In some parts of the country, home prices are back near 2001 levels, and now so is the volume of advertising the TV networks have sold.
Buckling under the pressure of a weak advertising market, the broadcast networks have cut prices for commercial time, a rare setback for companies used to commanding ever-higher prices. It shows how the 1 1/2 -year-long recession is finally catching up with the networks, which rely on a rise in ad revenue to cover the escalating costs of prime-time, news and sports programming.
The retrenchment marks the first time in years that ABC, CBS, NBC and Fox have failed to leverage their large audiences to boost ad prices during the industry's annual bazaar for TV commercials. In previous years, advertisers grudgingly paid the higher rates despite years of declining ratings because the networks still delivered larger audiences than any other media outlet.
Network executives estimated on Thursday that this year's sales volume would be down between 15% and 20% compared with last year, when the five English-language broadcasters, including the CW network, rang up a combined $9.2 billion in prime-time sales. That would put this year's advance, or "upfront," prime-time commercial sales around $7.5 billion -- a level not seen since 2001. Networks declined to provide individual sales figures.
"The advertising market has been exceedingly weak since last November," said Jon Swallen, senior vice president for research at TNS Media Intelligence, a firm that tracks ad spending. "The demand is down across all media and as a result, advertising pricing has fallen. It has been a very, very soft marketplace."
In May, when they unveiled their fall prime-time schedules, network chiefs insisted they wouldn't lower ad rates. But as negotiations over ad sales dragged on into summer, advertisers refused to make deals unless the networks slashed their prices. At that point the networks realized that they were not immune to the economic downturn.
About three weeks ago, after two months of stalled negotiations and with the fall TV season quickly approaching, network sales teams quietly agreed to lower ad rates to break the impasse.
One media buyer, who asked not to be identified because of the sensitivity of the negotiations, said advertisers held the upper hand in this year's negotiations.
"The demand just wasn't there," the buyer said. "And there was no way we were going back to our clients, the advertisers, with anything that didn't begin with a negative in front of it."
