Networks Face Tough Sell For Fall Advertising Time
Jul. 16, 1986
NEW YORK (AP) _ A sluggish economy and low inflation are curbing the appetites that major advertisers normally bring to the traditional midsummer sale of prime network commercial time, industry watchers say.
They say the availability of less costly alternatives to network television and increased use of quick-acting marketing tools such as promotions, price coupons and direct mail appeals are also making advertisers more choosy.
Earlier this week, the trade newspaper Advertising Age reported that two of the networks, ABC and CBS, had cut rates below last year's level on advance sales of prime commercial time in their fall schedules.
It said such cuts were unprecedented.
Paul Isacsson, executive vice president at the advertising agency Young & Rubicam, said the situation simply shows that television time is a commodity.
''Supply and demand make it act, and the economic fortunes of some companies are forcing them to use less of it,'' he said.
Independent television stations, cable networks and program syndication by companies that put together makeshift combinations of television stations of their own choosing nationwide have diminished advertisers' dependence on the commercial networks.
Companies also are spending a larger share of their marketing budgets on promotions, coupon programs and direct mail campaigns which tend to produce quicker sales increases than traditional advertising.
In addition, recent mergers of consumer products companies have created ad giants which often carry more influence in negotiating ad rates, analysts said.
Network and advertising executives and industry analysts are divided on the significance of the developments. Some argue it is a temporary situation which should be corrected with the next economic resurgence and the emergence of a few feisty battles among national advertisers. But others say network television's days of consistent and rapid revenue growth may be over.
''If this were the stock market,'' said Richard Kostyra, director of media services for the advertising agency J. Walter Thompson USA, ''you would call it a correction.''
But Edward Atorino, who follows the media for the investment firm Smith Barney, Harris Upham & Co. in New York, said the weak market already had lasted much longer than many in the business had expected. ''The question now is will the short term become the long term?'' he said.
Industry figures indicate that network television ad revenues fell last year for the first time since 1971 when the ban on cigarette advertising on television went into effect.
This year, the ABC and CBS networks each have either trimmed or announced plans to trim a total of 700 jobs. Last September, CBS cut 125 news jobs. Despite its network ratings victory last year, the NBC network reports it currently is reviewing its operations for ways to cut costs.
All three networks are nearly finished selling season-long packages of commercial time for the new fall season. Once this so-called ''upfront buying'' period ends, advertisers will have to buy network time show-by-show.
''Historically, there would be a mad scramble and prices would be up fairly sharply,'' Atorino said. He said upfront rates rose even in weak economic times.
But Ad Age said upfront rate cuts at ABC and CBS averaged about 1 percent below last year. Neither network disputed the report, but CBS said it expected its rates would wind up on average slightly higher than last year by the time its entire upfront inventory was sold.
NBC, whose prime time lineup is led by the top-rated ''Cosby Show,'' had rate hikes averaging 3 percent to 7 percent, the trade journal said.
The networks say they are hurt by the absence of well-heeled and free- spending product groups such as computers this year.
Jerome Dominus, vice president of sales for the CBS Television Network, said he expected national banking services could eventually fill that role.
Jon Nesvig, vice president and general sales manager in the New York office for the NBC Television Network, said he was optimistic that the ad market would improve later this year.
''It depends on what happens to the economy. We are all tied to that,'' he said.