Will Nick Get Nicked By Ratings Woes?

Rival networks look to poach kids upfront advertising dollars

As kids networks' upfront presentations
begin this week, Nickelodeon’s
rivals smell blood in the water.

In the fourth quarter, the crucial holiday
period for toy marketers, the longtime leader in
children’s TV suffered an unexpected, uncharacteristic
ratings decline. Nickelodeon had to
issue make-goods to its advertisers, and parent
company Viacom’s earnings took a beating.

Now, with eyes turned toward the 2012-13
season, the kids game may have changed. Disney
and Cartoon Network think
they can steal ad dollars from a
weakened Nickelodeon, which accounts
for a 70% share of the category’s

“I really have to believe that advertisers
are going to review their
spending and I think money will
come our way,” says one rival network
sales executive, in predictable
and hopeful fashion.

Media buyers and advertisers will
go to the Nickelodeon upfront March
14 looking to see how the
network plans to
address the ratings
issue. “We’ve
been talking to
our clients
for several years
about other opportunities for
kids’ eyeballs,” says one buyer. “The numbers are
showing eyeballs are going somewhere else, so
let’s do something else with the money.”

At the same time, upstart networks are looking
to grab viewers and revenue. And everyone
is crossing their fingers that kids keep watching
TV, even as they increase their use of video
games and other digital devices.

Disney, which launches its Disney Jr. network
this month, was
talking tough before its March 12 presentation.

“We are in a unique position in this marketplace
to really talk to advertisers from a different
perspective than we have in the past, the
role,” says Rita Ferro, executive VP
of Disney Media Sales and Marketing, pointing
to viewership figures that show Disney Channel
with Nick in the key kids’ demos.
With Disney Jr. for preschoolers, Disney
XD for boys and Radio Disney,
“we’ve never been positioned better
as a multiplex of channels to take
advantage of an upfront,” Ferro says.

Cartoon Network, coming off
its best year since 2006, is also
bullish. “We think this is a good
time for [advertisers] to re-evaluate
how they spend their money based on our
growth,” says John O’Hara, executive VP of ad
sales and marketing for Turner Broadcasting’s
Cartoon Network and Adult Swim.

Nickelodeon, naturally, expects to maintain
its top-dog status. “The relationships that we
have with our advertisers have never been
stronger. The brand has not been diminished
in any way whatsoever,” says Jim Perry, executive
VP, 360 Brand Sales, Nickelodeon and
MTVN Kids and Family Group. “We continue
to have the top shows out there. We have no
intention of giving up our No. 1 position.
We’re going to be putting more
than 600 hours of new content out there
in every genre on every platform, and
we love the direction we’re headed.”

Perry maintains that Nickelodeon took
care of its advertisers during the fourthquarter
ratings plunge. “We’ve made
them all whole coming out of the important
fourth quarter and in pre-Easter, so
as far as our partners in the ad community
are concerned, we’re confident in the
brand and what we’re going to be offering
[during the] upfront,” he says.

Last year’s kids’ upfront marketplace
generated about $1 billion in sales. But
buyers expect there to be fewer ratings
points in the market this year, partly
because of Nick’s problems. “I think
this year, when you look at the overall
picture, we’ll actually see a more significant
decline in supply,” says Darcy Bowe, associate
activation director at media agency Starcom.

Kids ratings also haven’t been helped by a
lack of new tentpole programming that gets
viewers excited. “There hasn’t been another
SpongeBob, there hasn’t been another Hannah
,” says Bowe. She adds that it is unclear
whether technology like video on demand
is limiting the networks’ ability to ignite
a blockbuster, or if it’s just the quality of the
material. “We don’t really know,” she says.

In the ad market, lower supply usually means
higher prices on a cost-per-thousand-viewers basis. And while Nick could decide to push
up rates to maintain revenue, buyers warn that
being too aggressive on price could encourage
advertisers to shift money to other networks.

“It will be really interesting to see how they
play it out,” one buyer says.

One rival network executive thinks Nickelodeon’s
strategy will be to maintain volume.
“They don’t seem to be as worried about price
as they are about volume. And that’s more than
just the kids business,” the executive says, referring
to Nick parent company Viacom.

With only a few major players in
the kids market, advertisers don’t have
many alternatives, so Nickelodeon
probably won’t have to take a big hit on
rates in order to make a volume strategy
work, the buyer says.

Historically, the kids upfront market
moved in March and April, following
Toy Fair in New York City. But in recent
years, with more adult
brands buying kids nets to
reach moms, and with media
companies unwilling to
let a price precedent be set
by a network in the kids
category, negotiations have
waited until May, when the
grown-up nets do business.

That means at this point,
buyers say they don’t have
a good handle on how
much their clients plan to
spend. Nevertheless, most sellers are optimistic.

“We hope if the economy is slowly turning
around, that we’re going to have another good
upfront in terms of demand, both on the adult
and the kids side,” says Perry.

Nickelodeon already has 2012-13 business
booked in long-term deals that include licensing,
marketing and advertising with major
marketers including Mattel and General Mills.

“So we’ve got those guys locked up, and
then we’ve also got a bunch of new partners
that we’ve been bringing into the market,”
Perry says. This quarter, automaker Mazda is
advertising on the main Nickelodeon channel
for the first time. Other new clients include
Hewlett-Packard, Dell and Pirate’s Booty Popcorn,
which will soon be featuring SpongeBob
SquarePants on its packages. Those deals were
done in midyear, but Perry expects many of
them to return as upfront advertisers.

Perry also says that Nickelodeon already
has sponsors lined up for the network’s new
version of Teenage Mutant Ninja Turtles, coming
in the fall.

While Disney sells commercials on its XD
network aimed at boys and on its Websites,
Disney Channel and the new Disney Jr. rely
on a sponsorship model. Disney’s Ferro says
more advertisers are seeing value in a sponsorship
model as multiplatform campaigns
become more sophisticated.

Ferro points to a campaign that linked
Nestlé’s Nesquik brand with Disney’s Phineas
and Ferb
franchise. “It was really
about how they tie into these
franchises that are so engaging
with kids and moms,” she says.
“People understand now that the sponsorship
model is not only about the sponsorship
opportunity on-air, but how you are able to
tie that into a 360-degree experience so that
you’re reaching the consumer with the advertising
message regardless of where they experience
the content.”

Cartoon Network will be marking its 20th
year, and O’Hara says ratings are being boosted
by new shows, including Adventure Time, The
Regular Show
and Level Up. He says the network’s
“Flicks” Sunday movie franchise is attracting
coviewing, with parents and children
watching together, and that it’s attracting advertisers
outside of the usual kids categories.
Cartoon also recently aired its Hall of Game
awards show, which was sponsored by Kids
Foot Locker and Universal Pictures’ The Lorax.

A host of smaller networks are also looking
to attract viewers and ad dollars. The Hub,
a joint venture of Discovery Communications
and Hasbro, is counting on a coviewing
strategy. “We know we’re the little guys, we
know we’ve got a ways to go, but we’re very
optimistic and we’re growing our audience,”
says Hub president Margaret Loesch. Where
Disney focuses on girls and Cartoon attracts
boys, “we provide programming for the older
boy and girl in the home, and the younger
boy and girl in the home, and there’s shows
they can watch with their parents, too.”

The Hub recently added four new shows to
its lineup, including a new version of The Care
, The Littlest Pet Shop and Kaijudo:
Rise of the Duel Masters

The Hub has also attracted a variety
of advertisers, ranging from automotive
to packaged goods, according to Brooke
Goldstein, Hub senior VP for ad sales.
Hasbro’s involvement has made some
toymakers wary, but Goldstein says “we
started out with 20-plus kids advertisers.
We’re probably into 40-plus now. We still
certainly have challenges with some of
the larger competitors in the space, but
we’re slowly breaking through.”

Qubo Channel says it is adding 16
new series to its family-friendly lineup,
including Artzooka, Jakers! and Sandra:
The Fairytale Detective

PBS Kids Sprout, the preschool network
partly owned by Comcast, targets
18-to-49-year-old women for advertisers,
making it a bit different than its competitors.
Sprout has had Nielsen ratings for a year and
is up to 55 million subscribers, putting it in
the conversation with the Hub and Nick Jr.,
says president Sandy Wax.

Sprout will be launching a new acquired
series, Justin Time, about a boy’s imaginary
adventures in history with friends, and is developing
an original series starring Sunny Side
cohost Chica the Chicken that could air in
the fourth quarter.

“The market is getting a lot more crowded
with the Disney Jr. launch. We take that as flattery,” says Wax. “As long as there’s a lot of
good options for kids, it’s a good thing.”

But smaller kids networks face an uphill fight. “It takes a lot of time and very deep
pockets to be able to do what some of the
major players have done in this space,” says
Nickelodeon’s Perry. “It’s not an easy business
to be successful.”

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