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THE FIFTH SEASON
The Fascinating History Of The Upfront
By Erwin Ephron
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With the next upfront a few months away, it’s well to ask how did this monster come to be and how has it survived its useful life? A Spring upfront made sense when there was a new TV season each Fall, but not now when new shows are dribbled-in across the year. Far from a Perfect Market The mechanics of the upfront market are simple. Advertisers can buy TV in advance, upfront, or hold back money to buy TV later, as scatter. The buyer plays the market by betting on demand. If the buyer commits upfront and the market has overestimated demand, prices will fall in the scatter market and the buyer will "lose money." But the upfront is far from what Alan Greenspan would call a "perfect market." There is disinformation, mind-games and the fix. The large sellers have better market intelligence, more control and have stacked the deck. Fear of not being able to deliver what the advertiser wants is what drives the buyer to pay the higher price rather than risk the personal failure. The Upfront is as old as Television
Although it was all upfront, it was different. Negotiations were low-key and discreet, more like private banking than a sheriff's auction. For the upfront to become the major selling event, three pieces had to fall in place: the networks had to control their programming. They had to invent the New Television Season and advertisers had to move from sponsorship to package buying. From sponsor to network control In the 1950’s, advertisers not networks owned the top-rated shows like Texaco Star Theater, Philco TV Playhouse, Colgate Comedy hour. To create a TV market, the networks needed these big shows to package with the little ones. Then in the late 1950's, a scandal of epic opportunity occurred. Twenty-one, the popular advertiser-controlled quiz show turned out to be rigged. The congressional investigation that followed gave the networks the political cover to take-over programming from advertisers. And they did. The New TV Season The Fall debut of new season programs helped to create the upfront by requiring advertiser commitments by the Spring. The 1960's also forced advertisers to rethink sponsorship. Costs rose rapidly when live TV moved to film and the production values of Hollywood. Program risks became greater as ABC gave viewers the choice of a third network. This meant more shows would fail. The combination of higher cost and higher risk started the advertiser migration from sponsorship to today's package buying, which is the coin of the upfront market. JWT took a stand and lost By the 1970’s, the upfront was firmly in place and the ever-confident networks were testing it with steep price increases. When CPM's went up an incredible 25 percent in 1975-76, J. Walter Thompson, the largest TV agency, decided to sit it out and wait for more sensible pricing. But the timing was bad and Thompson clients eventually paid more for poorer programs in the scatter market. That experience scarred buyers and for the next 15 years, the preferred strategy for buying network was to buy it early. The emergence of “Clout” By then agencies had learned they were powerless to moderate price increases. So instead, they began to talk about beating the market by paying less than the average increase. The tools were "clout" and "corporate buying". Clout stressed the need for big dollars to get good prices. That made agencies in-house advocates for television. This increased the demand for TV time and helped support the higher prices clients were trying to avoid. Despite the rhetoric of negotiation, a supportive relationship developed between buyer and seller, where everyone's vital interests were protected. The evolution of CPM guarantees is a good example of how the system worked. Guarantees meant risk-free buying The first guaranteed CPM was negotiated by American Home Products with ABC in 1967. It was an informal commitment by the number three network to protect a buyer who bought early. The other networks soon learned buyers would pay a premium for a guaranteed buy and wouldn't be as picky about the programs.
Guarantees revolutionized the business. The move from sponsorship in the 1960's had reduced advertiser risk. The CPM guarantees of the 1970's and 1980's eliminated it entirely. By 1985, guaranteed upfront buys accounted for 85 percent of prime time sales and the words "feeding frenzy" began appearing in print to describe the rush to buy early. Then came the crash. Advertisers challenge the upfront
But a reviving economy came to the rescue. In August 1992, $3.8 billion was spent in the prime time upfront, considerably more than the year earlier and CPM's were up for the first time in three years. In 1994, the prime time upfront hit a record $4.5 billion. This year with far less inventory, it was close to $8 billion. Get you now or get you later? The networks claim they don't need the upfront to sell. They say "we'll get you now or get you later." That may be disinformation. A Spring upfront for the following year's budget is a preemptive selling strategy that all media envy. But now there are other big players looking to help set the price of television, the mega-media agencies. Today close to 40% of TV dollars are concentrated at four big buyers. The question is whether they can use their market power to restrain prices the way the big four networks have used theirs to increase them. It's unlikely because of the difference in objectives. Sellers want the highest price. Buyers will settle for buying better than the market. This leads them to commit dollars for the guarantee of a lower than average percent increase - the so-called "Concept deal." Buying for competitive advantage without a keen regard to absolute price invites the networks charge more. It’s alive! And that is the most frightening thing about this monster called the upfront. It’s Frankenstein-like ability to come back from the dead. - April 1, 2003 -
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If he were composing
today, Vivaldi would write a fifth season, The New TV season. More abundant
than Summer, brisker than Fall, more turbulent than Winter. A season punctuated
by that two-week crescendo called the Upfront. Last Spring, close to $9 billion
prime time dollars committed in weeks, at prices 8-to-15% higher, in a recession.
For all of its recent
celebrity, buying upfront isn’t new. In the early days of television everything
was sold upfront. Sponsorship discussions started the week after Washington's
Birthday and by the end of February, advertisers had committed to programs and
time periods for the following season. 
Back then there was
no television season, either. The start-date of each program's cycle determined
when its new season began. I Love Lucy premiered in October, Dragnet in January.
Then in 1962, ABC, the weakest network, came up with the idea of premiering
all of its programs in a single week following Labor Day. CBS and NBC knew a
good thing and by the mid-sixties, the New TV season was a major national event,
marking the end of Summer as surely as back-to-school. 
The timing was perfect.
Despite the celebrity of the Nielsen "Top 10," the TV networks were
no longer selling shows; they were selling CPM's. To get the hits at a reasonable
price, you had to take the rest and you had to buy it all upfront. If you did
that, the networks would guarantee audience delivery. 
By 1986, network ratings
were falling, so ABC, CBS and NBC began quietly increasing commercial time.
By 1989, FOX had expanded its programming and both cable and syndication were
supplying more inventory, all at a time when a weakening economy was reducing
demand. For the first time in a long time, there was more TV time available
than advertisers willing to buy it.
This past season, with
the economy in recession, TV ratings down and advertisers cutting back on everything,
a weak upfront was expected. Yet broadcast network prime time TV prices were
still up 8%-to-15%. There were many explanations offered, none of them convincing.
