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Fallout: The Financial Crisis

Ad sales down for Fall TV lineup

Marketplace Staff Aug 7, 2009
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Fallout: The Financial Crisis

Ad sales down for Fall TV lineup

Marketplace Staff Aug 7, 2009
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TEXT OF INTERVIEW

KAI RYSSDAL: You wouldn’t know it to plop down in front of your television set. But the major broadcast networks are selling less ad time. Networks and ad buyers have just closed out their annual negotiations over how much commercial time to buy and how much that time will cost, “the upfronts” they’re called. All indications are that broadcasters will be taking home a good deal less cash for the upcoming fall season than they’ve gotten used to.

Michael Burgi is the editor of MediaWeek Magazine. Good to have you with us.

Burgi: It’s great to be back Kai.

Ryssdal: I suppose we could’ve expected some kind of drop in these ad sales, but 20, 22 percent is quite a bit. Is that kind of in line with what we were thinking?

Burgi: Well it is in line with what we were thinking, but there is a reason why the drop is as precipitous as it was. The networks, realizing they weren’t going to get the pricing they were looking for in the market, have decided to shift some of their ad time out of the upfront market and they’re going to play in what’s known as the “scatter market,” where they sell quarter by quarter.

Ryssdal: In the hopes that in a couple of quarters from now, when in theory the economy’s better, they’ll be able to get more money for that ad time, yes?

Burgi: That is exactly the hope. And they believe that since the marketers, the advertisers themselves were holding back, because they were expecting pricing to drop even further, the networks hope that the marketers will come back in that scatter market and end up paying a little bit more.

I personally am not so sure that’s going to work out for the networks, because since so much more ad time, or “inventory,” as we call it is going to be working in that scatter marketplace. Supply and demand tells me that there’s no way the pricing’s going to go up much higher.

Ryssdal: Yeah and today’s unemployment news aside, they are kind of rolling the dice that things will actually be better in six, eight, 10 months.

Burgi: I think that’s very much a crap shoot, yes.

Ryssdal: Can we expect to see the same kinds of things for cable networks, as opposed to the broadcasters, which is what this upfront season was?

Burgi: I’m going to answer that yes and no. Yes, because it is a tough marketplace out there and the challenge for the cable networks is that they have that much more ad time to sell. They have just much more inventory working in the marketplace. But no, because cable is really where a lot of ratings momentum is taking place. We’re seeing a lot of new cable premieres that are getting ratings that are network-sized audiences. So, there’s a lot of ratings momentum and kind of creative development momentum very much working in cable’s favor.

Ryssdal: Are the networks now going to get more creative with other ways to make up revenues, since they don’t have this ad money in hand? I’m thinking product placement here and those kinds of things.

Burgi: Well, the product placement and what the industry calls “branded entertainment” is really being baked into the process much much more during these upfront negotiations.

And there’s one kind of stellar example here: NBC is going to be rolling out the Jay Leno show on primetime every night this fall. Well, that show lends itself to much more product placement-style advertising that it was a little bit more sophisticated for the networks and the advertisers to negotiate. So that’s one of the new tools that NBC is hoping will be to its advantage. It remains to be seen whether the ratings hold up for that show and I think there’s some question about the ratings, whether advertisers get the bang for the buck that they’re hoping for.

Ryssdal: Let me take the perspective, before I let you Michael, of the person sitting on the couch in their living room, watching these shows. Does this mean anything for them, other than more ads?

Burgi: Well, it doesn’t mean much different for them, besides more ad. What works to the consumer’s advantage is now more and more homes are equipped with digital recorders, DVRs, and they now have the ability to skip those ads. I am guilty of it myself.

Ryssdal: Ditto, baby.

Burgi: And what’s going to happen out there is the networks — and they’re working really furiously at this — the networks have to figure out how they’re going to keep viewers around during those commercial breaks, when they are otherwise skipping.

Ryssdal: Michael Burgi, he’s the editor-in-chief of MediaWeek Magazine. Michael, thanks a lot.

Burgi: Pleasure to be here. Thank you.

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