How CBS' Les Moonves Can Get Price Increases Out of Advertisers

Before it gets lost in the shuffle, let’s congratulate CBS CEO Les Moonves for starting this year’s upfront-negotiations-in-the-press at this week’s Deutsche Bank Media and Telecom Conference.

Why the hyphens? Because for all of the back-channel discussions that go on between media buyers and TV networks regarding buying ad time for the upcoming TV season, negotiations-in-the-press is also a time-honored strategy. One side floats a trial balloon about pricing with a reporter; then the reporter goes to the other side to get a response, repeats this process until deadline, and then writes a story about what each side thinks of the other side’s lunatic demands. (Trust me, I know these things.)

So what was Moonves’ trial balloon? He floated the helium-filled notion on Tuesday that CBS (BNET’s ultimate parent company) will be able to demand price increases, sounding more bullish about the network then he did even a few weeks ago, when he wouldn’t quite say to analysts that he planned to do that very thing.

Moonves’ bullishness doesn’t just stem from the optimism that a guy in his position needs to have, but also from the net’s ratings, which are flat in the 18 to 49 demo. OK, you’re saying to yourself: “Flat is the new up.” In network TV, which has been seeing its ratings decline for years, flat is actually the new way, way up, so if anyone can demand a price increase, it’s CBS. (We’ll leave the reasons why the networks can even dream of price increases when their ratings are declining for another post.) All of its competitors are continuing to show ratings declines.

If you read between the lines, the way Moonves may be planning to get the price increases he’s so confident about – despite the lousy economy – is by holding back more inventory than usual for the scatter market, which consists of the inventory that’s left over after the upfront ad sales for the coming TV season are done. He said at the conference that “[Advertisers] are going to be locking in budgets a lot later” and that he expects a lot of companies — particularly movie studios — to put a lot of money into scatter. What he didn’t say is that, in this economy, selling commercial time later in the year could wind up being much more profitable than doing it in the next several months.

Tightening the supply of upfront inventory could force that market’s prices to go up, even if the overall volume of ad dollars is down. Then, if things are better next fall, Moonves will have the inventory to get a big benefit out of the expanded ad dollars that may then be available. The wild card here is the automotive category. Moonves said, “Eventually, they are going to have to start spending money.” Not if those companies don’t exist, they don’t.

UPDATE: For more on this, check out this post from BNET Advertising’s Jim Edwards. He asks: “Is the TV Networks’ Upfront an Antitrust Violation?” We blog, you decide.