Advertisers are agreeing to buy television commercial time ahead of the 2001-2002 season from cable networks and program syndicators at rates even lower than those negotiated last month, when they made plans to buy commercial time in advance of the coming season from the broadcast networks.
The average decreases in rates are being estimated at 15 percent to 20 percent - even more in some instances. That compares with average decreases of 6 percent to 8 percent in rates for commercial time sold by the broadcasters like ABC, CBS, Fox and NBC.
In another indication of just how much the economic slowdown is affecting advertising, most agencies are deciding to spend less money for clients in the so-called upfront market for cable and syndicated programs than was spent before the 2000-2001 season began. That's despite the lower out-of-pocket costs resulting from the lower rates.
Indeed, the total amount to be spent on cable TV spots ahead of the new season could fall as low as $4 billion, said Jack Myers, chief economist at Myers Reports in New York, which publishes media and research newsletters. That would represent a 16.7 percent decline from $4.8 billion worth of cable commercials sold in the upfront market last summer.
The total amount to be spent on commercials during syndicated shows - everything from new episodes of "Oprah" and "Jeopardy" to reruns of familiar series like "Friends" and "Seinfeld" - could fall as low as $2 billion, the trade publication Mediaweek estimated, down 27.3 percent from $2.75 billion sold ahead of time last summer.
In both instances, those declines would considerably exceed the shortfall suffered in the upfront market last month for broadcast commercial time, as total spending fell to an estimated $6.9 billion, down 11.5 percent from $7.8 billion last summer.
"Budgets are down and decreases are greater," said Andrew Donchin, director for national broadcast at Carat USA in New York, a media agency in the Carat International division of the Aegis Group.
"The negotiations are also being strung out longer," he added. "People are afraid to commit because it's hard to read where the bottom of this market is."
The negotiations to buy commercial time on the broadcast networks also went on for many weeks more than has been typical in the last several years, when advertisers rushed to pay ever-rising prices because they feared waiting would result in even higher rates.
"The clients want revenge because the increases over the last several years were high," said Ronald M. Schneier, executive vice president for sales and marketing at A&E Television Networks in New York. "And some networks are saying, `Maybe we pushed a little too hard.' "
"The business this year has become a commodity business," he added, as agencies pay more attention to deals at lower rates for every thousand viewers, known as cpm's, than to "the quality of programming." A&E, which operates cable networks like Arts and Entertainment and History Channel, is owned by ABC, part of the Walt Disney Company (news/quote); the Hearst Corporation; and NBC, a division of the General Electric Company (news/quote).
The cable and syndication sales executives who are signing agreements with agencies are the ones "saying, `Give me the dollars and I've give you a nice cpm,' " said Dan Rank, managing partner at OMD in New York, a media agency owned by the Omnicom Group (news/quote), or they are the ones "saying, `Hold your dollars flat' - which in this market is something of a feat - `and we'll give you a nice minus.' "
Mr. Rank defined a "nice minus" as "20 percent off on the cpm, sometimes more."
But some executives "are holding at minus 7 percent and are not budging," he said, "and at minus 7 I'm in no hurry to make deals."
Mr. Myers, whose newsletters include The Myers Report, estimated the average decline in cost per thousand viewers for cable at 15 percent and "starting at minus 20 percent" in the upfront market for syndicated shows, which is proceeding even more slowly than the upfront market for cable.
Among the cable networks "best at holding the line" on lowering cpm rates, Mr. Myers listed two networks owned by Viacom (news/quote), MTV and VH1; one, Comedy Central, owned by Viacom and AOL Time Warner (news/quote); and one, E!, that is part of Disney.
Among the networks "doing well on a dollar basis," in terms of total revenue, Mr. Myers listed CNBC, like NBC part of General Electric; CNN, owned by AOL Time Warner; and Lifetime, owned by Disney and Hearst. The bigger cable networks like Discovery, part of Discovery Communications; Lifetime; and the TBS and TNT units of AOL Time Warner have made more deals with agencies than the smaller ones.
"The buyers are getting more and more invigorated," said Joe Mandese, editor of Media Buyer's Daily, a newsletter recently introduced by Brill Media Holdings in New York.
But for the sellers, "it's getting ugly," he added, "because there's too much supply in a declining market."
Stuart Elliott, The New York Times. July 23, 2001
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