2011 upfronts—a bellwether of good things to come for the economy?

All five TV networks completed their 2011 upfronts this week, giving the industry a valuable glimpse into the 2011-2012 television landscape. Hosted by television network executives, the upfront begins the broadcast advertising sales season “upfront” of the season’s fall commencement. Essentially, it gives advertisers the opportunity to buy media associated with new and existing programming, before the season starts. While all available numbers are estimates and the cable industry is still in the process of completing their upfront negotiations, significant spending increases over last year are already evident.

As the upfronts conclude and the industry reacts, two sets of numbers dominate the headlines: CPM (cost per thousand) increases and overall spending totals year-over-year. Whereas CPM increases are more often reported, overall spending is a more tangible number on which to focus our attention. CPM is calculated using both cost and audience, which means these numbers are more likely to fluctuate. An increase in year-over-year CPMs generally shows a combination of increased rates and lower audience numbers. All networks are reporting an increase in CPM, ranging from 9% (NBC) to 15% (CBS); however, this does not necessarily mean an increase in rates from 9-15%.

The overall spending at the upfronts for the five networks, which include only national prime advertising, totaled approximately $9.3 billion, which is up about 7% from the 2010 upfront estimates of $8.7 billion. CBS’ strong prime programming allowed them to come in on top at $2.6 billion. ABC came in a close second at $2.4 billion. Fox finished their negotiations earlier than the others, partially due to the much-anticipated premiere of ‘X Factor,’ at approximately $2.1 billion. NBC has struggled with their prime programming in recent years, but with the help of both the 2012 Summer Olympics in London and the rights to the Super Bowl (barring an NFL strike) they finished at $1.75 billion. CW also had a slight increase from 2010, ending the upfront at $400 million. Although the 2011 overall spending estimates are up approximately 7% and have been up in recent years, it is still not as high as it was in 2004 when upfront spending was at its highest—$9.5 billion. 

The cable networks’ upfront process is expected to finish up in the next week, and there are similar increases there. TNT, TBS, MTV, Comedy Central, Discovery and ESPN are leading the rest and have sold a significant portion of their inventory, though industry analysts are already estimating that the cable networks as a whole will secure approximately $9.2 billion before negotiations end. This brings the cable estimates slightly below the overall network estimate of $9.3 billion. If an NFL lockout does happen, some budgets will almost assuredly move from network to cable in order to reach the younger male audience that the NFL typically attracts.

Spending increases at the TV and cable upfronts is a signal of industry and national economic growth. National advertisers’ TV budgets have increased, and in turn, it is likely that their overall media budget has increased. However, it’s important to remember that these numbers represent promises and approximations, not actual spending. The ad spending totals at the end of the year seldom match the original upfront estimates. In addition, the inventory sold at the upfronts is only national prime inventory (including prime time, national news, sports and other high-profile events), and all of the networks retain a specific portion of their overall inventory for national use.

These estimates allow us to get a feel for the national media landscape in 2012; they won’t affect the schedules that we already have in place for the fall 2011 season. While we have the ability to move our spots into different programming/dayparts, our CPMs for purchased inventory will not change. More important to our local market TV schedules and planning will be the fact that 2012 is set to be one of the biggest political years in history, in terms of campaign spending. There are still many factors that will come into play and have the potential to change the landscape. Vladimir Jones will continue to monitor these dynamics and will provide updates as critical information is available.