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Barter resilient during economic downturn. (Advertising).

While there seems to be no immediate end in sight to the economic downturn that has chilled the TV industry, the barter market appears to offer some welcome long-term stability. "Barter is the oldest form of commerce," noted Ad Week analyst Jack Feuer. "It is an alternative that is always more favored during down economic times because when you're doing barter exchanges you are, in effect, saving money."

According to Tim Spengler, director of the National Broadcast for Initiative Media's Los Angeles office, "This is the softest ad market since the depression relative to what it was. It is coming off of some very high spikes in 1999 and the first half of 2000. Now it's sort of slowly dripping all those gains away, with everything coming back down to 1999 and 1998 levels." He added that this is not good for any business, particularly networks which are spending more in above-the-line costs, such as making expensive commitments to multiple episodes or high-priced development deals. "Their costs are going way up and the revenue is going down."

According to media buyer Jon Mandel, co-managing director and chief negotiating officer of New York-based MediaCom (and this year's NATPE chairman), there are two types of barter sales: "There are sales where the syndicator gives a TV station a show and instead of paying for it in full, the station pays a little bit of cash and gives back two minutes of time in it." These segments are often broken down into 30-second spots, which the syndicator turns around and sells. "The other sale is the advertising sale to people like me, where I'm basically buying a 'network' spot across all the stations the show was cleared on." Whether the transaction is straight barter or cash-plus-barter, "depends on the quality of the show," Mandel said. "If you've got a really great show, you can get a little bit of cash."

A typical barter split for half-hour first-run strips (Monday -to-Friday schedules) and off-network shows is five-and-a-half minutes of local time and one-and-a-half minutes of national time plus cash. For one-hour shows, it's 10 minutes local, and three to three-and-a-half minutes national.

Mandel explained that the good part is that "in weaker economic times, when the stations do nor have a strong advertising market, barter does work better because the station does not have as much cash to pay for the programming. Barter is cheaper for the station because they are giving time instead of money. Time is then consolidated and monetized by selling it as a national spot.

But what's good for the stations in tough economic times works in reverse for the syndicators because, said Mandel, "the syndicator has to take that time and resell it to people like me. And in a soft market, I beat the hell out of them," meaning the syndicator gets much less money for the spots they have to sell.

No one uses the barter market more heavily than local network affiliates, where advertising time can literally be bartered for equipment such as company cars, office space and supplies. Some companies, like Tribune, are using the barter market to forge additional business opportunities. Tribune President and CEO Dick Askin recalled "When I first came to the company [five years ago], we were doing approximately $40 million [a year] in barter sales, which was really Geraldo and a couple of third-party projects."

Since then, the number has quadrupled, and in 2000 barter sales ranged from $150 million to $200 million. "The most significant part of this is not only our own growth internally but that we've been able to forge some very valuable client relationships with significant companies who don't have their own barter operations or have decided to close theirs."

These companies include Hearst Entertainment. "Not only do we represent them on the barter operation," said Askin, "but this summer we announced a distribution alliance with them. We're also doing all their backroom operations: research, distribution, collecting, billing and contract administration. We set what we both think is a win-win situation where they have their own sales force and go out and sell their own product. But once the sale is made, every step from that point, from the contract all the way up, is what we do. So we allowed them to reduce their overhead, keep control of their sales force and continue to expand because they oversee their own development and their own production as well."

Tribune has also forged a relationship with NBC Enterprises. "In addition to having The Other Half George Michael's Sports Machine and The Weakest Link, we also picked up the barter sales for a January 2002 debut and the ad market on behalf of all these projects." In all, Tribune has 23 projects it is representing on the barter side.
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Article Details
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Author:Milano, Valerie
Publication:Video Age International
Article Type:Brief Article
Geographic Code:1USA
Date:Jan 1, 2002
Words:801
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