Add advertising to the long list of items that aren't selling these days. As the fall TV season fast approaches, ad inventory for the shows still sits around like unsold houses, cars and clothes.
The spring "upfront" ad sales season has become the summer ad sales stalemate. Ad buyers and sellers typically move about $9 billion worth of ad inventory before Memorial Day.
This year, while some deals are just starting to trickle in, the networks and advertisers remain at odds over pricing:
•Advertisers want double-digit discounts.
•Media-buying agencies that help broker the deals for ad time think more moderate discounts of 7% to 8% would be realistic.
•The broadcast TV networks are holding out for cuts of no more than 1% to 2%.
Sales of fall ad time are "moving at a glacial pace," says Elizabeth Herbst-Brady, president of Magna, which handles buying for dozens of national advertisers.
"We are in an unprecedented time, and so it is certainly not a surprise that everyone is proceeding cautiously, prudently, intelligently and is under even more pressure to deliver meaningful results," she says.
In recent years, the broadcast networks have survived a writers strike and new ratings systems that take into account delayed viewing. But ad watcher and researcher Brad Adgate wonders how the networks can pull through the economic downturn, which is expected to slash 10% of ad spending this year. He expects that revenue from the upfront could be down by as much as 14%, to $7.2 billion, vs. last year.
"Every year it's something," says Adgate, senior vice president of research at Horizon Media. "Somehow, some way, the networks always look good when all is said and done. But maybe the economy is something they can't overcome."
The economy is threatening TV ad sales just as they've been challenged by the rise of online social media and mobile advertising.
For years, networks showcased their new shows, and advertisers lined up to buy into the programming. An early buy typically provides audience guarantees and better prices than advertisers can get when they buy on the fly. If they don't buy in the upfront, they may face higher prices for whatever ad inventory remains in the so-called scatter market.
But advertisers are increasingly turning the tables on the networks and doing the pitching themselves. Rather than hear what great shows the networks have to offer, advertisers present their brand plans and ask networks to come up with ad solutions.
Networks are trying to sell ads for new and old shows. New NBC shows include two medical dramas, Trauma and Mercy. ABC has returning favorites Grey's Anatomy and Desperate Housewives, along with new shows Modern Family, a look at families in 2009, and Flash Forward, a look at the future and what people would do if they know what happens down the road.
Top network CBS picked up Medium from NBC and has new shows including The Good Wife, with Julianna Margulies assuming family responsibilities after her husband's sex scandal, and a new addition to the NCIS franchise, NCIS: Los Angeles.
For the first time, Pepsi-Cola marketers reached out to TV networks, digital media and print to pitch brand needs in meetings in New York recently. After a 45-minute presentation, brand teams fielded questions for an hour from the media buyers and planners. The goal: to have media folks come up with creative plans for Pepsi brands based on their content and programming.
"We are looking at it differently this year," says Seth Kaufman, director of media strategy, PepsiCo North America Beverages. "We educate them on our business and our goals, and they come back with programming that makes sense.
"As media proliferation happens and consumers multitask on computers and TV, we want to connect with consumers in relevant ways across platforms. In the past, we would bludgeon consumers over the head, and they would change behavior. That's not true anymore today. You have to create deeper connections."
Price has been a concern this year, says Kaufman, but premiums are not out of the question for the right content.
"It's important to find value and efficiencies but not in direct conflict with achieving business objectives. It is a careful balance. We're not going to overpay and buy things at a premium if it doesn't make sense. And we're not going to try to get 30-second spots really, really cheap."
ASK THE AD TEAM
Q: I was curious if recent ads that claim "real people — not actors" are truthful? I notice Pizza Hut has a current ad where they make such a claim. Are these commercials just gimmicks and these people are actually actors?
— Sam Eichner, Cave Creek, Ariz.
A: The Pizza Hut pizza lovers are real. The only actors are the waiters, waitresses and chefs who are in on the setup. The folks who claim to love the food are real, shot with a hidden camera. Reality TV has helped fuel the trend and real folks can give the ad more authenticity and credibility.
Pizza Hut has created about 12 ads using the hidden-camera technique to promote its new Tuscani Pastas, spokesman Chris Fuller says. The ads, by BBDO in the U.S., use a faux restaurant — an empty storefront dressed up by admakers to look like a real restaurant and equipped with hidden microphones and video cameras. After the ruse is revealed, the real people had to sign waivers to be in the ads.
The latest ad shows real people in Rome giving a thumbs up to a new lasagna. "It features real Italians approving of the lasagna, which seems unbelievable, but it's all true," Fuller says.