... But Cable Could Climb
Strong ratings fuel an upfront expected to grow 13%
By John M. Higgins -- Broadcasting & Cable, 2/22/2004 7:00:00 PM
Cable is poised to gain in the 2004 upfront. Estimates may be as high as $700 million, bringing the total to a cool $6.2 billion, a healthy 13% boost from last year's $5.5 billion.
So why the tempered enthusiasm? Despite cable's continuing success in grabbing audience, industry execs see a surprisingly weak scatter market and sketchy economic recovery.
Cable sales pros also remember how ad buyers caved in to broadcasters' price demands last year. "I don't think people are going to walk away from broadcasting," says the ad sales chief of one major cable network. That's why some cable ad watchers are hedging their bets.
"There's a lot of variables, but I think that buyers really hit our tipping point last year," says Andy Donchin, senior vice president, director of national broadcast, for Carat USA. "We don't want to pay big increases anymore for declining [broadcast] ratings, but effectiveness has to be a factor.
"We buy a ton of cable, and I believe in cable," he adds, "but if there's going to be a major shift, it has to be based on both effectiveness and efficiency."
It could be much better for cable. If buyers' boasts about staring down broadcast nets come true, more-aggressive forecasts call for cable boosts of 18%-27% over 2003's upfront.
Cable executives felt burned last year. Panicked buyers folded to broadcasters' demands for an average 15% CPM increase, despite viewer defections to cable. Cable networks settled for a more moderate 7% or so price increase. A $700 million shift to cable this year would translate into a strong 7%-8% CPM increase. The more aggressive forecasts would translate into a huge 13%-22% jump.
Cable again goes into this year's upfront in a strong ratings position. "Twenty weeks into the current TV season and only cable is up in ratings and reach, across nearly every Nielsen planning and buying demographic," says Sean Cunningham, president of the Cabletelevision Advertising Bureau. "Importantly, these gains for cable come directly from a migration of viewers from the broadcast networks."
According to Nielsen Media, the six major broadcast networks lost 2.4% of their prime time viewers during the fourth quarter. Viewership by adults 18-49 dropped 5.9%. Even after the weakest nets—The WB and UPN—are eliminated, the Big Four fell 1.3% in total viewers and 4.3% in 18-49s.
Cable, however, grew. The top 10 basic-cable networks—which generate about half of basic-cable ratings and ad sales—saw their total audience rise 3% and 18-49s increase 5.3%. More good news: It's not sharing in broadcasters' pain inflicted by the "lost boys," the abrupt shrinkage in men 18-34. Bad news: The young-male cable audience is flat, not growing.
The biggest warning flag for both cable and broadcast is the weak scatter market. Although TNT, MTV, Discovery, and TLC are seeing stronger sales, scatter pricing since September is flat compared with the upfront.
"Scatter is soft," says David Levy, president of entertainment ad sales, Turner Broadcasting System. "A lot of people shifted their budget from scatter to the upfront." But demand for sports has been relatively strong, he adds.
Cable is suffering disproportionately from the weak scatter market. As usual, cable nets locked in pricing for 50%-55% of their inventory in the upfront last year. Broadcasters sold 90% of their inventory, up from the usual 65%-70%. Cable net were expecting to feast on a strong scatter market as broadcasters' ratings sank and make-goods soaked up ad time.
Joseph Abruzzese, president of Discovery Networks ad sales, has strong expectations for his and other cable networks. He's betting on the ire of ad buyers and their clients over last year's selling season. "The broadcasters are having no success this year, except for CBS, after a huge upfront," he says. "The buyers are mad."
Soon, we'll see how mad.
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