Turnaround ‘Up-front’ Season : Despite Rate Hikes, Advertisers Rushing to Buy Network Time

The television networks have found surprisingly strong demand for advertising time in recent days as they have begun auctioning commercial time for the fall prime-time season.

Network officials, closeted with ad buyers in the frenzied “up-front” sales negotiations, are selling advertising time at rates that average about 12% higher than last year, say network officials and advertising executives. After two years of weak upfront seasons, “demand is really starting to go again,” said Robert Blackmore, NBC’s vice president of sales. “The advertisers are rushing back.”

The up-front sales have taken on a particular importance in a year when two networks, CBS and ABC, say they may lose money. But the sales’ effect on the networks’ profitability is far from clear.

The uncertainty is due partly to A. C. Nielsen Co.’s adoption of a new technology--the “people meter”--to measure the viewing habits of the sample households whose TV habits it studies. The meter is a hand-held electronic device with buttons that are pushed to record viewer selections.

The networks have built into their prices some increase to cover them if the people-meter results show--as expected--that network audiences are smaller than had been previously thought. If audiences are smaller, the networks will be forced to provide “make goods”--advertising time that ensures that commercials are seen by as many viewers as advertisers have paid for.

Providing that compensatory time would reduce the amount of time the networks could sell later in the season, in the quarterly “scatter” markets.

Some observers also believe that advance sales have been strong, in part, because advertisers have sought to buy in advance rather than in the scatter markets, which have recently offered time at high prices.

“There’s been a tendency to panic and buy early,” said Richard J. Kostyra, executive vice president of the J. Walter Thompson USA advertising agency. He added that because of the slowdown in sales he expects to see later in the year, the networks’ sales increases for the year as a whole “won’t be as much as the double-digit increases they’re getting now.”

Network officials, though excited over the early demand, were cautious about how much the demand could help their overall financial outlook. Sales have been “slightly stronger than we expected, but I don’t think it will make that significant a difference,” said Jeff Tolvin, a Capital Cities/ABC spokesman.

Price Increases Vary

Insiders said price increases varied greatly between the three networks. Top-rated NBC’s prices for a unit of ad time have averaged at least 15% higher than last year; last-rated ABC’s have been 10% or less, and CBS’s have been in the middle, according to a number of advertising executives.

The sales negotiations have fallen almost a month behind schedule because of the confusion and delay caused by introduction of the people meter. Network officials say have already sold about one-half of their advance sales inventory of commercial time, which last year cost between $75,000 and $400,000 for a 30-second spot.

The evidence of strong demand seems to defy predictions by a variety of analysts, who have pointed out that demand for other media have been unimpressive. “There’s no economic rationale for it when magazine (sales) are flat as a pancake, and newspapers are fairly soft,” said John Reidy, analyst with Drexel Burnham Lambert.

Network advertising officials, however, cite the recent strength of corporate profits, the introduction of a number of new consumer products that need advertising support and next year’s elections and summer Olympics, which will increase demand for advertising time. “There’s a lot happening that adds up to more demand at this end,” said Jerome Dominus, CBS vice president of sales.