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Networks Post 2% Drop in Prime-Time Ad Sales

With broadcasters under pressure from the Web, advertisers gain bargaining power.

July 06, 2006|Meg James | Times Staff Writer

The ABC television network said Wednesday that it had wrapped up its commercial sales for the fall prime-time season, bringing to a close a lackluster advertising bazaar that saw a decline in the broadcast networks' overall haul.

The five English-language broadcast networks -- ABC, CBS, NBC, Fox Broadcasting and the soon-to-be-launched CW -- wrote nearly $8.9 billion in prime-time business, at least 2% less than they did last year. General Electric Co.'s NBC for the second year was forced to lower its rates to attract advertisers.

Broadcasters have been under pressure as advertising dollars have migrated to the Internet.

The news was not all grim for the networks, however. Fox rode its high ratings wave to increase its piece of the advertising pie by about $250 million, the CW quickly made a splash, and ABC expanded its purse by capturing the highest rate increases of any of the major networks.

Still, advertisers flexed their newfound muscle in the marketplace.

"This was a very deliberate year," said Mike Shaw, ABC's president of sales and marketing. "Advertisers had a very strategic vision of what they were going to buy, and there was a gap between what we were looking for and what they were willing to pay."

ABC achieved rate increases of 3% to 4% to bring its prime-time "upfront" sales total to $2.3 billion -- nearly $200 million more than last year. The sales period is called the "upfront" because the networks traditionally sell the bulk of their time upfront, in advance of the new season. Walt Disney Co.-owned ABC said it sold 75% to 80% of its prime-time commercial inventory for the fall season, which begins in September.

Overall, ABC accepted commitments for nearly $3 billion in commercial time for programming throughout the day, including its newscasts, daytime entertainment and late-night and early-morning hours. Not only that, Shaw said, but ABC was able to meet its sales goals without having to offer advertisers "add-ons," such as commercial time in its shows available on the Internet or on other digital platforms.

"We got the dollars we needed without having to put that on the table," Shaw said.

However, network executives have conceded that advertisers this year had more leverage than in recent years, and advertisers withheld money to have dollars to spend later in the year on shows or other entertainment available on the Internet or digital devices such as cellphones.

In some years, the networks sold all their available commercial inventory in a few days. This year, it took six weeks.

"It's been a slow go," said Harry Keeshan, executive vice president for ad-buying firm PHD. "I imagine that the networks were hoping for a little bit more, but our clients were pleased with the results."

Keeshan said the longer time frame "enabled us to look at the media buying plans and really analyze the networks' schedules." This year, he said, the buyers were able to watch all of the pilots, not just some of them, before placing their bets.

One reason for the shift in the balance of power is the weak prices fetched in recent years in the so-called scatter market. That is the advertising inventory left over after the upfront sales that is sold piecemeal later in the season. With that new reality, advertisers had less incentive to pounce.

Most analysts had projected the networks would be down as much as 4%. One reason: The merger of the WB and UPN networks to form the new CW meant fewer programs to sell.

Some predicted that concerns over inflation and the overall health of the economy might give advertisers pause.

They also speculated that Detroit automakers' troubles and Hollywood's box-office blues and flattening DVD sales might mean less money at the networks. In addition, Viacom Inc.'s Paramount Pictures acquired DreamWorks SKG, and that meant there was one fewer movie studio in the picture.

However, those traditional big spenders were still eager to buy time on the networks.

"The automakers were actually quite strong, both foreign and domestic, and the movie studios stepped up to the plate," Shaw said, noting that the studios reserved fewer spots to promote DVD releases than they had in the past.

Although ABC just completed its sales, News Corp.'s Fox Broadcasting had little trouble because of the success of its prime-time lineup, including the mega-hit "American Idol," and fan favorites "24," "House" and "The Simpsons." Fox achieved modest rate increases and took in $1.8 billion, up from nearly $1.6 billion last year. (Fox's total is less than the other Big Four because it programs 15 hours in prime time compared with 22 hours for the others.)

CBS said it took in about $2.4 billion -- $200 million less than last year.

NBC rolled back its rates by as much as 5% and sold more inventory to remain flat at about $1.9 billion. The network was helped by adding "Sunday Night Football" to its lineup, and ad buyers including Keeshan were hopeful that some of its new offerings would take off.

Meanwhile, the CW turned out to be popular, scoring more than $625 million in ad sales with rate increases of 1% to 3% compared with the WB's rates. The network, a collaboration between CBS Corp. and Warner Bros. Entertainment, scored with more advertisers than its two predecessors.

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