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Reeling Nickelodeon Sets Plans to Stay in Kids Game Lead

Upfront presentation seen as key to rebound for lagging overall sector 2/25/2013 11:41:06 AM Eastern

Apps Are Happenings

Kids TV networks have watched for years as the phenomenon known as the "pass-back effect"-devices being "passed back" to kids in the back seats of cars-has taken root. Now, nets are selling advertising on mobile apps this upfront, and it could be a game-changer.

"For the first time, we're going to see more advertisers embrace the idea of multiscreen video in the kids marketplace," says Darcy Bowe, associate media director at Starcom.

Disney has apps for Disney Channel, Disney XD and Disney Jr. Cartoon Network introduced its app last year. And Nickelodeon's app just launched ahead of the Kids' Choice Awards in March. The apps' live streams will generally be the same as the respective on-air content, leaving pre-roll video spots as the primary opportunity. There is always a layer of extra scrutiny on those targeting kids, but the opportunity to connect via apps is a major new frontier.

"Kids have been watching VOD for years. They're not afraid to watch video on their tablets. They're taking their moms' iPhones and are watching video constantly," Bowe says. "Now you have the three top players in the kids' space who finally have released a methodology by which someone can more easily consume that content. I think you're going to see an interesting shift of dollars that way."

The Nick app is "going to be very different than anything marketers or consumers have ever seen before, so we're very excited about it," says Jim Perry, Nickelodeon group head of sales. "Everyone is looking for ways to have their advertising message seen wherever the kids are. And if they're going to mobile and they're going to different platforms we're going to be there, and we think it's going to be real good for business."

"Once you have an app, you hit that icon and it takes you directly to the content you want. That's a beautiful thing. It creates such an engaged experience," says Rita Ferro, executive VP, Disney Media Sales & Marketing. "We're very excited about what that's going to do for our business."

Advertisers aren't waiting for the upfront, Ferro says. "They all want it now. There isn't an advertiser who hasn't asked about it," she says, adding that the app doesn't seem to be either stealing viewership from Disney's TV channels or cannibalizing ad dollars. "What we're seeing is, it's incremental."

Media buyers, and in some respects the larger television
world, are eager to hear how the network of SpongeBob and Dora plans to reanimate
itself.

Times have certainly grown more stressful at Nickelodeon,
which is preparing for a high-stakes upfront presentation on Feb. 26. The
network's ratings plunge and declining revenue have echoed through the broader
kids market. Even industry observers not directly involved with the sector have
come to see the network's saga as a case study in the challenges facing storied
brands fighting to stay on top.

Buyers say the kids' category was flat to down last year,
with fewer family movies pumping marketing dollars into the mix. Home video and
restaurant buys on kids' shows also declined, according to Darcy Bowe,
associate media director at Starcom. Those drops were balanced by increases in
the toys, gaming and packaged goods categories, Bowe says.

Sales executives naturally are optimistic this year's kids
upfront market will be up from the $850 million in business that got done last
year.

No company has more at stake than Viacom, whose Nickelodeon
business is in the crosshairs. With its ratings down 23% among kids 2-11,
Nick's industry-leading ad sales fell more than 9% to $1.165 billion, according
to SNL Kagan. In recent months, as the network's ills hurt Viacom's earnings,
senior management took steps to reassure worried investors, including
reorganizing Nick's programming team.

Absent a persuasive plan to reverse its slide with a fresh
programming approach, things could get worse for Nickelodeon, according to
media buyers. So far, they say, most clients have not shifted much spending from
the leader to the other players in the kids market, but that leadership
position is anything but a given.

"Everyone wants to steal share from Nickelodeon," says Bowe.

So when Nickelodeon holds its upfront presentation in New
York, the audience will be eager to hear the script for getting ratings heading
upward again. "We're waiting for the big reveal of how they're actually going
to go about doing that," says Amy Sotiridy, senior VP at Initiative.

Nickelodeon's pitch basically will thank clients for
sticking with them during the downturn and show them what's coming, according
to Jim Perry, Nickelodeon group head of sales.

"We look to deliver more value to our partners... better
programs, more targeted programs, more digital video programs," Perry says.
"Obviously we're doing something right....We still own the kids space, and we're
very appreciative of everyone who stuck by us."

A big part of Nick's presentation will be the network's new
app, joining rivals Disney and Cartoon Network in chasing kids and their
newfangled mobile devices.

While Saturday mornings on the broadcast networks once
dominated the business, it now accounts for only about 2% of kids gross ratings
points, and cable dominates. "As budgets have decreased in the kids space, the
broadcast players have seen less demand overall," says Starcom's Bowe. Cable
had the run of the category for more than a decade but is facing stiff
competition from digital players. Netflix, Amazon Prime and Hulu Plus
subscribers consume plenty of kids content and have eroded ratings.

Perry is nevertheless expecting a strong kids upfront for
cable. "The movie studios are coming back. You saw resurgence in December with
the toy category," he says. Perry says Nick is nearly sold out for pre-Easter,
has only a few expensive spots left in its Kids' Choice Awards, and
cancellation options are way down. "I'm feeling good, Perry says.

Similarly, Rita Ferro, executive VP, Disney Media Sales
& Marketing, says Disney had a strong fourth quarter. Budgets and pricing look
good in scatter. "We are very optimistic about what this upfront could be," she
says.

Nickelodeon's competitors are taking different approaches.

Instead of a big New York event, Turner Broadcasting's
Cartoon Network is doing a road show of individual presentations for
advertisers and agencies. The network has already held about 20 presentations,
according to Joe Hogan, executive VP of young adults ad sales at Turner. "We
are getting questions about how kids are interacting with our brands across multiple
screens and what folks can do with us from a licensing and merchandising
perspective," Hogan says.

0225 Upfront Kids Chart Correx

The network is pitching a balanced and consistent schedule
as well. "It's important for folks to put their fair share of investment on
Cartoon Network," Hogan says. While not venturing a guess as to how big the
overall kids market will be, Hogan says that unlike past years, "the big
difference is the momentum that we have is real, and the gap is really
closing."

Disney is holding its upfront event March 12. The children
of buyers and clients are invited, like last year. "Not everyone has a
4-year-old, and the reality is when clients are there and they see the reaction
and the engagement that kids have with our talent and our content, nothing
sells it better," says Ferro.

Ferro adds that while Nick remains the leading ad vehicle
for reaching kids, "the fact that Disney Channel passed Nickelodeon last year
to become the No. 1 channel across all the key kids demos was really important
for us."

Disney is pitching sponsorships on its noncommercial Disney
Channel as well as spots on commercial networks like Disney XD. The company
also has websites, a radio network and new Watch Disney tablet apps to sell.
"We really integrate across all of the platforms and all of the businesses,"
Ferro says.

As Nickelodeon stumbled last year, upstart networks picked
up some of the slack. Disney XD, The Hub and Sprout each posted double-digit ad
revenue gains.

The Hub, a joint venture of Discovery Communications and Hasbro,
threw an upfront event last year. This year, the net is doing one-on-ones. "We
always felt-especially being still new and so small, but growing-that having
the ability to sit with clients, understand their business, crafting ideas, has
been beneficial," says Brooke Goldstein, senior VP of ad sales.

And the number of clients buying The Hub to reach young kids
and moms watching classic characters like the Care Bears together has grown
from 70 a year ago to more than 140 today, Goldstein adds.

"I think it's going to be a strong upfront," she says. "More
advertisers are looking for outlets with content they feel comfortable with."

Sprout is also approaching the upfront on a one-on-one
basis. It plans to have a fall slate of original programming to announce for
the first time, including The Chica Show's
return, says president Sandy Wax. The net reports ad revenue was up 20% last
year-even more if Sprout's Saturday-morning block on NBC is counted.

"Look at the networks that are growing- it tends to be the
upstarts," Wax says. "And some of the more entrenched bigger guys, like some of
the Nickelodeon networks, are still seeing some ratings softness. We've got
such a strong ratings story and such a strong brand story that we're really
optimistic."

Apps Are Happenings

Kids TV networks have watched for years as the phenomenon known as the "pass-back effect"-devices being "passed back" to kids in the back seats of cars-has taken root. Now, nets are selling advertising on mobile apps this upfront, and it could be a game-changer.

"For the first time, we're going to see more advertisers embrace the idea of multiscreen video in the kids marketplace," says Darcy Bowe, associate media director at Starcom.

Disney has apps for Disney Channel, Disney XD and Disney Jr. Cartoon Network introduced its app last year. And Nickelodeon's app just launched ahead of the Kids' Choice Awards in March. The apps' live streams will generally be the same as the respective on-air content, leaving pre-roll video spots as the primary opportunity. There is always a layer of extra scrutiny on those targeting kids, but the opportunity to connect via apps is a major new frontier.

"Kids have been watching VOD for years. They're not afraid to watch video on their tablets. They're taking their moms' iPhones and are watching video constantly," Bowe says. "Now you have the three top players in the kids' space who finally have released a methodology by which someone can more easily consume that content. I think you're going to see an interesting shift of dollars that way."

The Nick app is "going to be very different than anything marketers or consumers have ever seen before, so we're very excited about it," says Jim Perry, Nickelodeon group head of sales. "Everyone is looking for ways to have their advertising message seen wherever the kids are. And if they're going to mobile and they're going to different platforms we're going to be there, and we think it's going to be real good for business."

"Once you have an app, you hit that icon and it takes you directly to the content you want. That's a beautiful thing. It creates such an engaged experience," says Rita Ferro, executive VP, Disney Media Sales & Marketing. "We're very excited about what that's going to do for our business."

Advertisers aren't waiting for the upfront, Ferro says. "They all want it now. There isn't an advertiser who hasn't asked about it," she says, adding that the app doesn't seem to be either stealing viewership from Disney's TV channels or cannibalizing ad dollars. "What we're seeing is, it's incremental."

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