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Slowdown Hits 3Q TV Spending

Just six weeks after advertisers aggressively committed a record $12.7 billion in upfront buys to broadcast and cable TV networks for the 2000-2001 season, the market for third-quarter scatter inventory has gone surprisingly soft, with most networks left with more unsold inventory than usual this summer.

Network executives note that it is always harder to get advertisers to commit significant dollars to summer programming, when audience levels are lower. But media buyers are pointing to the availability and attractive pricing for third-quarter scatter as evidence of advertisers' desire to curtail their rampant spending a bit due to uncertainties about the economy.

One sure sign that broadcast and cable networks are concerned about a summer spending slowdown is that sales executives have been aggressively contacting advertisers in attempts to sell an abundance of remaining third-quarter ad time. In the type of sellers' market that has existed for more than a year until now, networks usually do not contact advertisers, even for scatter inventory, until ad budgets are registered.

"Everyone is dialing for dollars," said David Lerner, partner and associate director of national television for MindShare, describing broadcast and cable network sales teams. "People are calling and saying, 'We have a lot of business to write, and we aren't getting the phone calls.'"

Kris Magel, vp of national broadcast for Optimedia, said sales execs from some cable networks are even asking buyers to take dollars committed in the upfront for fourth quarter and shift them ahead into third quarter so that the nets can hit their quotas.

"We could be returning to a buyers' market, after two upfronts where the sellers controlled the prices," said another buyer.

The days of doing scatter business in cable at 45 to 50 percent year-to-year increases are likely coming to an end, a cable sales executive admitted. "It can't last forever," he said.

In noticeably short supply among third-quarter scatter advertisers are the dot-coms, whose frenzied spending lifted the broadcast and cable networks to revenue records last season. For example, while the hour-long July 5 premiere of CBS' reality series Big Brother scored strong double-digit ratings in both 18-34 and 18-49 viewers, the prime demo for Internet advertisers, only three dot-coms were among the show's 25 different advertisers.

"The dot-coms are not spending as freely," said Tim Spengler, executive vp and director of national broadcast at Initiative Media North America. "The venture capitalists are releasing less money, and that was what the dot-coms were using to advertise."

About 25 percent of last season's fourth-quarter broadcast scatter dollars came from dot-coms. "I don't know how much of that will be there this year," Spengler said.

Complicating the networks' position is their strategy during the upfront of holding back at least 5 percent more ad inventory for scatter for the upcoming season than they did last year--giving them more time to fill.

"The networks are beginning to wonder where all the money is going to come from," said one media buyer who controls a significant TV budget. "I think there's some concern about how strong fourth-quarter scatter will be."

"We're not panicking," said one network sales exec. "It's the July doldrums. We're getting the traditional summer advertisers, but some categories, like packaged goods, are slower than usual. Some advertisers may be holding scatter money back in third quarter because of the Olympics, to make a bigger splash in fourth."

CBS, bolstered by its hit reality series, Survivor, and the launch of Big Brother, has had some success in moving third-quarter scatter inventory. CBS sales president Joseph Abruzzese noted that seven of the nine sponsors of Survivor are new advertisers to the network. And about one-third of the advertisers on Big Brother, including several movie studios, soft drink and beer companies, are "non-traditional" advertisers for CBS, Abruzzese added.

But buyers say that both CBS and Fox have been struggling to finalize deals for their Sunday-afternoon NFL telecasts this fall, and Fox has encountered similar slowness on sales of its World Series telecasts.

While a Fox exec noted that World Series spots traditionally begin selling in earnest after Labor Day, when the Series matchup may be clearer, a buyer whose client has advertised on the Fall Classic for the past few years said advertisers are balking at paying the double-digit increases Fox is seeking this year. "At this point last year, World Series time was more sold," the buyer said. "Demand was stronger earlier, and the price went up as time went on. This year the demand is less, and [Fox] is starting out with higher price demands."

The same situation exists for the NFL, buyers claim. "Both CBS and Fox are looking for mid-teen CPM increases, while all the advertisers are thinking it should be more in the single digits," said one major sports buyer. "Not much has been sold because we can't agree on a price."

Third-quarter scatter sales are particularly slow in the last two weeks of September, when NBC will broadcast the Olympics. Advertisers have already committed close to $1 billion in spending with NBC for the Games. Yet one media buyer noted: "There are a number of advertisers who still need to be on the air in the month of September, even if they're not in the Olympics coverage. If they're not advertising at all, there is something wrong."


John Consoli and Megan Larson, ADWEEK. July 10, 2000

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