General Motors, Broadcasters in Upfront Standoff
General Motors and its media agency, Carat, have created a standoff in upfront negotiations by asking TV networks for significant pricing rollbacks, which the major broadcast networks have refused, according to media buyers and other executives familiar with the pace of talks.
GM's request "has not been well received" by the TV outlets, said one ad buyer. Spokesmen for General Motors did not immediately respond to queries.
Advertisers have typically asked TV networks for rollbacks during a major economic downturn, like the beginning of the recent recession, or when there has been a ratings shortfall. This year, both sides of the table agree pricing is on the rise. Instead of arguing over whether a price increase is warranted, most of the haggling is centered on the size of the increase.
GM's ask has the potential to cause ripples. General Motors is one of the biggest spenders on TV advertising, spending about $1.1 billion on TV ads in 2011, making it the third-largest U.S. TV advertiser last year after Procter & Gamble and AT&T.
Its demand for pricing cuts would likely cause significant recalculations in the amount of ad time the networks choose to sell this year. All the TV networks have refused to negotiate with GM so far, ad buyers said. A fear is now blossoming among media outlets that if one TV network deals with GM, the others will have to capitulate, one ad-buying executive said.
General Motors already enjoys significantly lower-than-market pricing, a benefit accorded to advertisers who have spent on networks for decades. Procter & Gamble is another marketer whose relatively low ad rates are more or less "grandfathered" in to negotiations. For GM to win rollbacks on rates that are already below market would mean the networks would see less volume in this market.
"They have a pretty low base to begin with," the ad-buying executive said. "They have been an advertiser since the dawn of time and they are a founding or incumbent sponsor on a lot of network, so they get a very low base."
To get a price cut on top of that "is just very, very detrimental," this executive added.