Ad prices climb for major TV networks
Despite sour economic news and declining ratings, the major broadcast networks garnered substantial rate increases for commercial time sold for their upcoming TV season.
ABC, CBS and NBC on Thursday said they had completed their advanced advertising sales with rate increases of 9% to 14% over last year’s prices.
However, despite fetching double-digit rate hikes, the networks will not receive a commensurate boost in total ad revenue. That’s because programs have been delivering lower ratings, and the formula used to establish prices correlates with the size of the show’s audience.
When all the money is counted, the broadcast networks will have collectively secured advanced ad commitments worth $8.7 billion to $9.5 billion for primetime commercials for next season, according to several people familiar with the process.
The amount, short of a record, is still significant because the networks have steadily been losing audiences to other forms of entertainment. Nonetheless, the networks continue to command a premium for their advertising time, capitalizing on their ability to deliver more eyeballs than any other medium.
CBS, which draws the largest audience in prime time, negotiated the biggest rate gain for next season — an average of 14%, according to people familiar with the process.
NBC, which finished the most recent season in fourth place once again, managed increases of about 9%. Third place ABC hiked its rates by about 11%, the same as the much smaller CW network. Fox Broadcasting was the first network to sell its ad time, garnering rate increases of about 10%.
The networks sell more than 75% of their commercial time for the upcoming season in what’s known as the upfront market. Last month in New York, the networks unveiled their new fall lineups to spur interest. Advertisers are encouraged to buy the time in late May and June — in advance of the season — rather than risk paying higher prices later in the year.
Several advertisers were particularly aggressive in buying time, including Hollywood movie studios, national financial firms and insurance and pharmaceutical companies, according to network executives.