Upfronts lose advertisers

Marketplace Staff May 19, 2006


MARK AUSTIN THOMAS: Each year around this time, the TV networks trot out their programs for the fall season before major advertisers. This is called the “upfronts.” But this year, Johnson & Johnson announced it would not commit ad dollars in advance. That could have big economic consequences for the networks, especially if other companies follow suit. Mike Speier covers entertainment for Variety. I asked him how he thinks the TV industry has responded to Johnson & Johnson’s decision.

MIKE SPEIER: The TV industry isn’t that worried just yet, because it’s only one major company, though a huge company deciding to make a big move, but they’re not worried because they know they’re going to come around eventually. What is different is the culture and it always used to be that major corporations would spend the money early on because they wanted to get in on the schedule. Now schedules have changed so much and the digital platforms have become a big part of this and they want to sit back and wait to see what other strategies are.

MARK AUSTIN THOMAS: What are the chances other companies will follow suit and withhold ad dollars from the upfronts?

MIKE SPEIER: Well, right now it looks as though two conglomerates, Coca Cola and Johnson & Johnson, are the ones that are holding out until they see how everything plays out. But what this could do is, look further into the future, and we could see that many companies next year and years down the road could say that was a smart move, let’s wait until we see all the options before we decide to spend our money.

MARK AUSTIN THOMAS: Is this going to create a loss of revenue for the networks and if so how do they make up for that?

MIKE SPEIER: I think the networks say they’re not worried right now but in a very small way they are worried because no one wants to hear that your major advertisers, and Johnson & Johnson is the No. 1 advertiser along with Proctor and Gamble and Coca Cola, these are top-tier advertisers. If they say they’re not going to spend their money, that’s a big problem. The networks though, are making up for it in other ways. The iTunes deals that networks are creating, that’s not just because it’s fun and it’s cool. It’s also because they get to sell programs for $1.99 and that’s revenue they never had before. So what they hope to do is, they hope to balance the fact that advertisers are worried with the fact that they can sell their own shows and make their own money that way.

MARK AUSTIN THOMAS: If TV networks are using MP3 players, as one example, of new revenue streams, will the advertisers go there too?

MIKE SPEIER: That’s a very interesting proposition. The fact that a lot of these networks not only are using iPods and MP3s, but they’re also creating their own Web-based networks. If the programming and the content goes online, then that’s also a place that advertisers are sure to follow.

MARK AUSTIN THOMAS: What kind of impact, if any, will this have on the average TV viewer?

MIKE SPEIER: The average TV viewer doesn’t really care about this stuff in general. That’s easy to say sometimes but it really is true. The average person in Middle America who comes home from work and turns on their television set, they don’t even know about the upfronts, they just know what they like. What this does is it plays around with scheduling, because in the old days everything used to get a 22-episode order, it started in September, it ended in May, end of story.Now because of reality programming, shows that come on for six weeks, those kinds of things, all the scheduling gets thrown into a tizzy and advertisers have to kind of work around it, but the average viewer notices that shows come and go a lot quicker and a lot more.

MARK AUSTIN THOMAS: Mike Speier is managing editor for Daily Variety. In Los Angeles, I’m Mark Austin Thomas. Thanks for joining us and have a great weekend!

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.