Spinning the network upfront

The observers continue to try and get a handle on this year’s network upfront buying season. It’s the time of year when one can generally judge the financial wellbeing of the TV industry, and spin is very important. MediaDailyNews has a nice article on the upfront to date, and the spin is rather obvious in the headline: Big 4 Lose Some Upfront Market Share, But Reap Strong CPM Gains.

The major broadcast networks have indeed seen their share of upfront advertising budgets erode to cable; but the relative price gap between broadcast prime-time inventory and cable is continuing to spread in broadcast’s favor.

Despite facing relatively flat demand in terms of upfront ad volume, the Big 4 broadcast networks have seen their prime-time CPMs (cost per thousand) soar at high single-digit rates, with lead network CBS spilling into the double-digits, media buyers acknowledged late last week. CBS is believed to have averaged CPM gains of 10 percent, with Fox and NBC reaping hikes of 7 percent to 8 percent. Even ABC, which was expected to experience relatively moderate demand, fetched CPM gains of 5 percent to 6 percent.

Okay, so what does that mean? It’s all in the math. The networks are losing share in the upfront to cable and syndication. That means, overall buys are shifting away from broadcast. But the networks are now charging more for individual spots, so while their share of the ad buy may be diminishing, their revenues will likely still go up, because the CPM is increasing.

Now let’s think about this for a minute. What it says is that 1,000 viewers on any show on NBC are worth more than 1,000 viewers on any program on The Food Network. While I’m happy for the networks, this slight of hand cannot last in a shrinking marketplace. Sooner or later, the whole thing will implode, and it’ll seem like it happened overnight.

Think of cable as Wal-Mart and the networks as the mall. It’s nice to window shop at the mall — and you have to make certain specialty purchases there — but your everyday money simply goes further at WallyWorld.

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