It's shaping up to be a long, laborious summer in the TV business.
With so much uncertainty surrounding the economy, discussions have stalled between advertising and television executives during the industry's annual deal making season. Both sides appear frustrated and entrenched.
At this time last year, ABC, NBC, CBS and Fox had wrapped up $9.2-billion (U.S.) worth of deals with advertisers in the upfront market, when the two sides negotiate about 75 per cent of the commercial time for the next TV season. In 2007? Same story. A few years ago, deal making was done by May.
This year, it has hardly begun, and neither advertisers nor TV executives seem ready to blink.
"It's like the Cuban Missile Crisis," said Brad Adgate, a senior vice-president and researcher at Horizon Media who has been monitoring upfront markets for three decades. "I've never seen one like this."
Ad and media executives interviewed for this story, who spoke on the condition of anonymity because they did not want to be seen negotiating in public, agreed that there is little or no chance that deal making will finish up by July 4. More likely, the process will stretch out into the middle of August.
"It's looking like even if we do get a little business done, it will stretch out well beyond the holiday," said a top executive at one media agency.
Another executive close to the talks added: "Moving slowly might be optimistic. Having said that, I don't think either side can be solely blamed."
How bad is the atmosphere? One rumour circulating along Madison Avenue is that the chief executive of a major advertising company has issued a warning to staff that anybody who agrees to pay a rate higher than last year's should simply resign.
True or not, those sorts of whispers underscore the intense pressure advertising executives are under this year to strike favourable deals for their corporate clients - who have cut budgets and are demanding better returns on their investment.
Sales executives at the major TV networks - Walt Disney Co.'s ABC, News Corp.'s Fox, CBS Corp.'s CBS, and General Electric Co.'s and Vivendi's NBC - are under no less scrutiny from their bosses, media watchers said. Corporate profits are down, stock prices are depressed, and the industry has been put on the defensive by suggestions that the whole business of broadcast TV is outdated.
The result - trench warfare.
The battle, of course, is over price. Executives say that media buyers are asking for discounts of 8 to 12 per cent from a year ago, pointing to the severity of the recession and concerns that the recovery will be slow and painful. They may, however, settle for a discount closer to 4 to 6 per cent, some believe.
The TV networks, meanwhile, are trying to hold the line on pricing. The deals negotiated during this season's upfront can stretch out until late 2010, and nobody wants to be stuck with discounted prices should the economy rebound. Some say the networks are holding out for slight price increases from last year's deals.
"The networks are being extremely unrealistic to think they'll get increases," an executive said. "It's just not going to happen. They are out of their minds."
Another executive, however, said that the broadcast TV networks seemed resigned to the prospect that they would have to cut prices.
"Both the buyers and sellers realize it is a deflationary marketplace. The networks have seen the commitment on the side of the buyers that we're looking for price rollbacks. Our clients are expecting us to get that, and we heard them loud and clear," this executive said. "The networks understand that. The question is, what number?"
The other question is how much commercial inventory time will be sold. A handful of media buyers predicted that the size of the market would be well down from prior years.
"I think it's going to be way down," one negotiator said. "I would say 10 per cent, 15 per cent, maybe even 20 per cent."
The reason is the length of the deals. Both advertisers and TV networks are wary of committing to long-term deals when the economic outlook is so unclear. Instead, a larger-than-usual amount of deal making will likely be put off until the scatter market, when short-term commercial agreements are negotiated.
Nonetheless, the very nature of the TV business dictates that the two sides will still strike billions or dollars worth of commercial deals in this year's upfront market - it just may take a while.
"There is nothing going on," an executive said. "The sides are fairly far apart. It's a matter of who is going to blink first."