Big Deals Based on New Ratings Currency An upfront advertising market marked by firsts started rolling last week, with broadcast television networks getting some of what they wanted. Breaking new ground, early deals were done on the basis of average commercial ratings that include viewing on a delayed basis using digital video recorders. Fourth-rated NBC completed an upfront deal with major buyer GroupM valued at nearly $1 billion that calls for a new measuring stick: commercial ratings plus three days of playback.
Top-rated Fox also did some deals with the movie studios that sources said were based on live plus three. "We've come to terms with many of our clients, and negotiations are under way with the rest," a Fox representative said, declining to elaborate. Getting credit for commercials seen on DVR playback is key for the networks, because the recorders contributed to a decline in live ratings last season as more consumers delayed viewing and skipped commercials.
Counting delayed viewing also helps networks stomach the use of average commercial ratings, which tend to register lower audience counts. Figuring out how the new ratings system will affect ad prices has slowed the pace of the upfront market this year. Last year, after a two-week deadlock over whether DVR viewing would be included, the upfront was about half done in mid-June.
"For the first time, advertisers will be paying for viewers that watch a commercial within the first three days of the broadcast of a show," Jeff Zucker, president and CEO of NBC Universal, said at a presentation to investors last week. "We are going to get credit for viewing off the digital recorder." Zucker said in the GroupM deal, pricing was positive on the network and cable side, even with the conversion to commercial ratings.
Last year, NBC was forced to cut its industry-leading ad prices after its ratings dropped and lower spending overall created a buyer's market. So any increase in prices would be an improvement. NBC declined to discuss pricing, but industry buzz signaled that NBC got mid-single-digit increases for broadcast and somewhat larger increases for cable.
The deal also included NBC's Spanish-language programming, digital and product placement. Those figures sounded high to other buyers. Rino Scanzoni, chief investment officer at GroupM, called published reports about his company's deal with NBC wrong, but declined to discuss details.
Rival buyers had questions about the deal, wondering why a media agency would commit dollars to a fourth-place network before negotiating with the top-rated networks. "Somebody's playing Bob Barker," said one buyer who declined to be named. Some media buyers noted NBC Universal may have a struggling broadcast property, but it can rely on other attractive properties such as top-rated cable network USA.
Other buyers said the GroupM deal was struck early because NBC needed good news to unveil at its investors meeting and GroupM wanted headlines. The rest of the networks and media agencies will go more slowly as they work through the new ratings system and the increasing amount of digital advertising and product integration being included in upfront deals. "Some of the networks are asking for double-digit increases.
It's insane," said John Moore, director of ideas and innovation at Mullen Advertising, who expects negotiations to be long and arduous. "This upfront is so important because it sets the tone for future years," he added. With everyone apparently agreeing to live plus three, this year's upfront goal establishes a base for the next few years "until we get down to the individual commercial level, which is what everyone is clamoring for," Mr.
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