May 27, 2024

Advertising: TV Networks Expect a Jump in Spending on Commercials

The joy among broadcasters stems from a widespread belief that they will, for the second year in a row, be able to charge a good deal more for commercial time during their shows for the coming season than they were the year before.

Last spring, the networks took in about $500 million to $700 million more in the upfront market — called that because it happens before the season— than they did in 2009.

Now, as executives start this week to share with advertisers and agencies their schedules for 2011-12, they are anticipating a robust gain in ad revenue of $600 million to $800 million from last spring — and, by some estimates, perhaps as much as $1 billion.

Those expectations come despite potential problems like a disruption of the next National Football League season; a slowdown in consumer spending caused by rising prices for gasoline, food and clothing; declines in ratings, particularly among younger viewers; and efforts by digital media to lure away advertisers.

“It is an amazing story that in a weak economy the national television business is strong for the sellers,” said Steven J. Farella, president and chief executive at TargetCast TCM, a leading media-buying agency.

“We have clients in financial services, travel and consumer packaged goods,” he added, “and we have no one feeling as good about this economy as the networks.”

Bill Koenigsberg, president and chief executive at Horizon Media, described this as the annual “silly season, where it behooves the sellers to pound their chests and set expectations incredibly high.”

“If I were in their shoes, I’d probably be doing the same thing,” he said, “but I’m not quite sure I see where the money is coming from.”

Still, marketers in categories like cars, fast food, movies, retailing and telecommunications have been increasing ad budgets in recent quarters. That growing demand has been demonstrated by rising prices for commercials that are bought with less advance notice than the upfront provides, in what is known as the scatter market; those rates have run 20 to 40 percent higher than the same quarters a year ago.

“As a hedge” against those rates rising further, “you’ll probably want to lay down your money” in the upfront market, said Steve Kalb, senior vice president and director for video investments at the MediaHub division of Mullen, because “nine years out of 10, you’re likely to do better in the upfront than in scatter.”

Agreements made in the upfront market also yield benefits not found in the scatter market, among them options to cancel commitments.

Another reason most outlooks call for a strong upfront market is a multiplier effect that networks, advertisers and agencies are beginning to notice: Social media like Facebook, Twitter and YouTube seem to be stimulating renewed interest in watching television, making commercial time potentially more valuable as viewers seek to share with family and friends comments about Hail Mary passes, awful gowns or pitchy singers.

Social media and television “work very synergistically,” said Carolyn Everson, vice president for global marketing solutions at Facebook, because “TV has always been a social medium.”

“TV is about creating ‘water-cooler moments,’ only now they don’t take 12 hours till you’re at school or the office,” Ms. Everson said. “They happen in real time.”

“So instead of saying to advertisers, ‘Why are you spending X on TV when you can spend Y on Facebook,’ ” Ms. Everson said, “we’ll say, ‘If you’re going to be spending X on TV, if you add Facebook and social media you maximize the experience.’ ”

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