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TV Networks Score Higher Ad Rates

June 01, 2002|MEG JAMES | TIMES STAFF WRITER

Anxious television executives on both coasts began loosening their knotted stomachs late this week as it became clear that advertisers were willing to pay higher rates than last year for commercial spots on the networks' upcoming fall shows.

For weeks, speculation had swirled over whether the economy had improved enough for the networks to demand the kind of money they reaped before the downturn. The answer started coming in Thursday: With NBC leading the way, ad rates increased for some networks between 9% and 15%.

"There's a lot of money out there," said Jessica Reif Cohen, media analyst for Merrill Lynch. "It's clear that the market is getting healthier.... This is at the top end of what we were predicting."

Network advertising sales are viewed as a barometer of the overall health of the advertising and television industries.

Movie studios and auto makers were among the first to scoop up commercial time, with NBC making the first deals late Thursday. By Friday, NBC had sold nearly half its advertising inventory and advertisers began quickly grabbing slots on CBS, Fox Broadcasting, ABC, UPN and the WB.

Broadcasters typically sell about three-quarters of their commercial inventory in May and June for the season that begins in September.

Last year, sales were sluggish, falling more than 15% from the heady dot-com days of 2000, when a record $8.1 billion in so-called advanced ads were sold. Last year, with the slumping economy, the amount totaled $6.9billion.

This year, with the improved economy, Wall Street analysts had projected that the combined ad revenue for the six major networks would increase 3% to 6%. But this week's flurry of sales suggested that the total could rise even more, topping $7.5 billion.

Industry experts said the networks would benefit because advertisers spent $750 million earlier this year for commercials during the Winter Olympics on NBC. That amount will be freed up for other programs and other networks.

What's more, money is expected to flow from the intense competition for consumers among pharmaceutical companies, fast-food chains and the beverage industry.

For the most part, advertisers hedge their bets by spreading money among the networks. But the biggest dollars go to the ones that attract viewers ages 18 to 49 and viewers with sizable incomes who are prized by advertisers trying to build brand loyalty.

This year, the hottest network is General Electric Co. unit NBC, which ended the 2001-2002 season with the most viewers and the highest-rated programs. The company was garnering overall rate increases of 7% to 9%, sources said. NBC executives were unavailable for comment.

Business also was brisk at CBS, which finished the season ranked No. 2 in viewers and in the key 18-to-49 demographic.

The unit of Viacom Inc.--which sold $1.4 billion in advanced ads last year, about two-thirds of the network's overall inventory--secured rate increases of more than 10% in several deals, sources said. CBS executives also were unavailable for comment.

Sources said advanced sales revenue for CBS' sister network, UPN, could approach $250 million, up from $170 million last year. That would be the biggest percentage increase among the networks.

At Walt Disney Co.'s ABC, where prime-time ratings plummeted more than 20% last season, one source said the network had sold nearly half its commercial inventory for rates that had risen 4% to 6% from last year. But industry sources predicted that the overall increase could end up lower.

Rates were expected to increase by about 5% at News Corp.'s Fox Broadcasting, which has seen its ratings slip as its steady hits "The X-Files" and "Ally McBeal" lost viewers in their final seasons.

The sixth-ranked WB network, which has successfully lured young viewers with its teen dramas, said Friday that it had sold about half its advertising inventory, receiving rate increases of up to 15% over last year, even though the overall haul is much smaller than those of the dominant NBC and CBS.

AOL Time Warner Inc. owns three-quarters of the WB network, with the remainder owned by Tribune Co., which also owns the Los Angeles Times.

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