USA: Advertisers Will Spend Nearly $10 Billion This Week On A Broken TV Model

This week, advertisers will sit down with the broadcast TV networks and hash out their "upfront" ad buying deals for the year.

The talks are one of advertising's huge, dramatic set-pieces. As Ad Age describes it, "possibly as few as 40 people from the networks, agencies and brands will go into backrooms and decide how $9 billion of the $62 billion U.S. TV ad market will be spent next year."

Networks are expecting, again, to see TV ad spending rise. CBS chief Les Moonves is bullish, and analysts expect the network may get 7-9% price increases. Some believe more than $10 billion will get spent.

Oddly, the networks want those increases even as the viewing audience itself dwindles. Goldman Sachs estimates that 17% of the 18-to-49-year-old demographic simply stopped watching broadcast TV in winter 2012-2013, the New York Times notes.

On its face, this doesn't make sense: Why would advertisers pay more to get less?

The usual explanation is to do with supply and demand. Although TV's numbers may be dwindling, it still has a massive audience. And with the fragmentation of the audience across thousands of different online and digital venues, there remain very few vehicles who can reliably deliver eyeballs in the millions, night after night. The supply of big audiences is getting smaller, in other words, and thus prices increase.

But there are signs that this won't last, and that broadcast TV may be facing a crisis. The Times said:

"The networks are getting picked at from every direction," said Jessica Reif Cohen, the senior media analysts at Bank of America Merrill Lynch. "This year was the tipping point," she said, "when the television ratings really fell apart."read more http://ca.finance.yahoo.com/news/advertisers-spend-nearly-10-billion-145904067.html