Fox Will Be Forced to Give Sponsors Free Ad Time : Television: The network is renegotiating commitments with advertisers because its ratings have fallen short of projections.

Fox Broadcasting Co. is falling short of ratings projections and will have to give several million dollars worth of free advertising time to dissatisfied sponsors, according to industry executives.

The so-called fourth network has gotten off to a shaky start after ending its third year with a very strong performance. Now Fox is in the unhappy position of having to renegotiate a portion of the $550 million in advertising commitments made earlier this year.

So worrying is the audience shortfall that the network has stopped selling advertising time for the fourth quarter in order to use what’s left for “make-goods”--the bonus spots given away to advertisers when shows don’t attract enough viewers.

Fox is performing “considerably below what people had estimated,” said Richard Kostyra, executive vice president at the J. Walter Thompson ad agency in New York. “The numbers have fallen so dramatically that they are using most if not all of the available inventory for make-goods.”

During the first three weeks of the new season, Fox has attracted 5.7% of the national TV audience. Although it pulled in 6.2% of the audience in the third week--its best performance so far--that is still below the average 7% that industry executives said it promised advertisers.

“It will be extremely difficult for Fox to hold their guarantees,” said Steve Grubbs, senior vice president at BBDO Worldwide, another New York ad agency.

But Jamie Kellner, president of Fox Broadcasting, said: “We are capable of making good on our guarantees.” He noted that Fox had not yet run new episodes for all of its shows and said it was too soon to judge viewing patterns.

“Historically, Fox takes a dip in September and October while the networks are promoting their new shows, but we build after that,” Kellner said. “We’re comfortable where we are right now.”

Fox Inc. Chairman Barry Diller said the network could handle the current make-goods situation without hurting the network’s bottom line. “It will have zero economic effect on the company.”

The networks customarily keep unsold commercial time in reserve for make-goods. But with a soft advertising climate this fall, Fox is unlikely to sell all of its commercial units. So the network is giving away advertising time that it could not sell anyway.

If ratings do not pick up, however, Fox could be forced to run make-goods in place of ads it had sold.

This fall, Fox aggressively expanded its schedule from eight hours of prime-time programming to 12, slightly more than half the hours broadcast by the other three networks.

Fox’s biggest gamble--moving “The Simpsons” from its secure Sunday berth to take on NBC’s “The Cosby Show” on Thursdays--is still to unfold, but “Cosby” already has trounced reruns of “Simpsons.”

The first new episode of “Simpsons” airs tonight, and how well or badly the series performs will be anxiously awaited by Fox executives. Fox hopes that “Simpsons” will have a “halo effect” on the shows that follow it, similar to how “Cosby” has boosted overall ratings for Thursday night on NBC.

Advertising executives said Fox has promised “Simpsons” sponsors, who paid between $300,000 and $400,000 for a 30-second commercial, that new episodes will attract at least 27% of the TV audience. But reruns since August have averaged only 15%, and that has some wondering if the lower ratings are a harbinger of how the new episodes will do.

NBC’s “Cosby,” which is perceived by many network insiders to be rickety with age as it enters its seventh season, has attracted about 35% of the audience and continues to be one of the top-rated shows in TV.

Many of the advertisers who bought time in “Simpsons” are major Hollywood studios, which paid a premium to reach the 18- to 34-year-old moviegoing audience. This presents a major problem for Fox if the new time period should fail, since studio advertisers want to promote their weekend movie releases on Thursdays and they cannot be switched to another night.

At the same time, Fox has suffered setbacks in its ambitious expansion plans.

The network is behind schedule in producing films for a planned movie-of-the-week program for Monday nights, and production delays for its animated children’s shows are forcing it to substitute planned episodes with reruns at the last minute.

As a result, Fox affiliates are on their own for nine of the 13 Monday nights through the end of the year, including two during the crucial November “sweeps,” when ratings for local stations determine ad rates for the next quarter.

Last week, Fox substituted old “Tom & Jerry” reruns for its new animated series “Peter Pan and the Pirates” while production snafus from overseas suppliers held up delivery of the episodes.

Networks customarily take a bullish attitude to predicting how their new fall shows will perform. At the same time, they are usually wise enough to reserve commercial time in the likely event that ratings don’t perform up to snuff.

“Our strategy was to sell a lot (in advance) because we anticipated a lower demand (later), especially in the fourth quarter,” said John Nesvig, vice president of advertising sales at Fox. The network generally is considered to have sold more of its inventory than any of its competitors.

Nesvig confirmed that Fox was using unsold inventory for make-goods and did not expect to sell much commercial time in the fourth quarter. “We will make our fourth-quarter budget,” he said.

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