TV Ad Prices Remain High Despite Weak Market, Lower Audiences

UPDATE — Chrysler will shift its TV dollars to spot TV from national TV, another indicator that major clients will be resisiting high prices at the upfronts.

Network TV ad sales chiefs are delusional — or they’re evil geniuses. Despite the recession decimating their clients’ advertising budgets, and despite huge declines in viewing audiences, ABC, NBC, CBS and Fox are refusing to make any concessions on ad TV ad prices. Here’s Ad Age:

Despite troubled times and ratings erosion, many of the broadcast networks are holding firm to the terms of their upfront ad deals, and are unwilling to offer price concessions, according to ad buyers and network executives.

Here’s the Times:

Cumulatively, [audiences] are down 10 percent in actual live viewers, with ABC, NBC and Fox all drawing around a million viewers less each night than they did last season. CBS is the one network that has improved from last season; the network is up 1 percent in viewership.

Among the 18-to-49-year-old audience sought by advertisers, there are also declines. Both ABC and Fox are down 14 percent, while NBC is down 9 percent and CBS is down 3 percent.

Rather than rebel, advertisers are justifying TV’s genius/delusions by continuing to advertise on the dwindling medium. Why? Because audience declines for newspapers, magazines, radio, etc., have been even worse. Thus TV is still in a position to deliver comparatively massive audiences.

It all begs the question as to whether TV thinks it can defy gravity for long. Some are suggesting that it’s time for TV to “aquiesce.” According to Ad Age:

“The outlook for [the second and third quarters of 2009] remains murky, with cancellations ramping up and pressure on pricing ongoing,” according to a report issued by Wachovia Capital Markets. “With autos, retail and financials weak, buyers continue to look for discounts relative to upfront rates, though it’s too soon to know to what extent the networks will acquiesce.”

Historically, the TV business has been good at fighting off any attempt to make the commercial market more transparent or competitive. A Wal-Mart/Microsoft proposal for an electronic exchange was nixed after it experienced resistance from cable TV sellers.

There seems to be some notion in the Times and Ad Age reports that concessions will be delivered at the next upfront. Advertisers might want to ask themselves why the upfront (which has diminished in stature already) still exists at all.

Here’s a little thought experimment: If an industry was selling a commodity product that was extremely sensitive to price competition, one way to keep prices artifically high would be to restrict the availability of the product, limiting its purchase to a small time window — May, for instance. At that time, all customers would be asked to buy a year’s worth of goods all at once. As long as all the buyers had only partial or imperfect information about what all the other buyers were doing, the resulting pressure for purchases would be sure to artifically inflate the price of the available product. Which is exactly what the upfront does.

More on TV ad pricing:

• Levi’s Asks for Transparency and Media Buyers Balk

Image by Flickr user Oferico, CC.