The Upfront That Could Have Been

As the broadcast network television Upfront moves forward quietly and with little momentum, it's becoming clear that procurement and financial officers of major marketers are dictating the pricing decisions and driving Upfront purchasing models. Based on the deals that are being negotiated and completed, overall apples-to-apples cost-per-thousand pricing is down compared to last year with total Upfront sales down considerably, leaving a higher than normal percentage of inventory available for scatter markets. Exceptional deals are available to marketers who would agree to flat to modest CPM increases, but instead of capitalizing on these potential opportunities, marketers are walking away from incumbencies and category exclusivities, ignoring major long-term relationships in return for cost efficiency considerations. In this week's subscriber report, I share detailed insights into this year's Upfront market conditions.

An estimated $13.0 to $13.8 billion will be invested over the next 45 days in broadcast, cable and syndication advertising for the 2009-2010 season that begins in September, down from $17.2 billion invested in 2008. (Press reports estimated an incorrect $19.0 billion in Upfront spending last year. Caution should be taken not to use that incorrect data to make judgments on this year's Upfront.) An estimated 90% to 95% of total Upfront investments are being negotiated with price as the primary consideration. Less than ten percent of purchase decisions are being made based on qualitative factors. According to initial information gathered by Jack Myers Media Business Report, broadcast network costs-per-thousand will be off by five to eight percent with cable network CPMs fluctuating but down overall by at least that much.

Advertisers who are willing to accept significantly less attractive program mix combinations are realizing CPM decreases of as much as 20% depending on their daypart and programming mix differential. Driven by corporate procurement demands, marketing officers and their media agencies are foregoing sponsorship and category exclusivity rights and shifting away from high profile programming rights that have been held for years and, in some cases, even decades. Most visibly, Anheuser-Busch, under InBev ownership, has failed to renew multiple sports sponsorship rights, some of which were immediately scooped up by Miller Beer. Several other advertisers are less noticeably following the same path.

Procter & Gamble has refocused marketing attention on its price-sensitive brands and is significantly reducing ad budgets for its core higher priced brands that have driven the company's ad spending growth for years. With major CPG marketers shifting budgets to retailer incentives, coupons and promotional efforts, they are intensifying demands for traditional media CPM reductions, even though in many instances they already pay some of the industry's lowest costs. It's ironic that many marketers and agency leaders have been vocal in the past few years about the importance of unlocking the value of consumer passion, using that mantra as validation of their shift of budgets to social media, user generated content and search engine/database driven marketing techniques.

Yet, these same marketers and agency execs have been unable to convince procurement executives of the importance of investing in the consumer passions that audiences feel for much of the media they consume. Media companies and agencies are investing hundreds of millions in consumer insights, understanding and tools. There is a wealth of data available connecting media value to product purchase. Strategic planning competencies are far greater in advertising than in other parts of marketers' businesses. Brilliant and inspired media-focused creative opportunities abound as never before.

Yet, the network Upfront marketplace is locked, as it has been for more than five decades, in an inventory-based supply and demand oriented business model. Inventory-based markets are in an irreversible downward pricing spiral. Network sales organizations need to extract themselves as quickly as they possibly can from this market and refocus attention instead on purpose, meaning and passion.

Just a few weeks ago, Procter & Gamble introduced product and packaging design considerations into their brand development process. A next logical step will be for them to introduce advertising and media opportunities into the early stages of product development. This can only become a reality when the networks themselves make a dramatic break from their own sales traditions and embrace new relationship-building models that focus on connecting marketers to content, enabling advertisers to exploit audience audiences rather than simply negotiating deals based on audience reach and cost.

Marketers had an extraordinary opportunity to capitalize this year on their competitors' procurement-driven strategies. They could have acquired long-term exclusive marketing and promotional rights to content that would deliver unbelievable long-term value for their brands. The networks are responsible for failing to communicate this opportunity and for failing to develop the tools and resources that would have empowered agency and advertising execs to overcome the demands of a procurement-based marketplace.

It will be a mistake for the networks to place too much dependence on a strong scatter market and expectations that historical market patterns will reemerge. It's time to become far more aggressive in changing the fundamentals of the business.

Jack Myers is a media economist and consults with media companies, agencies and marketers. He can be reached at jm@jackmyers.com.