NBC Rings Up Holiday Refunds (NBC forced to refund advertisers

NEW YORK NBC has quietly begun reimbursing advertisers for fourth-quarter prime-time ratings shortfalls, averaging about $500,000 per advertiser, according to media buyers, marking the first time in years a network has taken such a step to compensate marketers for ratings deficiencies.

Buyers said NBC is offering cash back to advertisers looking to get ads on the air before Christmas. Marketers cannot get make goods, as the network has none to give. In fact, no broadcast net has much ad inventory left between now and year-end—except for, perhaps, a handful of units the week between Christmas and New Year's, and that doesn't do much for advertisers chasing holiday shoppers.

NBC isn't the only net in make-good trouble. The CW has been out of sale for several weeks now, and while the network is not giving refunds, it has issued make goods for the last month. CBS, ABC and Fox also are doling out make goods, primarily for first quarter. None of the networks would comment.

The nets have blamed ratings softness on the conversion of the upfront sales metric this season from live program ratings to commercial ratings plus three-day DVR viewing (C3). But media agencies contend broadcast prime-time ratings are down significantly even when DVR viewing is added in.

They also contend that the nets created the problem by carrying over make goods from last season, and by overselling scatter inventory at hefty prices rather than holding back more for make goods. "They got greedy, and now they are paying the price," said one buyer.

The nets' problems emerged even before the Writers Guild strike. The walkout has yet to affect programming, as the nets had enough first-run shows to get them through the November sweeps, and repeats and replacement programming will not begin in earnest until January.

Among the Big Four networks, NBC has the most serious ad shortfall, as its prime-time ratings are down most dramatically. Meanwhile, none of its new series this season have caught on with viewers. Compounding buyers' angst about NBC: the net's plan to add more reality shows. Celebrity Apprentice premieres on Jan. 3, and American Gladiators launches Jan. 6. NBC last week announced a deal with BermanBraun, helmed by former network executives Gail Berman (Fox) and Lloyd Braun (ABC), to produce nonscripted programming.

"We're trying to understand NBC's recent moves," said Laura Caraccioli-Davis, evp, Starcom Entertainment. "We are concerned that it might be thinking about adopting a programming strategy like some of its sister cable networks. American Gladiators and even some of the shows in development, like Knight Rider, are remakes, being dusted off rather than coming up with new creations.

"NBC used to be the upscale, quality network," she added. "We have come to expect quality, iconic programming. Maybe they are searching for the reality hit they don't have, their own American Idol. But too much reality just doesn't play well with advertisers."

Vince Manze, president, NBC program planning, countered that the net would air more scripted shows in the first quarter than it did a year earlier, so the perception that NBC is moving more heavily into reality is wrong. "We will have about 85 hours of original, scripted, first-run programming in the first quarter," Manze said, citing the return of dramas Law & Order, Law & Order: Criminal Intent (which previously aired on NBC's sister cable net USA) and Medium. In February, NBC will premiere midseason drama Lipstick Jungle. It also has first-run episodes of Law & Order: SVU, ER, Chuck, Friday Night Lights, Las Vegas, Scrubs and My Name Is Earl yet to air.

"Most of our originals will be up against the other networks' repeats, particularly if the writers' strike continues into January," he said. "Our plan is to use reality to fill in for scripted shows that may not do so well in repeat."

He added, "We are going to keep putting original reality programming on the air until we come up with our own American Idol."

Steve Sternberg, evp, audience analysis at Magna Global, said he saw no problem with NBC airing a reality block on Saturday or even during the week if the production values were high or if it replaced other reality programming.

However, "if it replaces midweek scripted hours, it could have a negative impact" on ratings and audience quality, he said.

Reality programs featuring high production values, including Fox's American Idol, CBS' Survivor and Amazing Race, and ABC's Dancing With the Stars and Extreme Home Makeover, draw sizable audiences each week. Still, one network exec charged that audiences for those shows are "borrowed" viewers. "A majority of those viewers come in for that show and then leave," the exec said. "That's why there is usually a huge drop-off in audience for the lead-out show, while scripted shows usually flow into one another better."

Said Ed Gentner, svp, group director at MediaVest: "No one [advertiser or agency] wants to see too much reality programming on TV. But broadcast television has changed, and reality is part of today's landscape."

NBC, he added, "still has a decent amount of scripted shows on the air, and the network still has value to advertisers. It just can't compare to where it once was. But all networks go through changes."

Gentner pointed to how far ABC has come. "A few years ago, they were in fourth place," he said. "Now they're battling for the top."

http://www.crainsnewyork.com/apps/pbcs.dll/article?AID=/20071210/FREE/71210003/1040

Writers strike is threat to $9B upfront market
Marketers and agencies have tried for years to change the way TV time is bought and sold; the strike may be the catalyst for retooling the process.

December 10. 2007 10:26AMBy: Brian Steinberg and Jean Halliday, AdAge.com

Bloomberg News If the writers strike continues until January, it will endanger the $9 billion TV upfront market.

Marketers and agencies have tried for years to change the way TV time is bought and sold, arguing that committing such a large portion of their budgets ahead of the start of the fall season no longer makes sense. And it’s looking increasingly like the Writers Guild of America strike could be the catalyst for retooling the annual May upfront process.

“If we don’t have any [next-season pilots] developed and we are at the end of the first quarter, I have to believe that’s when everyone is starting to think that the upfront may be in jeopardy,” said Ed Gentner, group client director at MediaVest USA. “Once you get beyond January, the traditional network development presentation that is generally in March is probably going to be off.”

Networks typically spend millions of dollars to hype their fall schedules, wooing advertisers during upfront week in May with song-and-dance numbers and huge bowls of shrimp. Those celebrity-studded confabs could be delayed or even canceled next year due to the strike, but some deals still would get done. Without a robust slate of original dramas and sitcoms, however, there won’t be so many.

“If you can’t line up your marketing needs with program availability, you can’t do a deal. It’s irresponsible,” said Jason Kanefsky, account director at MPG.

This is “the quiet before the storm,” said an auto-company marketing executive who requested anonymity. “The longer the strike goes on, the broader the impact.” Already the pipeline is far from brimming. “This time of year, there are usually 70-plus pilots and shows that are in production. They don’t have that bulk of work,” said one executive producer.

Carol Barbee, executive producer of cult favoriteJerichoon CBS, said while her show would only benefit (a full season is already in the can), the damage could wreak havoc beyond the upfront. “If this goes past January, [the networks] have lost the entire development season, which means that they’ve lost all the new shows and the midseason replacements.”

Network executives, cognizant of continuing negotiations, were not available for comment. But instead of bringing marketer and agency executives together in May for a presentation, networks most likely will opt for a series of private meetings to lay out plans for the summer and beyond. Many advertisers’ budgets are locked in for the rest of 2007, and networks have largely been able to keep original programming on the air. Reality shows and replacement programs are due in 2008. Some of them are of high quality, such as Fox’s American Idol and Showtime dramas that could land on CBS. Marketers can judge in early to mid-January, when options open to move around previous ad commitments or even ask for cash back.

The upfront has shown signs of erosion for the past two years. Johnson & Johnson gained notice by not taking part in the May brouhaha so it could deploy marketing dollars closer to the timing of its business planning. A goal of NBC Universal ad-sales chief Mike Pilot is to get advertisers to discuss ways to tie promo messages to various shows earlier in the cycle.

If the networks manage to do deals in a series of individual meetings, freed from the pressure of getting all of the deals done following group presentations, marketers and agencies may decide they like that way of doing business better.

The strike could accelerate recognition that consumers don’t “revolve around prime time and the networks’ new seasons anymore,” said Rino Scanzoni, chief investment officer for WPP Group’s Group M media-buying consortium. With people using DVRs and watching programming online, a better system of buying and selling needs to be put in place. If the strike were to help people see that, he said, “that might actually be a silver lining.”

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