It's Only TV -- But They Like It
By Jon Fine
The bizarre rituals of the television "upfronts" are upon us. Each May the broadcast and cable networks trot out their stars and upcoming schedules in lavish presentations at landmark Manhattan theaters. Advertisers are feted until their eyes bulge. Somewhere in all this, commitments are made for billions of dollars of ads. (The tally for last year's upfronts was $9.1 billion.)
This is all very old-school stuff: vaudevillian dazzle, copious applications of food and alcohol to lubricate the ad spigots, a frenzy of dealmaking primarily compressed into several days in one city. And all the more so in a TiVo'd (TIVO ), rapidly digitizing world. But the upfront ritual keeps chugging along, and the advertisers keep buying it. If you expect an imminent earthquake in TV spending to shake this year's upfronts -- well, stop. Even though the rites come amid a steady string of digital TV initiatives and the onward march of digital-video-recorder use, the nastiest thing people will say about the event is that dollars may drop slightly. "Overall, we are thinking flat," says Betsy Lazar, who as executive director of advertising and marketing operations for General Motors (GM ) oversees one of the nation's largest ad budgets. Some of the money the upfronts may lose will simply be that spent on TV later in the year. Rino Scanzoni, the chief investment officer at mediaedge:cia, a media-buying agency, says that when "scatter" ads -- those not purchased at the upfronts -- are factored in, overall TV ad spending will be up 2% to 3%.
That's higher than you would expect given that there is no obvious newfound ratings strength for television as a medium. But if the end is near for advertising in traditional media in general and TV in particular, an awful lot of people didn't get the memo. And many of them are in very powerful positions in the ad world.
IT IS NO COINCIDENCE THAT IN THE WEEKS preceding the upfronts, virtually every major broadcast and cable network of note rolled out various digital initiatives, such as the just-announced CBS (CBS ) online video channel, Innertube. The upfronts are changing as networks, with varying degrees of aggressiveness, dangle TV-plus-digital packages in front of advertisers. But make no mistake: The boob tube is still the star of this show. Media buyers and network execs say that, thus far, there aren't yet many opportunities for video ads online. And key media executives remain remarkably sweet on TV. The 30-second spot, maligned as it is, "still works, despite TiVo and clutter," says Andy Donchin, director of national broadcast at media-buying firm Carat North America. "[Let's] stop talking about how the upfront is broken. It works for clients, it works for networks, and it works for agencies."
So the dollars keep flowing to TV. Agencies, and by extension the marketing departments of most major U.S. companies, are still essentially built around buying TV ads. The online ad market may be poised to swell impressively this year (Merrill Lynch (MER ) analyst Lauren Fine -- no relation -- just upped her estimate for Internet ad spending this year, saying it will rise 28.7%, to $16.2 billion), but it remains a fraction of the $53.9 billion total that advertisers spent on TV last year, according to TNS Media Intelligence. And now that digital offerings are being lumped into the upfronts, the networks can hold on to some of that increase. "I see TV budgets holding," says Heather MacPherson, a managing director of ad giant Ogilvy & Mather. "Most of the shift [to the Web] is coming out of print."
Even outside traditional marketers' and agencies' TV-centric bubble, the perception of the medium's primacy is tough to shake. At the ineffably next-generation OnHollywood conference in May, where many tech-forward companies huddled with jeans-clad venture-capitalist types, a poll of attendees (in person and online) found that a majority believed that upfront spending would not fall this year.
None of which should be taken as a "was, is now, and ever shall be" argument for TV. Clear threats to its effectiveness continue to multiply. Even media-buying executives who vigorously defend it nonetheless say a TiVo-led implosion is coming, in as soon as two to five years. But when so many people who control the purse strings continue to extol the virtues of TV advertising, it makes you wonder. Consumers' established habits are slow to change. Advertisers' are even slower.
For Jon Fine's blog on media and advertising, go to www.businessweek.com/innovate/FineOnMedia