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Upfront TV Ad Economics 101, Broadcast Revenues Likely To Fall

Started by Robert Seidman · 1 year ago

I wondered earlier (somewhat tongue in cheek) about how ads would be sold in the current TV upfront advertising season. Now that negotiations seem to be substantially complete for most of the broadcast networks, and in light of the glowing, upbeat, uncritical coverage of the upfront selling results I thought I’d shed a bit [...]



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9 comments

  • The Networks ;)

    1 year ago

    Viewers and advertisers should believe the optimistic press release spin...errr...objective news reports. Pay no attention to the man behind the curtain.
    reply
  • Robert Seidman

    1 year ago

    I don't think Gossip Girl has any ruby red slippers. She'll click her heels together three times anyway.
    reply
  • Mikey

    1 year ago

    Geez, Bill, that's an awfully negative view. Not to say that it's inaccurate, just very gloomy.

    Given the widespread predictions of weakness in this year's upfront, isn't it fair to say that the market came up strong for broadcasters?

    The likelihood is that revenue will be up this year at every broadcast network, and perhaps up quite substantially. The scenario you outline in which ratings don't bounce back from the strike season seems awfully bleak to me.
    reply
  • Robert Seidman

    1 year ago

    It's particularly amazing (or upbeat) that upfront sales were flat versus last year. They could sell "the truth" about the 2007-2008 season and just say it was anomalous and in fact, "the truth" allowed the nets to mask a bigger problem they may have, DVR viewing. *Because* of the strike we wind up seeing ZERO news about advertisers squawking about paying for DVR users. For next season there will be even more DVRs and even more DVR viewing.

    I'm guessing this spring was the last "normal" upfront for the nets and that next year will be harder. We'll see. If the actors strike *that* would be really gloomy, and then of course, all bets would be off.
    reply
  • TV by the Numbers

    1 year ago

    One thing to keep in mind is that the upfront sales "announcements" even if entirely accurate (and the numbers don't add up in many cases) only tell one part of the picture (pricing increases to advertisers). We have to see what the viewing numbers are for next season (advertising "production") to see the other side of the equation.

    I think it's reasonable to guess that revenue in 2008-9 is slightly up vs. 2007-8 because price increases will outdo any ratings decline [or strike recovery increase], but 2008-9 revenue will unlikely be up vs. 2006-7 because even with a 2 year price increase of 10-18% viewership losses in those two years will have been even greater.
    reply
  • Carl LaFong

    1 year ago

    "And unlike most markets, the sellers [TV networks] of the product [advertising availability] do not control the supply, TV viewers do. "

    Not true. Networks can and routinely do control their supply, usually by adding more commercials. Sometimes this can have a greater impact than rising or falling ratings.

    Fox is famously controlling its supply in the coming season in the opposite direction by reducing commercial load in two new programs, which drove up the cost of these shows. What Fox hasn't told us is if the deleted spots from those shows will be filtered in throughout the rest of their primetime lineup.
    reply
  • TV by the Numbers

    1 year ago

    Carl, you are indeed correct, advertising availability = eyeballs x ad minutes and the networks do control the ad minutes.

    However, I assumed that networks *always* place the number of ad minutes that they believe will maximize their revenue, so any variability in ad availability comes from changes in eyeballs.

    The example of Fox reducing the ad minutes during those new shows is consistent with this. They still expect to maximize revenue by doing that, with a combination of higher CPMs and, they hope, higher ratings.
    reply
  • Mikey

    1 year ago

    Bill, you raise an interesting question about 08-09 revenues being up or down compared to 06-07. I think they will be but it's certainly not clear-cut.

    If we can agree on a credible source for revenue data, I'd offer you a friendly wager that total revenue for the four major broadcasters will be up over two years ago
    reply
  • TV by the Numbers

    1 year ago

    Mikey, I'd wager you, but I don't think there is a publicly available source. I've looked at the 10-K's of the companies that own the broadcasters and prime-time advertising revenue, [which is what the upfronts are all about, and pretty much all our discussion re: advertising] is never broken out in a way that it can be isolated and compared.
    reply

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