In the upfront market, syndication can be a good value, but buyer beware
By Wayne Friedman -- Broadcasting & Cable, 5/20/2007 8:00:00 PM
No matter what else happens in this year's upfront market, advertisers will continue to view syndication as among the most predictable and least volatile national TV business.
“It has had proven performance and is relatively stable,” says Larry Blasius, executive VP/director of negotiations for Magna Global USA. “It's not bad. It's not good. It's somewhere in between.”
Merrill Lynch predicts syndication ad sales will grow 3% this year to $3.1 billion. Merrill also expects the Big Four broadcast networks' advertising revenue to grow 3%, too, moving up to $8.03 billion.
On the low end of estimates is David Joyce, equity analyst for institutional securities firm Miller Tabak LLC, who believes that syndication will under-perform the broadcast networks. He projects syndication at only a 1.9% increase, to $2.75 billion, and pegs broadcast networks to rise by more than double that, 4.7%.
“Generally, there was poor crop of new syndication shows this season,” he says. “Rachael Ray was the only new hit this year. That may make the media-buying community hesitant. There is also competition from a variety of other media content.” When it comes to syndication, Joyce has a brutal assessment: “It's a little bit better than filler.”
Big Hits, Big Misses
Media buyers aren't that negative. The good: Syndication has many long-time shows with predictable ratings. The bad: New shows are increasingly hard to find and launch.
This year, in the key daytime period, Rachael Ray, from CBS Television Distribution, is the only new Monday-Friday player to survive and make an impact.
Syndication's upfront is the smallest of all the national TV media. Cable is at about $7 billion, nearly twice the size of syndication's upfront revenues, and the six broadcast networks (including The CW and MyNetworkTV) are just under $9 billion, about three times the size of syndication.
But syndication still holds value for marketers due to its consistency. It also continues to be a bargain for advertisers compared with network TV shows—by as much as 15% on comparable cost per thousands (CPMs), although higher-rated syndicated shows like Seinfeld and Friends can command prices similar to networks'.
Syndication viewership has slipped slightly in terms of overall viewership over the last few years. Through April of this year, syndication posted a 2.4 average household rating in comparison to a 2.7 of a year ago. Two years ago, syndication averaged a 2.5. That means ratings have slipped 4% in two years. Looking at some key demographics, adults 18-49 are sitting at a 1.1 rating, down from a 1.3 of a year ago.
Brad Adgate, senior VP of corporate media research for New York media buyer Horizon Media, says all this means that “syndication has been relatively flat.”
Perhaps syndication's biggest advantage for this upfront might come from the advent of commercial ratings that could replace some program ratings for next season.
For all TV, commercials ratings can be 1%-10% lower than their comparable program ratings. Syndication is at the better end of that range––just 1% or 2%. Better news still, syndicated programs aren't time-shifted with DVRs as much as cable or network shows, which means advertisers' messages are seen more (see related story, opposite).
Summing it up, Mitch Burg, president of Syndicated Network Television Association, the trade advertising association for syndication, says, “Flat viewership at 98% [retention] is pretty good in this year's marketplace.”
Regardless, it's getting tougher for syndicators to get stations to pay license fees for programs; stations prefer straight barter deals. Says Bo Argentino, senior VP of advertising and media for NBC Universal Television Distribution, that means syndicators have to become even more aggressive about selling national advertising.
That creates competition between the syndicators' and stations' sales staffs. “Syndication is really in the business of converting local advertising to national advertising,” says Hal Vogel, president of Vogel Capital Management, and longtime TV-business analyst.
Although shelf space is limited, experiments abound. Warner Bros. will let stations run Two and a Half Men on their Websites, allowing them to sell advertising time. Additionally, TV stations' new, local digital signals might be a place to expand syndication programming.
NBC's Argentino is hopeful for more business this year but also realizes that advertisers have certain incumbencies and discounts with other TV media, ultimately signifying that there may not be a major shift of money.
Relative to other media, syndication sellers acknowledge that certain advertising categories could spend more. Argentino believes this includes automotive, telecommunications, financial and fast-food restaurants.
Syndication continues to be a big draw especially those daytime advertisers looking for 25-54 audiences, especially women. But media executives complain that other demos are lacking; many syndicated shows don't attract young males or upscale audiences.
Burg begs to differ. He says syndicated magazine shows attract top-notch audiences, and off-network sitcoms pull in young men.
Syndication's Three Tiers
Buyers believe syndication of top programs will continue to draw advertisers––but everything else is a problem.
“There have been three tiers of syndication programs for a long time,” says Magna Global's Blasius. “The top tier includes Wheel of Fortune, Jeopardy!, and Oprah, and inventory in top shows is usually tied up by incumbents.” It's those other, lower-tiered shows, he says, that advertisers tried to avoid when buying syndication, shows that syndicators want to package with higher-rated programming.
Second- and third-tier-rated shows are also a problem for syndicators. Some of them have been successful in eliminating such shows from their stable.
“King World [now called CBS Television Distribution] spent years getting rid of their second-tier stuff,” says Jason Kanefsky, senior VP of national broadcast for media agency MPG. “You work much harder on second-tier properties. It's not worth it.” Now the CBS syndication arm has nine out of the 10 top-rated syndicated shows.
Increasingly, this leaves the syndication business somewhat easy to predict: There are big winners and big losers. Kanefsky says, “You can close your eyes every year and know what is going to be there.”
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