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Sales Are Up for Networks but Maybe Not for All Media

In the wake of the broadcast television networks' surprisingly strong performance selling commercial time for the coming season, the rest of the media are fervently hoping that the rebound will augur improved results for them, too.

But the advertising bonanza the networks accrued during the closely watched preseason negotiations - in what is known as the upfront market - may not translate into robust demand for media like print or even other television outlets, like cable.

"I expected things to get better, and the upfront sort of confirms that," said Robert J. Coen, senior vice president and forecasting director for Universal McCann in New York. "But there are still a lot of media out there having problems, as it looks as if print will lag TV.

"There are still weak categories, like financial advertising, recruitment advertising and technology advertising," he added, "so I would be a little cautious about declaring a boom."

The results in the upfront market are so closely followed because broadcast network television is such an important medium, accounting for more than 6 percent of total ad spending each year, according to Mr. Coen of Universal McCann, a big media-buying agency that is part of the McCann-Erickson World Group division of the Interpublic Group of Companies. Also, the broadcast upfront market starts before those for other television networks and stations, often making it the equivalent of the first robin - or first vulture - of spring.

Michael J. Russell Jr., an analyst at Morgan Stanley Dean Witter in New York who follows the advertising and broadcasting industries, said, "I've been expecting advertising to be less awful this year than last, and the upfront numbers are eye-poppingly large." Estimates for the amount of advertising inventory that was sold during the upfront range from $7.5 billion to more than $8 billion.

"But I think this is less of a leading indicator for business than an echo," he said, of previous indications of improvements, like data showing consumer spending has remained relatively strong.

Some media, like the Internet and radio, had already been showing signs of improved sales before the upfront market.

"We've been noticing a steady increase, starting in the middle of the first quarter," said Gary Fries, president and chief executive at the Radio Advertising Bureau in New York, "and everything I see now has a positive number next to it."

"The upfront should help because it's traditional that when the upfront is good, strong, everybody below feels a trickle-down," Mr. Fries added. "But I'm cautious because business is being placed at a different tempo with `just in time' media buying."

Mr. Fries used a phrase that has recently gained currency in the media industry to describe how marketers have been backing away from buying large amounts of advertising months in advance. Instead, they are increasingly waiting until the last minute to buy ad space and time, much as manufacturers like automakers strive to have parts delivered to plants as close as possible to assembly. The uncertainty has made it more difficult for media executives to forecast demand or what rates they can charge. And there is a concern that the longer advertisers wait to make their spending decisions, the greater the chance that bad economic news could persuade them ultimately to hold back their dollars.

"One of the great assets newspapers have is short deadlines, which is a big advantage," said Nicholas Cannistraro, president of the Newspaper National Network in New York, a division of the Newspaper Association of America. "But it's also a disadvantage when it comes to predicting advertiser behavior.

"We have yet to see much of an improvement that would translate into spending gains for the third or fourth quarter for the newspaper industry," he added. "On the other hand, the strong upfront is a good sign, and may present newspapers with some opportunities among advertisers that feel they are priced out of the market if the double-digit increases hold."

The reference was to large increases in the upfront market in the cost to reach each 1,000 viewers; the increases for some networks were estimated at as much as 10 percent to 15 percent.

Ellen Oppenheim, executive vice president and chief marketing officer at the Magazine Publishers of America in New York, said she was unsure what the robust upfront market portends for her industry. "We're glad about it to the degree it indicates there's a renewed interest in advertising among a broad range of advertisers," Ms. Oppenheim said. "But it's hard to know fully what the upfront signals because of the differences among the media themselves."

For instance, magazines "are a little bit slower on the uptick," Ms. Oppenheim said. Because of production lead times as long as three months, advertising agencies make their commitments to publishers months before readers get their magazines. So a recovery in the magazine industry will not become apparent until much later than in other media, like radio.

Though magazine ad pages for the first four months of 2002 fell 13.1 percent compared with a year earlier, Ms. Oppenheimer said "we're starting to see glimmers of recovery in categories like travel, where we'd seen softness, and in categories like packaged goods, where magazines are increasing their share of the media mix."

The rest of the television business is picking up mixed signals from this year's broadcast upfront. "Some fear that the broadcast-network upfront was so robust that it will suck ad dollars out of cable and syndication," said Joe Mandese, editor of Media Buyer's Daily in New York, a newsletter published by Primedia.

"Or the strong broadcast upfront could be a positive indication for the entire media economy," he added. "We won't know for several weeks."

Complicating the prognostication abilities of media executives is the tendency of upfront numbers to change, because most deals have escape clauses for the advertisers. "Over the last few years, it has become confusing as to what a strong upfront augurs for other media," said Chris Rohrs, president at the Television Bureau of Advertising in New York, which represents local broadcast stations.

"But in this environment, a seller's market in broadcast network television is a pretty encouraging signal generally," he added.

Local broadcast stations showed an increase in revenue in the first quarter of 3.2 percent compared with the period in 2001, Mr. Rohrs said, fueled by spending by automotive advertisers and for campaigns related to the Winter Olympics. He forecast a strong second half, based on continued demand from automakers, particularly General Motors, and from candidates in the fall elections.


Stuart Elliott and Bill Carter, The New York Times. June 5, 2002

Copyright © 2002 The New York Times Company. All rights reserved.