TV advertisers are being unexpectedly tight-fisted.
Wall Street and TV networks had been banking on an improving economy this year to help drive demand. But the annual “upfront” advertising market, when marketers place their orders for commercial spots for the coming year, was unexpectedly weak.
Broadcast networks ABC, CBS and Fox collectively booked $600 million less this summer than during last year’s market, according to estimates by network executives and analysts.
Cable network executives also struggled to find buyers for their commercial time.
Analysts have speculated on various causes, citing the migration of advertising dollars to the Internet and a retrenchment by two major advertisers. Others might be on the sidelines gambling that prices will be lower later in the year.
“The broadcast networks took the biggest hit, but cable networks also had trouble getting to their goal,” said Ed Papazian, president of Media Dynamics Inc., which has analyzed the TV ad market for more than 30 years. “The marketplace is down; advertisers are being more cautious.”
New Jersey-based Media Dynamics estimated that broadcast and cable networks accepted $18.1 billion in prime-time commitments during this summer’s upfront market, a 6 percent decline from last year’s total of $19.3 billion. The annual auction held in June and July is called the upfront because advertisers place their orders in advance of the new fall season.
Declining ratings at Fox, ABC and cable channels TNT and MTV contributed to the lower hauls. A Cowen & Co. media analyst Wednesday downgraded stocks of 21st Century Fox, Time Warner Inc. and Viacom Inc., in part, because of declining ratings.
“Advertising trends clearly worsened in the second quarter,” Cowen media analyst Doug Creutz wrote in his research report. “While we do not necessarily believe recent softness signals the start of something more serious, our caution level has increased.”
Not everybody took it on the chin during the upfront market.
NBC increased its haul for next season by $750 million, NBCUniversal Chief Executive Steve Burke said during parent company Comcast’s earnings call Tuesday. The peacock network came roaring back to life during the just-ended TV season after a decade in the ratings cellar. NBC was able to hike its ad rates 8 percent during the upfront market, Burke said.
Two major sporting events — the Sochi Winter Olympics in February and this summer’s FIFA World Cup in Brazil — also soaked up more than $1.5 billion in advertising dollars this year, leaving fewer dollars in the upfront market.
NBCUniversal took in $1.1 billion in ad revenue for its broadcasts of the Olympics. Advertisers sometimes adjust budgets to save money following a big expenditure, such as the Olympics.
For example, Spanish-language media firm Univision Communications, which took in $174 million in ad revenue for its World Cup broadcasts, said that it expects third-quarter advertising to be lower than its second quarter because some advertisers spent big on the World Cup — and that money has to come from somewhere.