And Now, A Few Costly Words From Our Sponsor
Hey, aren't the TV networks supposed to be in the doldrums these days, their audiences siphoned off by cable and the Net? That's not what Aaron Cohen found. Cohen, executive vice-president of New York-based Horizon Media Inc., will end up buying $390 million worth of ads this year for such clients as Boston Chicken, Geico Insurance, and Sony's Columbia-Tri Star studio. Even as early as last month, as he was looking to buy a string of spots for a client, Cohen found prices only climbing. "We ended up spending a goodly few millions," says Cohen. "It sure didn't turn out to be cheap."
Today, there are few cheap buys as ad executives scurry to buy time in the so-called scatter market, the estimated 25% of available commercial time that wasn't sold before the season traditionally starts in September. And this year, fueled by a rush of high-tech companies marketing everything from computers to E-commerce sites, those commercial time slots are more in demand than ever. Half-minute spots during hot shows like Fox Television Network's Ally McBeal and CBS Corp.'s Everybody Loves Raymond are fetching twice what they went for in September (table). It doesn't seem to matter that overall ratings are down this year by 5% for the five largest networks. When it comes to getting the biggest bang for the ad buck, the networks are still seen in almost every U.S. home, averaging 7 million homes a show, vs. 4.8 million for cable's top-ranked shows, featuring wrestling.
CASH TO BURN. Advertising and network marketing executives say it's the convergence of several trends. A still-strong economy has brought consumer- product companies, auto makers, and Hollywood studios into the market for additional ad buys. They are bumping up against high-tech companies using cash from a white-hot stock market to buy network ads for quick national exposure for their products--and their stocks. Among the most active, say industry executives, are Amazon.com, eBay, Cisco Systems, and Yahoo! "It's the best of all worlds for us," says Jon Nesvig, executive vice-president of marketing for Fox.
Not all networks are sharing in the action, however. Because networks traditionally sell some of their scatter spots at discounts to compensate ad buyers when their ratings don't hit projections, some networks have fewer to sell than others. ABC and NBC, for instance, held back some spots for so-called make-goods, say insiders. That has put even more pressure on prices for available spots on the hot teen network WB, whose ratings are up 6% this year, and on Fox. Also enjoying a fat scatter market is CBS. Its ratings are off 8%, but its performance beat the rating guarantees it had given to advertisers before the season started, what with the return of National Football League football and the success of shows like Raymond.
Although their audience is more splintered, cable networks are also riding the ad gravy train. They continue to see strong overall growth, picking up 12% more prime-time viewers, according to the Cable Advertising Bureau. Ted Turner's TBS and TNT networks are seeing ad sales growth of 20% to 30% over spots they sold before September, says Joe Uva, president of Turner Entertainment Co.'s sales and marketing unit.
LITTLE SLACK. Advertisers now worry that the market will stay hot through the summer, when networks begin selling spots for the September season. Last year, the four major networks sold $6 billion in up-front ads, about $100 million less than in 1997, although networks negotiated a small increase for each additional thousand viewers they could attract. This year, the networks will likely push for double-digit increases in the cost-per-thousand (CPM) rate. "These guys are never easy to deal with. So now, when you're negotiating, they're not going to give you much," says Bill Croasdale, president of Western Initiative Media, a Los Angeles-based media buyer.
The annual mating dance between network executives and the ad community usually starts by late May. That's when the networks unveil their new shows for September. But Jed Petrick, WB's executive vice-president for media sales, says that "we're already getting calls from folks who want to make deals for September." Slow season? Not this year.