Networks, Ad Agencies Still Battling Over Rates : Introduction of ‘People Meter’ Causes Upheaval in Upfront Buying Season for TV Commercials

By early July, the television network sales staffs and New York’s media buyers are usually bringing to a close the so-called upfront buying season, the frenzied negotiations in which the networks sell two-thirds of their commercials for the following television season.

This year, however, the sales staffs and ad buyers are still at it. They’re poring over computer printouts, haggling, posturing and, in general, suffering more discomfort than they have in a long time. “This is not a pleasant summer,” said Stephen Fajen, executive media director at Saatchi & Saatchi Compton, a major advertising agency. “You’re looking at an enormous upheaval.”

The upheaval is the result of this year’s introduction of a new electronic gadget, the “people meter,” to measure audience viewing levels. Use of the new device by the nose-counters at A. C. Nielsen Co. has brought disagreement, delays and complications that are expected to last throughout the summer.

It has clouded the outlook for an upfront season that has attracted wide interest. This year’s advance buying was expected to be strong--a much needed development for the networks, which have suffered through two weak upfront seasons and last year wrung no price increases at all from advertisers. Indeed, for the CBS network, the upfront season might mean the difference between profit and loss for the year, company officials say.

Negotiators are trying to work out prices based on last year’s viewership figures but also on new people-meter results, which have indicated that network viewership is generally lower than previously thought. At issue is not only pricing but also how much free compensatory advertising--”make-goods”--networks should give out in the coming season if, indeed, viewing levels are reported to be lower than estimated.

The networks fear that they will be hurt by this switch from one series of viewership figures to a second, since the people-meter data has varied substantially from week to week and is poor at measuring the viewing of children and teens. In their initial round of pricing proposals, the networks have built in increases meant to protect them from the vagaries of the new device.

“The people-meter numbers are certifiably unreliable,” said Jerome Dominus, CBS vice president of sales. “If they want us in a crap game, they’ve got to pay for insurance.”

In the first round of network offers, in fact, top-rated NBC proposed price increases of as much as 30%, while CBS and ABC proposed prices that were up more than 10% from last year. While such initial proposals tend to be high, the figures were above average and aroused more than the predictable negative reactions from the advertising community.

“Ridiculous--outrageous!” stormed Joel M. Segal, who is in charge of media buying for Ted Bates Worldwide. “Some of us are thinking of diverting spending to other media.”

While networks may not strike deals with the big packaged-goods companies for days, they have signed deals with some advertisers that must bid early and pay the highest prices to secure advertising at specified parts of the week. Advertisers for children’s shows, for example, have agreed to price increases of 15% to 20%, according to Barry Kaplan, analyst with Goldman, Sachs & Co. in New York.

Some observers believe that negotiations will continue throughout the summer on the advertising packages and that the networks and advertisers will modify their terms as time passes and people-meter results change. Nielsen continues to expand the group of households that it studies to assess viewing levels; and viewing patterns have continued to change as the sample has grown, some say.

Saatchi & Saatchi’s Fajen said NBC was ready to start making deals in May. Then, suddenly, new people-meter results showed the network’s audience to be sharply lower than it had been--and “NBC just closed up shop,” Fajen said. “There’s no stability in these numbers.”

There is persistent disagreement over exactly how strong advertising demand will be this year.

Some network officials have been estimating that sales will reach $3 billion, up from last year’s $2.6 billion and 1985’s $2.5 billion. “We definitely feel some strength there,” CBS’ Dominus said.

Analyst Kaplan said a number of factors suggest a strong year, including the strength of demand in recent, late-season “scatter” sales; tax law changes that helped the big packaged-goods companies, and decisions by some big advertisers to shift ad dollars to television from couponing and other promotions.

Other signs are not so favorable for the networks, however.

Last month, Robert J. Coen, a widely watched forecaster at the McCann-Erickson Inc. ad agency, said national advertising spending would rise 6.7% this year over last. That was a significant downward revision from his earlier forecast of a 7.4% increase.

Coen said the big packaged-goods companies had not, in fact, increased their ad budgets but were, among other things, relying on 15-second commercials rather than the 30-second spots that have long been standard.

“Of course, it’s in the interests of the networks to talk up the strong demand, but I think there’s a real question as to how real that demand is,” said J. Kendrick Noble Jr., media analyst with Paine Webber Inc.