US TV's upfront season must evolve to survive

With major advertisers declaring the upfront ritual outmoded, Alasdair Reid looks at the future of US airtime trading.

This year's upfront season - a feature in the US media calendar since the mid-60s - has been a somewhat sobering experience for the big US television networks. This event, which brings advertisers, media agencies and the TV companies to New York in May, is where the networks let advertisers choose the hit programmes they want to be in. Premium, peaktime, national network airtime in "must-have" shows such as CSI, American Idol and Prison Break are up for grabs.

Although some sections of the US business community baulk at the frivolous aspects of this deal-making event, its central importance to the US TV economy has never really diminished.

Last year, although business was not as brisk as expected, the six networks (NBC, CBS, ABC, Fox, UPN and WB) shifted $8.65 billion in primetime network advertising inventory - well in advance of 10 per cent of America's $55 billion annual TV market tied up within days.

But this year's upfront season is being regarded as something of a watershed.

For a start, business was slow. Three years ago, 80 per cent of trading was tied up within 72 hours of the market opening. This year, a significant amount of inventory is likely still to be in play well into June. Buyers say the networks made things too complex by trying to bolt on digital opportunities from broadband downloads to mobile. One advertiser, Johnson & Johnson, decided to take its $450 million budget off the table altogether, announcing it would buy its airtime on the "scatter" market, where it is sold in short-term deals closer to transmission time.

And days before the upfronts were scheduled to begin, Julie Roehm, the senior vice-president of marketing communications for Wal-Mart Stores USA, declared the ritual outmoded and called for the whole US airtime trading system to be shifted online, with all inventory available for sale in a transparent auction system.

Roehm soon gained the support of a number of advertisers, including Christine MacKenzie, the executive director, brand and agency relations at Chrysler, and Ann Bybee, the corporate manager, advertising, brand and product strategy at Lexus USA. They've set up a working party and asked fellow advertisers to contribute funds for a trial. The Google co-founder Sergey Brin announced he'd help to develop a system and eBay is also bringing forward proposals.

The ad community was more than a little perplexed by all of this. According to Steve Grubbs, the chief executive of Chrysler's media agency, PHD North America, top advertisers "are already paying bottom dollar by using their clout in the existing system".

This, of course, is the nub of the matter. The upfront system does let advertisers cherry-pick the shows they want to be associated with but it also delivers preferential rates for those prepared to commit large sums of money to long-term deals. Although airtime on the scatter market is relatively inferior, it is more expensive.

Critics of the upfront system, however, say that it serves merely to shift the market's whole baseline in favour of the networks. The networks respond that no-one forces anyone to come to their upfront events, but it's a brave advertiser who takes a unilateral stance on this and history contains a number of salutary tales.

In 1976, J. Walter Thompson, then the biggest TV buyer in the US, decided to sit on the sidelines and planned to make its play when pricing had dropped to more sensible levels. Unfortunately, its abstinence actually made the feeding frenzy worse and JWT's clients were left with scrapings from the bottom of the barrel.

More recently, a weak TV market in 1990 and 1991 led to plans by a number of major advertisers and agencies to boycott the 1992 upfront season.

Their scheme was left in disarray when a sudden upswing in the economy led to something akin to panic buying.

That's why Roehm is seeking to create a focus for joint action - though history, again, is against her. In the late 90s, AdValue, a division of Reuters, attempted to set up a digital trading system in Europe and the US. It failed, largely because media owners only offered the inventory they found impossible to sell in the conventional manner. And it's instructive, some say, that Roehm's working party is setting itself increasingly modest targets. It is now looking for a single cable station to give over bits and pieces of its inventory for a trial.

But this could still be a significant step forward. Setting aside primetime spots at the big networks, the US airtime market has a very long tail - and at lower levels, airtime is already traded as a commodity.

So this could evolve into a multi-billion-dollar secondary market.

John Billett, the chairman of Billetts America, says the US market has to embrace audit pools that will establish true average price levels before it can establish the transparency needed to make online trading viable.

Change will come, he argues, only when the networks see it as being in their interests - when the US becomes a buyer's rather than a seller's market.

He concludes: "There are two questions you have to ask yourself. Are the networks going to continue to lose share? And are advertisers going to spend less on network TV? If the answers are yes and yes, then upfront has to change."

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