In what will go on the books as one of the most drawn-out upfront seasons in recent memory, NBCUniversal has finalized its last major agency deal.
Having finished its business with GroupM, NBCU closes the door on a particularly contentious upfront bazaar. While Fox, CBS and the CW effectively finished their deal making in early- to mid-June, NBCU faced pushback from buyers who refused to yield on price.
That said, NBCU appears to have achieved its objectives, dramatically improving the CPMs at USA Network while fetching much more competitive rates for NBC prime-time programming.
Years of underdeliveries had so stunted NBC’s value that inventory in big-reach shows like Revolution initially sold for a relative pittance. Per SQAD NetCosts data, a 30-second spot in Revolution last fall fetched $90,000; sources said NBC secured much higher rates for many of its upcoming series, including The Michael J. Fox Show and The Blacklist.
NBC locked in CPM premiums of 7 percent to 8 percent over last year’s rates. Buyers said that the higher rates at the flagship and at USA Network were balanced out by much more moderate increases across NBCU’s portfolio.
Given the price increases and an 80 percent sellout rate, NBC is likely to have booked around $1.9 billion in advance commitments. That’s above analysts’ early projections, which suggested that NBC was likely to achieve volume of $1.8 billion—flat versus the 2012-13 bazaar.
UPDATE: Speaking to analysts Wednesday during Comcast’s second quarter earnings call, NBCU CEO Steve Burke said NBC sold “about 13 percent more [upfront inventory] than we sold last year.” This is well shy of the 20 percent increase regurgitated by many trade and business publications.
NBC’s final upfront deal was hashed out on the eve of Comcast’s second quarter earnings call. The broadcast and cable TV segments in 2012 accounted for a little more than one-fourth (27 percent) of Comcast’s overall revenue.
In Q1, the cable portfolio (which includes USA, Bravo, Syfy, E!, NBC Sports Network, Oxygen and the soon-to-be-rebranded G4) generated $2.23 billion in total revenue, while NBC’s broadcast operations took in $1.52 billion.
With NBCU having folded its tent, ABC is the last broadcaster still seated at the negotiating table. The network is at an impasse with GroupM over pricing, holding firm on a 7 percent CPM hike.
While NBC and ABC toiled well beyond the unofficial July 4 deadline, this sort of foot-dragging upfront seems to happen every three or four years. The last time negotiations dragged into August was in 2009, when a crippling recession erased nearly $3 billion in broadcast volume.
The 2006-07 bazaar was another late bloomer, as cable finished especially late. Broadcast volume that year fell 6 percent to $7.63 billion.
BOILERPLATE: While there is not sufficient data to get a read on where overall upfront volume will shake out, it has become increasingly evident that the obsession over making revenue projections based on the notoriously squishy figures that circulate each June is a fool’s errand. For one thing, analysts estimate that there is only a 35 percent correlation between upfront spending and growth in the U.S. ad market. For another, the unverifiable numbers are placeholders. Until holds are converted to orders, they’re about as meaningless as the millions splashed across the tote board of a telethon. Furthermore, given that clients have the option to change and/or cancel these buys in three of the four fiscal quarters, the dollar figures don’t become “real” until the checks clear.