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Networks to downsize 'upfronts'

Lineup showcases for ad buyers will be low- key as the economy and ratings falter.

May 12, 2008|Meg James | Times Staff Writer

For decades, this has been the week for network television to strut its stuff. But not everyone is in the mood to party this year.

Typically, the major broadcast networks -- Fox, ABC, CBS and NBC -- have spent about $5 million each to whip up excitement among advertisers for their new fall schedules. They would fly hundreds of stars and executives to New York for extravagant presentations at tony Manhattan venues, followed by lavish parties.

The five networks, including the upstart CW, rounded up $9.3 billion in prime-time commercial sales in the weeks after last year's "upfront" presentations.

But a souring economy and a lingering hangover from last winter's writers strike, which cut short the TV pilot development season and depressed prime-time ratings, could cast a shadow over the kickoff of the industry's springtime selling season, which begins today in New York.

"Advertisers are not going to be willing to pay higher prices given these ratings drop-offs," said Jason Maltby, a top executive at ad-buying firm Mindshare.

The upfront presentations will be a toned-down affair. CBS Corp. and Walt Disney Co.'s ABC canceled their parties. ABC plans to downsize its presentation by holding a more low-key "sales meeting" at Lincoln Center. NBC Universal ditched its Radio City Music Hall event in favor of a more trade-show-like expo "experience" at nearby Rockefeller Plaza that will showcase all of its media units -- not just the fourth-placed NBC network.

"The world has indeed changed," Michael Nathanson, media analyst for Bernstein Research, wrote in a Friday report about the upfront process.

In an age of shifting consumer tastes and viewing patterns, the giants of television are losing stature. Digital video recorders that enable viewers to speed through commercials are just one technological threat to network advertising revenue.

Younger viewers also are turning to such places as YouTube and Facebook for their entertainment fix. At the same time, cable television is attracting more viewers than the networks, thanks in part to its specialized programming such as the NBA playoffs, provocative series and year-round schedule.

The trend only accelerated during the writers strike, which left the broadcasters running weeks of repeats that drew dismal ratings.

"The networks were already headed for a very difficult season, but the strike made things worse," said Jack Wakshlag, chief research officer for the Turner cable networks. "This season has seen the biggest loss in audience in broadcast network history."

And Hollywood's labor troubles may not be over. A strike by members of the Screen Actors Guild, whose contract with studios expires at the end of June, would probably delay the start of the fall season and could dig the networks into a deeper hole.

Already, ratings are down by about 15% for the broadcast networks compared with last season.

Some of the most popular shows on TV have not bounced back since the strike was resolved in February. ABC's "Grey's Anatomy" and "Ugly Betty" in recent weeks have fallen about 20% from their pre-strike averages. CBS' "CSI: Crime Scene Investigation" is off by about 15%, and NBC's "The Office" and "Deal or No Deal" have posted season lows.

Even television's most popular show, Fox's "American Idol," is down 10% this year in the key advertising demographic of 18- to 49-year-olds.

Broadcasters are betting that they will recapture viewers when they return to a more normal season. A few shows, such as the CBS sitcom "How I Met Your Mother" and ABC's "Desperate Housewives," have bounced back to pre-strike viewership levels.

Yet Wall Street analysts, advertisers and network executives are divided about whether this year's broadcast sales will remain flat or fall from last year's totals. Some advertisers worry about a pullback in spending by consumers, who have been slammed with higher fuel and food costs at a time of falling home values.

"Consumers are definitely being stomped on," said Rino Scanzoni, chief investment officer of Group M, an umbrella company of advertising-buying firms. "Not since 1992 has there been this much economic uncertainty."

People who just a few years ago were buoyed by rising home values are now swimming in debt, he said, adding that if they continue to reduce their spending, "that will have a significant impact on advertising."

Merrill Lynch media analyst Jessica Reif Cohen predicted that broadcasters could see year-over-year declines of as much as 14% in total sales. She noted that local TV stations had already experienced a drop-off in advertising.

Other analysts, however, point to strong demand for network commercial time, which sent advertising rates skyrocketing earlier this season over last year's upfront prices. And even though broadcast ratings are down, Nielsen research shows that people have been watching more TV this season.

Cable channels have been the primary beneficiary.

"We captured all the viewers that broadcasters lost and then some," Turner's Wakshlag said.

Seven of the top 10 ad-supported cable channels, including TBS, TNT, MTV, USA and ESPN, have seen their ratings grow this year over last. Seeking to cash in on the networks' weakness, Time Warner Inc.'s Turner Entertainment, which programs TBS, TNT and Tru TV, made a bold move this year by scheduling its upfront presentation Wednesday, in the middle of the week that had long been reserved for broadcasters.

Not all the broadcasters have scaled back their plans. First-place Fox, part of Rupert Murdoch's News Corp. empire, is in the best position. Its prime-time ratings are up 5% this season, in part because of the gigantic Super Bowl audience in February. Fox will announce its schedule Thursday, and then, just like last year, host a party for advertisers in Central Park.

"Broadcast networks still have the power, the immediacy, the impact and the wide reach that advertisers need," said Jon Nesvig, ad sales president for Fox Broadcasting.


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