Publish date:

Broadband Gaining Larger Chunk of Upfront Ads

The annual TV ad-placement ritual sees increasing emphasis on broadband and streaming video.

Slowly but surely, the cash is starting to trickle toward streaming video.

As the annual television ritual, known as the upfront season, kicks off, marketers are predicting that a bigger chunk of advertising budgets will go to this relative newcomer on the media landscape.

Each year the networks --

GE's

(GE) - Get Report

NBC,

Disney's

(DIS) - Get Report

ABC,

News Corp.'s

(NWS) - Get Report

Fox and

Viacom's

(VIA) - Get Report

CBS -- roll out their coming attractions and returning shows. They're vying for roughly $9 billion in so-called upfront commitments from advertisers.

Much emphasis within the industry is still placed on which network will get the biggest piece of the pie. But increasingly the big cable operators, from

Time Warner

(TWX)

to

Cablevision

(CVC)

TheStreet Recommends

, and the big online companies, from

Microsoft

(MSFT) - Get Report

to

Yahoo!

(YHOO)

, are vying for a slice as well.

It is still too early to predict where a fluid market will settle, but sources say that while cable is expected to grab some $500 million from the big networks, online efforts will take somewhere in the neighborhood of $200 million from the pot.

Advertisers are trying to capture an ever more segmented viewing audience. The landscape is cluttered and new technologies like video-on-demand and digital video recorders give people more control over how, when and where they watch and listen.

For broadband-based media, the party has just begun. The question is whether media owners have been quick enough to anticipate the changing landscape.

Van Toffler, president of MTV Networks Group, told the audience at the Interactive Advertising Bureau's Broadband leadership forum Monday that Viacom's MTV will capitalize on broadband speed and technological change. He says that TV networks need to experiment with different models and "not be fearful that it will cannibalize what you do on TV."

Toffler made reference to CNN's recent decision to put its news content online but not charge subscriber fees, as it had done for such content in the past. He says that while pricing for broadband initiatives is still done on an ad hoc basis, "advertisers will pay a premium if they perceive value."

Ed Erhardt, president of ESPN ABC Sports sales, speaking recently at a pre-upfront conference, says what execs want is something "designed to be media agnostic" that allow advertisers to take advantage of various platforms. Meanwhile, David Cassaro, president of

Comcast

(CMCSA) - Get Report

sales, says the issue for advertisers is to come up with creative solutions, given the technology that's now out there.

ESPN has taken a leading role as a producer of streaming video. But according to one source, "ESPN can't produce enough online video to keep up with demand." Part of the reason for the inventory shortage may have to do with rights agreements that preclude it from putting live action content on the Web.

There are other hang-ups as the media move toward broadband. In television, marketers are "made good" if shows don't make their ratings numbers. So far there is no comparable system for broadband. The amount of inventory or capacity an MSN, an AOL or a Yahoo! has for advertisers is still ill-defined. On one hand they might not have enough product that people want or that buyers are willing to pay a premium for. On the other, if inventory is infinite, pricing will remain low.

Ultimately, compelling video product will have better rate integrity. The Interactive Advertising Bureau has been asked by the large media-buying agencies to look into standards, measurement and inventory issues to give online marketers more leverage against the TV networks.

There is a push in the direction of advertisers putting their product right online in streaming video and a general lack of excitement on media buyers' parts about making large commitments to the TV networks. Other buyers have said that they expect the pharmaceutical industry, for example, to lower budgets and in some cases shy away from the networks this year, thanks to tightened Food and Drug Administration regulations governing drug ads.

The story now, though, seems to be more about the health of the broadcasting industry as a whole in the face of changing technologies and evolving consumer habits. The revolution will not take place overnight, but the increased presence of high-quality streaming video will force all players to speed the plow.