Cable Upfront: Winners And Losers

The major cable groups are done with the bulk of their negotiations and most succeeded in keeping CPM rollbacks in the same range as broadcast networks. “The big ones are done, and now you’re starting to see the smaller deals beginning to take shape,” said one cable network sales executives. “Rollbacks are anywhere between flat to minus 8.” (Click here for complete upfront coverage.)
The cable marketplace is expected to see a decline of between 5% and 10% off last year’s $7.7 billion, putting the likely final figure at between $6.9 billion and $7.3 billion. A more precise picture will emerge by Labor Day, say executives in the field. Advertiser money that was held back early in the upfront process ended up flowing to cable, said one agency executive.
The big winner was NBC Universal’s USA Network which only saw rollbacks of 2%. The top-rated cable channel had media buyers flocking to deals offering high efficiencies or reasonable pricing. USA is historically a less expensive top tier service than other rivals. Strong programming and prices helped bring advertisers in the door. USA airs some of the most popular shows in cable including Burn Notice and Monk, in addition to off-net far such as Law & Order: Criminal Intent. Buyers said NBC Universal’s other cable networks which include Bravo and Syfy also did well.
Viacom arguably had the most difficult upfront period of all the major cable groupings and accommodated media buyers with rollbacks around the 5% mark. The network also saw volume fall in the 15% range, according to separate sources. One media buyer said that because so many of MTV Networks advertisers are endemic to the youth category, Viacom understood it had to give deeper discounts than the marketplace to hang on to money. “They knew they were between a rock and hard place,” observed one media buyer. Ad revenue at MTV Networks fell 6% in the second quarter, according to Viacom second quarter results. The stock, however, was trading upwards this morning at $26.17. Network officials had no comment.
Discovery Communications and Time Warner’s Turner Broadcasting stable gave only small rollbacks. Discovery is a still a week away from finalizing its upfront while Turner wrapped last week. CPMs rollbacks at Turner were between 4% to 5%, while volume was flat to slightly down overall, according to executives familiar with negotiations.

“Everybody had an eye on volume, but in cable it’s difficult to raise both the volume and the CPMs,” said one executive. A&E Networks and Scripps Networks Interactive are still negotiating. Both companies are understood to be taking CPM discounts in the 3%-4% range.
Scripps is reportedly one of the few places actually preserving or increasing volume this year. According to agency sources, clients are reluctant to pair channels like HGTV and Food Networks from their schedules, though digital services like DIY and Fine Living haven’t had as great a time.
“Scripps Networks is well positioned in the top tier of cable to help media buyers make their overall media decisions — meaning their network media buys — more efficient,” Steve Gigliotti, EVP of Ad Sales for Scripps Networks said. “The trend we saw last year, with our brands being included in business that normally is limited to the broadcast networks, is growing. That’s because we are upscale media brands with very desirable media audience.”
Lifetime is also said to be sitting in the middle of the pack with regard to CPM rollbacks. While smaller channels have had to bear the brunt of the most aggressive rollbacks, one agency buyer said there had not been a broad spectrum of pricing in cable.
Third quarter scatter is indeed seeing greater activity in some corners of the TV business. CBS Chief executive Leslie Moonves described the scatter picture at CBS as “phenomenal,” running around 30% above the same period last year. One cable sales executive said: “Third quarter scatter is pretty strong, we’re writing a lot of business; that is unusual in the midst of negotiating upfront deals.”
One media agency chief said third quarter would not end up strong and predicts a long term change in consumer habits. “Back to school retail numbers are going to be down. There is a lot of last minute shopping. I think the way people shop and how they think has changed permanently. It’s not ‘what would be nice to have,’ but ‘what do I need?’”
One theory on the buoyant third quarter is that companies have a slight surplus in their spending, having squeezed the cost of producing their services. Budgets for their products were conducted in the depths of the economic crisis and now that businesses have achieved savings in areas such as commodities, gas and labor, they’re spending those savings on advertising to drive volume and profits. That, however, may be a short term uptick for the TV ad marketplace.