Last Hurrah?

The ad industry pulses to the same rhythm as the school year. It starts in September, building to a peak just before Christmas. Then, nothing. Signs of life return in January, and things build again, peaking around Easter. From there it’s a gentle southward slope through the summer, and the cycle starts anew.

Marketers set their budgets by this calendar. One good predictor of year-ahead peppiness is network television’s upfront bazaar. Because it involves the nation’s top advertisers (which sort of commit to certain levels of ad spending for the upcoming year), the primary national medium (which gives concessions to top customers in exchange for “commitments”) and huge amounts of money, it has been a great source of analytic tea leaves, a pretty reliable barometer for how things will develop for all national advertisers across all media.

We’re at the point where this year’s upfront market seems ready to “break,” and industry watchers are peering intently. Enjoy the view. It may not matter much longer.

Of the ad industry’s total take, network TV commands a progressively diminishing share—around 20 percent now, down from 26 percent 10 years ago and an even higher percentage the decade before. Television, including cable TV and local broadcasting, has gained overall, but the over-the-air networks have lost.

This decline is but one indication that network TV is losing its status as something special. A decade ago, the top 25 advertisers devoted nearly half their ad budgets to it. By 2001, that had fallen to 35 percent, according to CMR. The big guns, it would seem, are pointing elsewhere.

The value of the upfront as an indicator of future activity rests on its ability to reveal the intentions of the big advertisers, whose spending patterns determine how the various media will fare. As they rely less on network TV, the indicator becomes less sensitive, and its predictive value diminishes. At some point, it may not really matter, at least from the prognosticators’ point of view.

There are a number of reasons for the change. The networks’ big advantage is their unrivaled ability to distribute ad messages everywhere all at once. For a lot of products, that will always be valuable. But as the ability to target messages ever more finely—both in terms of content and distribution—continues to improve, the ability to broadly cast will continue to diminish in importance.

The networks seem to be res ponding sensibly—by, in effect, demo cratizing themselves. Their loss of budget share among all advertisers is only half that of the loss from the top 25—those whose participation in the upfront gives that rite of spring its prognostic propensity. That, though not exactly good news, is hardly a death warrant.