Price Gap Between Broadcast,Cable Originals Gets Tighter Still

Increased spend on programming is paying off in advertising market

Why This Matters

Cable’s New Script Calls for Better Prices

As more cable networks add scripted shows to their programming lineups, they are seeing the benefits in higher ad rates.

Most scripted programming costs more than unscripted shows, and advertisers are willing to foot a part of the bill.

“At the outset, most everyone’s going to ask for more, and most advertisers are going to be willing to pay more for things that look like more of an investment has been made,” says Chris Geraci, president of broadcast at media agency OMD. “If you go out and spend an awful lot in advance on production values and all of that, chances are that will be reflected in the pricing you can get initially.”

“There can be big hits in unscripted programming, that then perhaps the second time around you see the premiums attached,” Geraci adds. “If you’ve got a big hit on your hands and a lot of demand for it, and it didn’t cost you much to make, you can still do pretty well.”

AMC has been registering double-digit jumps in ad revenue since spinning off from Cablevision Systems, largely on the strength of scripted series such as Mad Men, Breaking Badand The Walking Dead.

“Traditionally scripted commands, probably on every cable network, the highest CPMs, and the unscripted is priced based on what it’s delivering,” says Scott Collins, executive VP for ad sales at AMC, which has also launched a slate of unscripted shows. Those programs, in particular Talking Dead, have also had big ratings.

“Where price goes up is where demand goes up,” says Joe Abruzzese, president of sales at Discovery Communications, which is selling its firstever scripted miniseries Klondike in this year’s upfront. “If there’s several clients who want it, the price will go up. So we’re anticipating more people wanting scripted because scripted has done better in general on C3 [ratings data]. So we should get better pricing.”

For several years, Turner Broadcasting has been pitching its original scripted series as part of a “broadcast replacement” package. Now, Turner is coming out with more unscripted series. David Levy, Turner president for ad sales, distribution and sports, doesn’t think there’s going to be a big gap between the price of scripted and unscripted shows.

Over the last few weeks, Turner has been previewing some of the shows it has in the works for advertisers. “We gave them a little sampling of what our scripted and unscripted lineup was, and we had a tremendous response,” Levy says. Both scripted and unscripted shows will be a part of the Turner mix, but Levy notes that with unscripted shows being less expensive to make, “you can take more shots,” he says. “You get more chances to see if you can get a hit.” —JL


The Walking Dead
and other original cable series often win their time slots against all competition, including broadcast entries. But the gap between how much advertisers pay for broadcast and cable commercials simply won’t die.

The difference is, however, narrowing: As the amount of original programming on cable continues to swell and cable networks move to produce scripted shows, broadcast ratings slide.

Cable spending on programming is approaching $25 billion, with about 90% of that going for original shows, according to the Cabletelevision Advertising Bureau. As the upfront approaches, cable advertising volume is expected to increase while broadcast revenue remains flat, with demand growing for sponsorship packages built around scripted shows on a lengthening list of cable networks ranging from TNT to BBC America.

Historically, broadcast primetime ad rates, based on cost per thousand viewers (CPMs), have been on average about double those on cable, making cable an efficient buy. The most attractive shows on cable, scripted shows that generate millions of adult viewers, however, are getting premium prices that approach those of broadcast, buyers and sellers say.

In the scatter market in last year’s fourth quarter, one buyer said that spots in AMC’s monster hit The Walking Dead cost about $200,000 (the price includes multiple runs), which translates into a CPM in the 18-49 demo of $30-$35. At the same time, costs for CBS’ Sunday-night show The Mentalist could be had for $100,000, a $39 CPM; and ABC’s cancelled 666 Park Avenue sold for $120,000, with a CPM of $46.

“In scatter especially, we are hitting broadcast-like CPMs due to the girth of the number of impressions that [The Walking Dead] delivers,” says Scott Collins, executive VP for ad sales at AMC. “Anyone who bought in the upfront got a great bargain because it’s delivering 25%-50% higher than we thought it would.”

'Dead' Makes Everything Rise

Collins says that The Walking Dead has added prestige as far as marketers are concerned. “Advertisers are using Walking Dead to launch new creative,” he says. “So whether it’s a new video spot for a game or a new theatrical release, it’s become a pivotal piece of advertisers’ promotional plans.”

Chris Geraci, president for broadcast at media buyer OMD, says looking at the average price for advertising on cable can be misleading. “It’s a fallacy to think that all of the shows in cable are such a bargain versus all of the programming on broadcast,” he says. “If you were to isolate primetime cable, particularly the highend stuff, and compare it to the broadcast stuff you would see cost per thousands that look a lot closer than they’d lead you to believe.”

If you take out the handful of top broadcast shows, cable originals are competitive on both price and reach, says Lou LaTorre, president for ad sales at the Fox Cable Networks Group. “The reason broadcasting gets higher CPMs in the face of aggregate ratings declines is agencies believe they need the top 15 prime shows in broadcasting to maintain the cost efficiency of their reach curve,” LaTorre says. In fact, the pricing for the average broadcast network show is well below the top 15 and more in line with cable’s premium programs. “I think we’re getting close to the point where that axis will be crossed, and the top five or six cable networks will be able to provide that reach at a lower costper- reach point,” LaTorre says.

“From originals to originals to originals, I think the gap has closed,” says David Levy, president of Turner Broadcasting ad sales, distribution and sports. Outside of primetime, Levy says, Conan O’Brien’s late-night show on TBS has been getting broadcast-comparable CPMs since it launched three years ago.

When History took its first scripted show, the hit Vikings, to market seeking broadcast-level CPMs, the market was ready, according to Mel Berning, executive VP at A+E Networks. “When Hatfields & McCoys generated the kind of numbers it did last year, it gave us credibility when we were selling Vikings and The Bible,” the miniseries that also drew high ratings.

Berning gives credit to original programming pioneers Turner and USA for establishing a market. “They’ve driven audiences,” he says. “It’s a high-quality scripted environment. It’s all the stuff advertisers say they want. So it’s hard for [advertisers] to say no, it’s not worth it.”

In Cable vs. Broadcast, Mind the Gap

What makes comparisons with broadcast tricky is that original programming is only part of what cable networks sell, even in primetime. “We still have an enormous amount of content that is acquired series and things of that nature, and I think there’s still going to be a gap between that and original programming on broadcast,” Levy says.

Some cable programmers are willing to sell advertisers packages that include only originals. Others prefer to use their originals to increase the value of all of their programming.

“There’s going to be a variety of CPMs and a variety of different ways people cut and dice this, but I do believe that with the original content and the original programming that is drawing those type of numbers, and the continuing investment in original programming, you’re seeing the gap close dramatically, quickly on those programs,” Levy says.

OMD’s Geraci says the investment in programming has been good for the networks and good for advertisers. “Good ratings are good for everyone,” he says.

Because much of the original programming on cable is owned by the networks that produce it, they are able to offer comprehensive deals that stretch over multiple platforms and include integrations.

“If you look at our top shows on all of our networks, those CPMs are comparable to what you’ll get anywhere,” says Jeff Lucas, head of ad sales for Viacom’s entertainment and music networks. But more important than the CPMs or eyeballs, clients are looking to buy a closer association to that great content. When a client like Unilever wants to sell Choco Tacos to young men, it bought a multiplatform association with the Comedy Central show Workaholics, a hot show on college campuses. The campaign included an original Web series, The Other Cubicle.

0408 Upfront Central Cable chart

“That’s a great example of knowing our audience,” Lucas says. “Everything we do here is based on research and knowing the audience, but also being ahead of the curve on the audience.”

Original content helps AMC sell sponsorship packages as well. “It allows us to probably have an earlier seat at the table when it comes to upfront discussions,” says Collins. “As early as now, people are coming in and asking what we can do. ‘We love what you did with Hyundai, we love what you did with Dr Pepper,’ we love what you did with whatever sponsorship they see on-air. They say they’d love to get a piece of that as well.”

E-mail comments to jlafayette@nbmedia.com and follow him on Twitter: @jlafayette