SBJ/May 3 - 9, 2004/SBJ In Depth

Advertisers make their picks

When advertising executives compare notes this month in New York as part of the “upfront” television sales season, the few who will be thinking of sports are those holding Yankees tickets.

While the prime-time “upfront” marketplace is a frenzied and relatively compressed affair that is more or less attuned to the laws of supply and demand, the sports selling season is more comparable to a full-time bazaar where deals are just as likely to be sealed between friends at the 19th hole as over the phone.

“There has always been more stability in sports than in prime time,” said Larry Novenstern, senior vice president/director of national buying at ad agency Deutsch.

“Sports tends to not be as volatile as the broadcast upfront based on where the ratings points have gone,” said Trish Frohman, senior vice president of sales at Turner Sports, echoing other sentiments that sports ratings have not fallen as badly as those in prime time.

Sports advertising revenue by programming type 

Dialing in dollars: 2003 advertising revenue

Media buyers say sports programming benefits from a loyal, core audience that makes ratings more predictable than other types of programming. As a result, advertisers generally can buy spots with less fear of large ratings fluctuations.

Another difference: Sports sales tend to be more informal, with many advertisers simply renewing previous deals, leaving only the give-and-take of negotiations. “You’ve got a pretty stable roster of advertisers,” said Jon Nesvig, national ad sales president at Fox Broadcasting.

These “incumbencies” make the sports negotiations a more laissez-faire affair than the crazed upfront, which has attracted mounting criticism from buyers for its timing and frenetic nature.

“It’s a much more relationship-driven business where incumbents have certain rights going forward, thereby less variables are based on supply and demand,” said Jack Myers, editor and publisher of the Jack Myers Report, a media industry newsletter. “There is more structure in the sports marketplace. It’s based on more traditional buying periods as opposed to the upfront, that period in the spring when companies and agencies lock in ad time for the upcoming TV season.

“It’s still a supply-and-demand business, but if you have an incumbency you have a right to that incumbency going forward and it’s negotiated within certain established parameters as opposed to the free-for-all that is the upfront,” Myers said.

Advertisers often turn to sports programming such as the World Series and “Monday Night Football” to reach key demographics, especially men ages 18-49. The ability of such programs to deliver those audiences means that advertising spots command premium rates.
Because sports are reliable in attracting the hard-to-reach men ages 18-49, the biggest prime-time events, such as ABC’s “Monday Night Football,” Fox’s World Series and, of course, the Super Bowl, command premium rates compared to mundane prime-time fare — and in a league with such prestigious shows as “Friends” — and so are sold outside of the spring upfront season.

“Sports has always been a little bit different,” said Brad Adgate, senior vice president, corporate research director of Horizon Media. He described sports as more “core viewers than heavy TV viewers.” Because of that, he said, sports offers many opportunities for advertisers to reach certain age groups and upper-income viewers.

The glut of sports programming on the air will sometimes shift the negotiating leverage to advertisers, except for those who desire big events such as the World Series or NBA Finals, which have not lost favor with companies despite falling ratings.

“There’s a great demand for high-priced, entertainment-oriented stuff like the NBA Finals,” said Ed Erhardt, president of customer marketing and sales at ESPN/ABC Sports.

Year-round sales

In late May and June, when the upfront kicks in, only a tiny fraction of the sports inventory will go on the block, much of it in cable. For the most part, each sport has its own marketplace — generally far more orderly and predictable than the upfront — that makes ad sales a never-ending season.

But some companies will buy most of their time in the fall because they operate on a calendar basis. Like prime time, networks will also sell a sliver of their ads — 10 to 15 percent usually — in the “scatter” market, generally within three months of the telecasts.

ESPN/ABC Sports held its own upfront last fall in New York City to promote the programming the networks have to offer advertisers. Shown is Ed Erhardt, president of customer marketing and sales, who served as master of ceremonies for a series of presentations.
ESPN/ABC Sports and Fox will likely put less than one-third of “Monday Night Football” and the World Series on sale in the upfront, often to attract buyers — such as retailers selling into the holiday season or movie companies — who are more interested in their huge audiences than they are in the male-skewed demographics.

“We work with the network [ABC]. The network will put ‘Monday Night Football’ into deals,” said Erhardt, whose unit last year held its second “sports upfront” presentation to buyers — in October. “Because prime-time sales are really prime-time adult budgets, we don’t sell it as men; we sell it as adults. We might sell [a spot] as a male-oriented thing and get into different budgets altogether.”

As more premium — read expensive — programming, sports is sold outside the upfront, where the networks believe they can maximize pricing for marquee events that reach desirable audiences that advertisers have difficulty finding in such large numbers and concentrations elsewhere.

Where else can a beer company get a top-10 network show for which 62 percent of the audience is men 18 and over, according to a report by Magna Global USA, a New York ad agency.

“It’s better to spin that inventory out as a special package of inventory,” Myers said.

But Fox Cable Sports and smaller, niche networks like the Outdoor Life Network will put marketing money into the upfront for different reasons.

For Fox, the upfront is a propitious time-sell across a wide range of its national networks — including Fox Sports Net, Speed Channel, FX, Fox Sports World and the fledgling Fuel, a new action sports digital network.

“We have the luxury of competing in the cable world,” said Guy Sousa, executive vice president of ad sales for Fox Cable Sports. “We’ll try and sell 50 to 75 percent [of our inventory], depending on the [network], in the traditional upfront.”

That’s because the upfront is a more effective way to sell non-event programming on cable that lacks sponsorship opportunities that an event such as Outdoor Life’s Tour de France can garner. Unlike Fox, Outdoor Life has one channel to sell, but it finds the upfront almost as valuable for some of its programming.

“We have to be in the upfront because a lot of money is put down in that area.”
John West, Outdoor Life Network
“We have to be in the upfront because a lot of money is put down in that area,” said John West, senior vice president of ad sales for Outdoor Life.

Even so, West said the network still sells only about 30 to 35 percent of its time in the upfront, similar to “Monday Night Football” and the World Series. For its marquee programming, like the Tour de France, the Gravity Games and FIS Ski Tour, Outdoor will look for sponsorship opportunities that are sold on a different basis than the straightforward nature of the upfront.

That’s another major difference between sports and the upfront market. Depending on the network, sponsorships can entail up to 20 percent of a network’s sports sales. While agencies are starting to demand greater value in their pricey prime-time buys — such as the Coca-Cola product placements on Fox’s “American Idol” — sponsorships are a far more common and sophisticated sell in sports as well as on general cable fare. In cable, networks might sell entertainment sponsorships outside of the upfront, but place their proceeds in the same pot to goose their upfront numbers.

Numbers game

Still, it is easy to overstate the differences between the sports and prime-time marketplaces. Sports programming conforms to the same economic rule as for upfront programming: If there’s demand for the available time, then costs rise; if inventory soars, prices fall.

And the common perception that sports ratings are holding up better than prime-time figures may be a myth.

“The idea that sports can effectively bring large numbers of new viewers to a network’s prime-time programming may no longer be valid [except for the NFL]. … With the average home receiving 100 channels, viewing options abound, and audiences are significantly more splintered. After consistent increases in the amount of time spent viewing sports on the broadcast networks and basic cable throughout the 1990s, we’ve seen a slight decline,” said Steve Sternberg, executive vice president for Magna Global, in his April report on sports viewing.

According to Magna’s figures — which exclude regional sports and pay-per-view/on-demand programming — the average number of hours spent watching network sports dropped to 3.04 per week in 2003, the lowest ever, compared to 3.43 in 2002 (an Olympic year), 3.13 in 2001 (when 9/11 dampened sports viewing considerably), and 3.66 in 2000 (another Olympic year.)

Despite these similarities, the process can be an overriding factor. Trying to gauge the amorphous sports market is like trying to chase an eel.

Overall, sports’ cost-per-thousand has generally risen in the high single digits to low double digits depending on the sport, the network and state of the economy. But while analysts and observers can say with certainty that networks held advertisers over the barrel in the 2003 prime-time upfront with rate increases reaching 15 percent, with sports, such sweeping statements are usually futile, largely because the various sports marketplaces will command different rates and interest.

For example, in October rates tend to soften because of the glut of sports programming on television. “The World Series usually suffers from that,” said Deutsch’s Novenstern.

“We participate in six versions of that because of all the sports we have,” ESPN/ABC’s Erhardt said. “The marketplace is so different. … There is a third layer: How well is the sport perceived? If the sport has got a buzz, that only helps.”

For example, NASCAR is white-hot, according to media buyers and network executives, but the NBA gets mixed reaction due to its falling ratings on ABC in the regular season. That attests to the power of network television and the big events: NBA ratings on ESPN and TNT grew by 8 percent and 17 percent, respectively, this year.

“NASCAR sold out before it started,” Fox’s Nesvig said jokingly. Nesvig sells NASCAR events that air in the late winter and spring.

“NASCAR is a very, very hot, desirable sport,” echoed Bob Basche, CEO of Millsport, a Stamford, Conn.-based agency that helps advertisers find sports-related opportunities.

Fox earned about $110,000 per 30-second spot in 2003, excluding the Daytona 500, which is a premium sale.

For the NFL, ABC received up to $325,000 for “Monday Night Football,” about 10 to 20 percent more than Fox took in for its Sunday afternoon NFL games. CBS, with the smaller markets, gets about 10 to 20 percent below Fox at $200,000 to $230,000 per spot on the NFL. Price increases were generally in the mid single digits to low double digits.

Added value

Every network’s schedule differs, depending on its lineup, but ESPN/ABC actually has eight sports marketplaces, six of which are outside the traditional spring upfront, according to Erhardt.

With fragmentation and clutter starting to take the same toll on sports as it has in entertainment, advertisers now find that they have just as much leverage in both the entertainment and sports arenas when they buy outside the constricted confines of the upfront.

All of this has spelled a bonanza for new smaller services like Outdoor Life and Speed Channel that deliver pickup truck makers the male audience they desire without making them pay for urban viewers, children and others who are not likely to be in the market for them.

“We’re involved in smaller networks, as well,” Basche said of his company, which landed Tostitos a prime title sponsorship in ABC’s Fiesta Bowl. “They are doing some really cool stuff. Bravo, Discovery and A&E are doing some great stuff” in sports-related programming, such as documentaries.

Advertisers are demanding more value in the way of sponsorships as the marketplace gets increasingly fragmented and competitive.

With pricing pretty much a cut-and-dried affair, networks will often compete for a sale based on how much “value” they can offer a sponsor, said David Schwab, director of marketing for Octagon.

“People can compete against each other over a rating number; it’s just a matter of working a calculator.”
David Schwab, Octagon
“People can compete against each other over a rating number; it’s just a matter of working a calculator,” Schwab said. “What are the other intangibles that make a package worth it to the buyer?”

These “added-value” items could include anything from signs to merchandising to hospitality suites or a sweepstakes. Turner Sports engaged Chrysler in an effort to juice up its Friday night Atlanta Braves game by creating a 17-week “Friday Night Extra” program that has a different feel than the usual prime-time game.

“It’s not necessarily about paying premium rates, but is it positive for the advertiser? It is a way for them to separate themselves from a considerably cluttered market. It’s a way to carve an identity for a particular brand,” said Turner Sports’ Frohman.

Mars promotes Snickers brand with the “Horse Trailer Player of the Game” award presented during “Monday Night Football” broadcasts.
Broadcasters are starting to hear the siren song of sponsorships as well. Erhardt said ESPN/ABC got a good response from Mars from its Snickers “Horse Trailer Player of the Game” program in which announcers Al Michaels and John Madden gave the client mentions.

But in another sign that the sports and entertainment worlds are starting to converge, Basche said that sponsorships are gaining a toehold in prime time. The broadcasters are much more flexible in working with advertisers to deliver an objective, he said.

Just in April, J. Walter Thompson announced it was merging its Brand Entertainment Group with Hill & Knowlton’s Showcase, a product placement specialist, to form Amplify. The goal: place Ford’s brands in the middle of any aspect of entertainment, from gaming to television.

With prime time moving to a 52-week schedule of debuts, agencies rebelling against its artifices and frenzied pace, and advertisers looking increasingly to cable and niche networks to get more bang for their buck, it’s entirely possible that the way companies buy programming in prime time will eventually mirror the more genial, unhurried and clubby nature of the sports marketplace.

Andrew Grossman is a writer in New York.

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