This article was sent to me by my favorite CAA agent. It punches some very realistic holes in the networks "We don't need no stinkin' new shows" attitude. Worth the read. Pass it on.
Strike Has Cash-Back Clock Ticking
By John Consoli
Media buyers, in light of the Writers Guild of America strike, say they might be a month away from asking the broadcast networks to renegotiate their upfront packages or give them cash back. “The situation may not become a major problem until after the February sweeps, but we have to start thinking about how we are going to deal with things for the remainder of the season now,” said one major media buyer, who did not want to speak for attribution. “In the next three weeks, if there is no settlement in the writers’ strike, and prime-time ratings continue to fall, we will start looking for serious adjustments and even for cash back. That’s going to be awkward and hard for the networks to deal with.” Broadcast network sales executives, none of whom would speak for attribution, believe that their networks have enough fresh episodes of scripted shows to take them through the February sweeps (along with the liberal dose of repeats that are traditionally run in December and January), and enough reality programming to take them through the rest of the season. But buyers, likening that attitude to Nero fiddling while Rome burned, believe the networks are wrong if they think viewers will be retained with repeats and some new reality programming. Instead, they believe viewers will begin defecting to cable, which, because of its different cycles, can offer first-run programming in some instances and also repeat full arcs of their hit scripted series that many regular broadcast network viewers have yet to see. At an Advertising Club panel sponsored by Discovery Networks last week, Rino Scanzoni, chief investment officer for media agency conglomerate GroupM, said, “During the first four weeks of this season, when all of the broadcast networks were airing original episodes and their new shows, the ratings erosion from last season was about 12 percent. That’s quite unnerving, particularly since these ratings declines were with all first-run programming.” Scanzoni said it can’t get better once all the fresh episodes are used up. “Cable can be an alternative to broadcast if the strike continues,” he said. “Over the past several seasons, cable ratings in the aggregate have increased by about 5 percent in nonsweeps months,” said Steve Sternberg, executive vp of audience analysis at Magna Global USA. Sternberg projects that if the strike continues through the end February, the broadcast networks will lose an additional 5 percent of its prime-time ratings, on top of the minus 12 percent it is currently averaging. That number will grow to 8 percent in March (down 20 percent compared to last season), by 12 percent in April (-24 percent) and by 13 percent in May (-25 percent). That level of audience defection from broadcast prime time will surely leave the networks with virtually no way to meet their promised upfront guarantees and would likely prompt a large number of advertisers to ask for cash back. It would also create chaos for the 2008-09 upfront in May. Buyers said the broadcast networks assumed a 7 percent ratings decline for this season when doing their upfront deals and put aside makegoods for those levels of underdelivery. With current ratings 5 percent lower than that, the networks can still manage handing out makegoods without reaching an imperative cash-back situation. But one buyer said, “If a large majority of the original reality shows the networks plan to put on during the strike don’t hit a chord with viewers, the entire ratings and makegoods situation could spiral out of control.” Another media buyer added, “We need to know what we are going to do right now. Even if a strike doesn’t last until second quarter, it will impact second quarter. We need to know that the programming packages our clients have in second quarter resemble what they bought in the upfront. If there is no first-run Heroes or Grey’s Anatomy, what programs that resemble those shows’ audiences are our clients going to be put in to?” One buyer said that Fox’s announcement that it will not air drama 24 (because all the episodes have not been completed) is a problem for some clients: “Even if Fox offers them units in American Idol, it might not be the same target audience they are looking for. And putting them in a House repeat is not the same as a first-run House.” Andy Jung, senior director, advertising and media, Kellogg’s Co., and chairman of the American Advertising Federation, said if viewers begin abandoning broadcast prime time for cable, the advertisers will follow. “If the eyeballs move,” he said, “we will move our money.” Cable networks, particularly the larger, more general audience services like TNT, TBS, Discovery Networks and USA, along with the cable news networks in prime time, will probably see the bulk of shifted dollars. But media buyers warn that if they get greedy and ask for exorbitant rates, the agencies will balk and look to syndication, print or online. One cable network sales executive said he recognizes the opportunity the strike has provided his sales team and would strive to not mishandle the situation. “While we would ask for rates that are a little higher than we are getting right now, we would make sure we didn’t try to gouge the clients. But we do have enough inventory available to take advantage and to give each advertiser what they need.”
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