rates down 6% or 7% from the previous year, one buyer told the paper.