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A Business That Really Needs a Hit

Lack of momentum is a problem that's cooling off sales 9/30/2005 08:00:00 PM Eastern

Syndication is usually a boom or bust business. This fall, it finds itself in the uneasy middle.

Media buyers say syndication will probably end this year up only a bit from 2004.

Ad expenditures in the recent upfront tumbled, but cable and broadcast networks also had a tough go of it.

Syndication's boosters point out that some of television's longest-running shows are in syndication, so advertisers know what they're getting

On the flip side, buyers who recently finished negotiations in the upfront, which covers fourth quarter 2005 through third quarter 2006, say syndication's problem is a lack of fresh content.

“Syndication is a very good medium, but the product has been challenged [because] there hasn't been anything outstanding in the past year or so,” says Magna Global Chairman/CEO Bill Cella.

He finds strengths, in some of the court shows and in perennial hits like The Oprah Winfrey Show and Dr. Phil. But, Cella says, “the number of shows that are doing above a 1 rating has dwindled, and there are only a handful of shows with a 3 rating, demographically.”

Mitch Burg, president of the Syndicated Network Television Association (SNTA), has a persuasive opposite view. The dearth of new series, he maintains, isn't a sign of trouble but is instead a reflection of the health of programs already on the air. “Advertisers are looking for programs that they can rely on, that are proven performers, which is an area where syndication excels,” he says. “Syndication has 11 shows that have been on the air for more than 10 years. What's amazing is these shows have been on the air a long time but ratings are up,” though just 3% over the two previous seasons.

Clearly, growth is hard to come by, as cable eats into daytime television. Precise revenue figures for the upfront are difficult to pin down; one major media-buying agency estimates that 2005 spending will be down 9% from 2004, to about $2.1 billion.

Ad spending was healthy earlier this year but slowed in the second quarter, when expenditures were up only 3% over the year-ago period, according to ad-tracking firm TNS Media Intelligence. Spending in the first quarter was up 4.2%. Going forward, syndie is likely to face more of the same modest growth.

TNS is forecasting an increase of 3.3% for full year 2005. That is on par with an average 3.4% for all ad-supported media. Universal McCann forecaster Robert Coen projects growth of 4%, compared with 5.7% for all media.

Auto ad spending was soft in the upfront for syndication, but so is advertising outside the upfront arena. Still, Cella says, “This is the third year of a mediocre scatter market” for syndication.

Part of the problem facing syndication is that few media buyers are feeling upbeat about the handful of shows debuting this season. Among them: Warner Bros.' Tyra Banks, NBC Universal's Martha and Twentieth's Judge Alex. (A Current Affair, also from Twentieth was in limited distribution and slated to go nationwide in January but was axed two weeks ago.)

One cause of the relative scarcity of new shows is the increasingly high cost of producing first-run originals, particularly for daytime. A few analysts say stations also have an effect, choosing in many cases to double-run hot shows like Dr. Phil rather than risk losing money on unproven programs.

Syndication is also suffering another problem: the ripple effect created by the broadcast networks in last spring's upfront. ABC, with rebounding ratings, kicked things off with modest price hikes of 4%-6%. Other broadcast networks, cable networks and syndicated programs—few of which have the momentum of ABC—were then hard pressed to raise prices higher than that.

“[ABC] set the bar, and it was tough to go over that,” says Amy Carney, executive VP of advertiser sales and operations at Sony Pictures Television. “It may have depressed everybody's opportunities, at least during the upfront.”

Most buyers and sellers are quick to point out that syndication's woes don't apply across all program genres or syndicators. Of 10 syndicated genres measured by TNS, five had revenue either flat or down versus first half 2004. Off-network sitcoms posted the only decline of the most lucrative genres—$23 million, or 2.7%—while entertainment magazines, talk shows, reality shows and game shows mostly posted slight increases. Spending was down or flat for four of the five smaller genres, including a steep 33% tumble for action hours.

Steven Hirsch, president of King World Media Sales, which has the luxury of selling ad time on shows like ratings-charged Winfrey and Dr. Phil, says syndication's down cycle may prove to be short-lived.

Advertisers that budgeted for higher cost-per-thousand- viewers (CPM) increases than the networks charged in the upfront ended negotiations with unspent money. Some of it has trickled into syndication.

Says Hirsch, “I'm cautiously optimistic based on the spending that I've seen in the upfront plus the additional money that has been coming in.”

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