Upfront Is Not a Reliable Indicator of Network TV Economic Vitality

Again this year I am urging my colleagues in the press, on Wall Street, at media agencies and at networks to avoid reporting on Upfront investments. For the past few years I have steadily reduced my coverage of the national television Upfront market based on my conviction that press coverage does a disservice to both network TV advertising buyers and sellers. Economic reporting on Upfront spending is inconsistent, misleading and offers little insight into the realities of network TV economics or advertising industry health. Last year, for example, actual Upfront investments on the five broadcast networks were $7.9 to $8.2 billion yet the press reported it as $9.0 billion. Wall Street analysts have continued to use and report the higher figure. Year-to-year data becomes irrelevant in this context and insights on cost-per-thousand differential are dependent on too many variables to be meaningful.

These variables include sell-out levels, client mix, daypart distribution, ratings adjustments, guarantees, cross-media integration, value-added, agency holding company deals, live/C-3/C-7 differential, integrated marketing and sponsorships – making accurate evaluations of CPM, estimated total investments and per-network shares virtually impossible to assess. It's also increasingly irrelevant to view broadcast networks on a stand-alone basis, with cable, syndication, cinema, out-of-home video and even online video now being integrated into Upfront planning by many advertisers and agencies. Within cable, any market assessment will require a determination of whether dollars are being aggregated within fewer leading players or spread across a deeper array of networks.

Compounding the reporting challenge is the growing shift of spending to calendar year deals, especially by heavy sports and news advertisers. This year marketers are confident that scatter market pricing will remain reasonably consistent with and even below Upfront levels. So while Upfront deals offer certain key advantages, the historic supply/demand curves have been inverted. It's unlikely that many marketers will have visibility on business conditions in May and June for the fourth quarter 2009 and into 2010, and they have little incentive to make long term commitments.

Total Upfront investments by the auto industry, financial services, consumer packaged goods, home electronics, entertainment and other leading categories will be reduced this year. Myers forecasts for calendar-year ad revenues clearly reinforce the challenges being faced by all media, and network television is not immune. But the Upfront is simply no longer a reliable economic indicator of network television health and it should not be reported or analyzed as such. Especially in this year when the total advertising marketplace is being transformed, networks need to be given the freedom to focus on long-term strategic vision. Broadcast and leading cable networks have access to sophisticated modeling tools and should optimize their inventory allocation and pricing with a long-term perspective.

This year, Myers Report will not rate Upfront presentations and although we will continue to adjust our annual spending forecasts in response to market trends and realities, we will again withhold our reporting on Upfront economics.

Jack Myersadvises media companies, agencies and marketers on transformative business models and writes a weekly blog at www.jackmyersthinktank.com.