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NEW YORK (Reuters) - Advertisers bought about 15 percent less commercial time from networks ABC, NBC, CBS and Fox for the upcoming TV season and -- for the first time in years -- paid less for the airtime they did purchase.
Advertising and broadcast television executives said nearly all of the dealmaking for the 2009-2010 TV season had wrapped up by late Thursday, following months of what they described as protracted and frustrating negotiations.
Even after the completion of the upfront season, when TV networks often sell about 75 percent of their commercial time, the two sides disagreed about who was to blame for the delay. The upfront market is often finished in June.
"The media agencies were in a tough spot between client expectations and market realities," said one TV executive, referring to the buyers who negotiate time on behalf of advertisers like Procter & Gamble or Ford.
"It took us a month to find equilibrium there."
An executive at a media agency took another view.
"The buyers were hearing it loud and clear from clients, they needed to get better value in the market. Our clients were insistent. Eventually, the TV networks understood that. They understood they needed to get into negative pricing."
Executives on both sides, who spoke on the condition of anonymity because they did not want to be seen negotiating in public, agreed that the upfront market would be about 15 percent smaller than a year ago, when about $9 billion worth of deals were struck.
What is more, prices fell for the first time in eight years. News Corp's Fox, Walt Disney Co's ABC, and CBS Corp's CBS agreed to deals at rates about 4 percent below those of a year ago, according to various media executives.
NBC, majority owned by General Electric and in last place in the prime-time ratings, struck deals at slightly deeper discounts. An NBC spokeswoman confirmed that it had completed its dealmaking, but declined to comment on details about pricing or volume.
Tom Staggs, chief financial officer of Disney, said during a call last week he was "comfortable with the rates ABC has been achieving," although that network, too, declined to discuss specifics.
Jon Nesvig, president of sales at Fox, said in a prepared statement that the network had "achieved its primetime revenue goal" and that with "a broader economic recovery seeming to take hold, we are very comfortable in our marketplace positioning for next year."
Indeed, all of the broadcast networks appear to be banking on selling the remaining prime-time commercial inventory at higher prices in the so-called scatter market, the term used for last-minute sales.
CBS Chief Executive Les Moonves on Thursday said that "we have retained more inventory to sell in the scatter, and we like our position as the economy continues to improve."
He "anticipates the scatter market will be stronger than the upfronts."
An executive at another network said: "We sold this upfront with the view that we were moving into a rising economy rather than a softening economy."
What's more, some key advertising categories, like auto, retail and financial services, are expected to have bigger advertising budgets in 2010, after buying about 20 percent less commercial time this around in the upfront market.
"We are looking at still a very uncertain period and I think that most advertisers are being more cautious," said Robin Diedrich, a media analyst with Edward Jones.
She nonetheless said TV networks may be able to rebound from the depressed upfront market.
"When the advertising market was soft in 2002, the scatter market did actually stay up there and help make up for what had been a soft upfront."
She added, however, "There are big risks on both sides."
Reporting by Paul Thomasch; Editing by Edwin Chan, Gary Hill