Cable niches get the riches

But broadcast's big upfront takes a bite out of USA, other general-entertainment nets

By Steve McClellan and Allison Romano -- Broadcasting & Cable, 6/17/2002

One thing is clear about this year's cable upfront market: It didn't experience the big, quick rebound that the broadcast network market did two weeks ago. Buyers say that cable spending is down in this year's upfront and that deals are being done at lower cost-per-thousand (CPM) rates than a year ago.

On the sell side, there aren't a lot of vehement denials, although the Cabletelevision Advertising Bureau (CAB) says it's getting positive feedback from its members that sales are meeting growth expectations.

Broadcast syndication appears to be in better shape this year, after a 25%-plus decline a year ago. And indications last week were syndication spending will be up 15%-plus and back around $2 billion.

Firm numbers were hard to come by on cable sales last week, and negotiations were still continuing late in the week.

Tom DeCabia, executive vice president and general manager of PHD New York, a media-buying unit of Omnicom, told Wall Street investors that general-interest cable networks "are selling at negative" prices compared with a year ago.

The problem for those networks, he said, is an overabundance of inventory. "There just is not enough money right now to go around to fill all their boats," a reference to ever expanding numbers of cable channels.

But in contrast, DeCabia said certain specialty channels like MTV, VH1, Comedy Central, the Travel Channel and the History Channel "will see growth" in the upfront.

Mel Berning, head of national TV negotiations for Mediavest, said the cable market was unfolding at a "much more deliberate pace" than the broadcast-network market.

"The big difference in cable is there's a lot more inventory and that supply increases year after year. So there isn't the same pressure to raise CPMs."

The broader cable networks, said Berning, "aren't really showing a lot of ratings growth year-to-year and no real concentration in the key demos."

John Mandel, chief negotiating officer at Grey Global's Mediacom, says many clients, which include 57 national advertisers, moved money from cable to broadcast. "Now, maybe my experience was different from the rest of the market," he said in a way that indicated he didn't believe that at all.

Despite those buyer reports, CAB President Joe Ostrow says he's hearing other indications. "I have very good evidence that cable will be up double-digit, anywhere between 10% and 20%," he said. He wouldn't reveal the evidence, however, but he also admitted that a 20% gain in dollars is unlikely.

That would put cable's take at $4.3 billion, roughly where it was in 2000.

USA Cable's apparent decision to slash CPMs may have set the tone for the cable upfront. Two weeks ago, when USA Cable ad sales chief Jeff Lucas said he would cut CPMs to increase volume of sales, many expected other cablers to follow suit. (USA and co-owned Sci Fi Channel have slashed rates 8%-12%. That's not as bad as last year, when USA's rates dropped 25% in the upfront. Lucas could not be reached for comment.)

Responding with derision to USA's reported CPM cuts, Turner Entertainment Sales President Mark Lazarus criticized the Vivendi-owned network for caving in to advertisers. "We're involved in [negotiating] an upfront marketplace," and not, he implied, using low prices as a "sales tactic."

But one media buyer said Turner and Discovery may have to trim CPMs to compete with upstarts like TNN, FX and ABC Family, which have similar reach and lower CPMs.

MTV, doing some deals with slumping sister net VH1, has sold about 40% of its upfront inventory and is said to be seeing mid-single-digit CPM increases. ESPN has sold briskly in tandem with ABC Sports.

If broadcast stole cable money in upfronts, cable nets may be angling to pick up crumbs in scatter. "Scatter clearly factors into cable strategies. If broadcast ratings don't increase, there would be limited availability in their scatter market," said Lifetime's sales chief Lynn Picard.

Both Turner and Lifetime indicated they are reserving inventory in anticipation of a robust cable scatter market.

By last Friday, TNT and TBS had closed about half of their business, and Lifetime said it had sold about 80% of its time.

Rainbow Network Sales President Arlene Manos flatly refuses to entertain the idea of slashing CPMs. "We think last year was an adjustment and we don't plan to do that."

Manos, whose networks include Bravo and WE: Women's Entertainment, will start dealing soon and wrap up by July 4. Her first upfront deal came last Thursday for Rainbow's revamped music net, MuchMusicUSA.

Anatomy of a record broadcast upfront

When advertisers make up their minds to spend money, they spend it fast. And that was truer than ever in this year's broadcast-network upfront market. In just five business days in early June, advertisers plunked down about $12 billion in commitments across all dayparts on the six broadcast networks.

Most of that was placed against the Big Three networks (ABC, CBS and NBC), which, as the tally continued to be counted, gathered in roughly $10 billion in commitments over the course of those five days. ABC did all its business in two days; NBC and CBS finished in three.

That's an unprecedented pace even for a hot market like this year's upfront, and it has a lot to do with all the consolidation on the sell and buy sides of the business.

In previous years, the upfront was conducted over several weeks or even months as buyers and sellers negotiated deals by daypart, starting with prime time and then onto daytime, early morning, late night, news and sports.

This year, everything but sports (which sources say started moving last week) was negotiated simultaneously.

"This is the first year that every one of the dayparts got done together, but that will be the norm going forward," says Joe Abruzzese, president of sales for CBS, because, "strategically, that's the way buyers want to do business. The more things you put in the sandbox, the easier it is to get the deals done on both sides."

His network sold about $3 billion, which was close to $1 billion more than a year ago. NBC pocketed a total of $4.1 billion in business, up about $1 billion from the previous year. But that includes about $450 million in cable sales, $225 million for Telemundo and an undisclosed amount for Pax TV.

At ABC, which did $2.8 billion across all dayparts, Mike Shaw, president of sales, said that, last year, there were indications that conducting negotiations simultaneously across the dayparts was the way the business was headed. Earlier this year, the ABC sales department reorganized into teams that focus specifically on major agencies. "From the standpoint of having knowledge of the budgets and working with one client at a time," he said, "it makes sense to talk about [all dayparts] at the same time."

Pricing and dollar volume were up across the dayparts. Late night and early morning were particularly strong.

In early morning, helped by the powerful numbers of The Today Show, NBC sold a record $357 million, up 18% from a year ago, according to NBC Television Network President Randy Falco. Early morning was ABC's strongest daypart, said Shaw. The network commanded CPM hikes in the 10% to 13% range and collected a total of about $200 million in sales, although Shaw declined to confirm the dollar figure.

Daytime was up, too. CBS's Abruzzese said the network got "more money than we anticipated," with price hikes of between 3% and 4%.

In late night, NBC increased its dollar take by 30% to an estimated $275 million. CBS did about $180 million, with CPM increases in the 7%-9% range. At ABC, The Jimmy Kimmel Show, which will premiere in January sold well because it's the one network entry in the time period that will skew to the younger half of the 18-49 demographic. ABC got late night increases in the 3%-5% range.