Upfront 2009: Which Nets and Online Media are Best Positioned for Growth?

Myers Publishing has been issuing reports on the network TV Upfront market since 1987, on television media sales organization performance since 1984 and on online media sales organizations since 2000. Insights on advertiser and agency perceptions and priorities are even more relevant this year as advertisers and their media agencies plan their Upfront strategies and consider broadcast, cable and online plans that respond to the economic recession. Led by Procter & Gamble, marketers sent word last year to agencies and networks that they would seek reductions of as much as 20 percent in cost-per-thousand while demanding that historical presence levels be retained. P&G's pricing memo stirred debate and dialogue and has proven to be misguided and unrealistic, as market pricing for the strongest networks is proving to be resilient even in the face of economic pressure. While networks may recalibrate their client mix and advertisers may reallocate their budget distribution, most plans fail to embrace the one-TV world and still differentiate between broadcast and cable TV. While there are legitimate reasons, the status quo seems to be intact in the Upfront for at least one more year.

It appears certain that total Upfront spending will be down this year, perhaps significantly. But that concern is not new. In March 2004, I wrote, '"Concerns about consumer spending and an expanding economic slowdown are causing executives to hold back on ad spending plans. The steady decline in stock market values is causing marketers to rethink ad spending plans as fears of a continuing economic downturn force them to protect the bottom line.'" In 2004, however, marketers were investing just a fraction of their current commitments to online media. With broadcast network erosion continuing unabated, DVR penetration in households with $100,000+ income over 60%, dramatic increases in original cable series and ratings, and increasing emphasis on value added creativity, who among the TV and online sales organizations are best positioned for a successful Upfront and 2009? Based on our exclusive research among media agency and advertiser executives, the answers follow in this report, available exclusively to Myers Corporate Subscribers.

Both the broadcast and leading cable networks are committed to retaining pricing integrity. Overall sell out levels will be reduced by some networks and CPM optimization programs will be working overtime to enable both network buyers and sellers to achieve their goals within a relatively static pricing environment. Investors must be cautious in using reported Upfront market results as indicators of industry vitality. Upfront data is not validated or audited. For the past several years, total reported network TV Upfront spending has been over-estimated by as much as 15%. Upfront commitments are no more meaningful than cancellable airline reservations.

The most critical component in negotiations between buyers and sellers this year in ANY business, and especially in the media business, will be perceived value for the investment. According to research conducted among more than 500 advertising agency and marketer executive by Myers Publishing, there is minimal perceived difference between the value of advertising on network television and online. The categories that are best positioned as they enter the negotiating process are TV networks and media targeting youth audiences. MTV Networks' Nickelodeon and Nick.com scored highest for overall sales performance and value among both TV and online media buyers and is best positioned, along with MTVN's entertainment networks, for a strong showing in this year's Upfront. Because online media have ubiquitous reach among young adults and teens, and because vertical ad sales networks make access easy and costs cheap, there will be intense downward pricing pressure exerted on online media. Television networks that reach younger demos, however, are better positioned for growth.

BROADCAST NETWORKS

CBS-TV, ABC-TV and Fox-TV networks are well positioned to hold firm on costs-per-thousand and can be expected to reduce sell-out levels and recalibrate their advertiser mix to maintain as much price integrity as possible overall, while reducing the number of advertisers who have lowball legacy pricing. These advertisers will move more of their budgets to less expensive cable and syndication. NBC-TV can be expected to be more aggressive with their pricing and to move early to capture share of market.

Based on Myers' survey of advertising executives conducted in 2009 and 2008, also well positioned to capture a higher share of lower overall spending (in order of perceived overall value) will be:

TELEVISION

• Scripps Networks
• Discovery Communications
• Turner Entertainment Networks
• The Weather Channel
• Cartoon Network/Adult Swim
• A&E Television Networks
• Hallmark Channel
• CNN Networks
• Turner Sports
• ESPN
• The CW
• Fox Cable Networks
• MTV Networks
• GSN
• ABC Family
• NBC Universal Cable
• Rainbow Networks
• Lifetime Television

ONLINE

• The Egg Network
• Break.com
• Collective Media
• Vibrant Media
• ValueClick Networks
• Broadband Enterprises
• Burst Media
• Tremor Media
• Centro
• Yahoo/Platform A-AOL, MSN
• Specific Media
• Google Ad Network
• Gorilla Nation
• IGN Entertainment
• Washington Post/Newsweek
• Weather.com
• Hulu.com
• USAToday.com
• CNN.com
• Undertone Networks
• Fox Interactive Media
• Google Video/You Tube
• UGO
• Discovery Digital Media
• FoxNews.com
• SI.com, People.com
• CBS Digital Media
• Forbes.com
• ESPN.com
• HuffingtonPost.com

Jack Myers advises media companies, agencies and marketers on long-term revenue growth opportunities and business models. ABC-TV is a client of Myers Media Services LLC. Jack can be reached at jm@jackmyers.com