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Upfront's Mixed Bag

Cable is up 10%; broadcast sees few gains 6/06/2004 08:00:00 PM Eastern

Advertisers will spend more money on TV ads next season, and cable is getting most of that increase for now. Cable executives are forecasting growth of at least 10%, to around $6 billion, while spending on the broadcast networks will be roughly flat at about $9.4 billion.

With roughly 75% of the market sold, network executives say they'll need at least one more week of wheeling and dealing. During these frenetic few weeks, after haggling for months, sellers and buyers of network ad time sit down to write contracts for commercials in the upcoming season.

Among the six broadcast networks, ABC, NBC, and The WB are expected to take in less money than a year ago. Fox will be flat, and UPN will be up. CBS is only about halfway through its upfront market, but, if it can sustain the price hikes it has received so far, it too will be up in total sales versus last year.

Merrill Lynch's Jessica Reif Cohen predicts cable will post a 20% gain, to about $6.6 billion, and broadcast a 2% drop, to about $9 billion. "Advertisers are increasingly looking to cable-network programming as a compelling alternative," she says. She bases her sales projection on cable's 8% average gain in ratings this season, which prompted nearly across-the-board ad-budget increases for the medium.

Syndication sales, which got under way last week, are expected to be up 15% to $2.7 billion, says Cohen.

The market dynamics have changed from last year, when broadcasters began selling first and were finished in about three days, with double-digit gains in price hikes and total spending. Then, the cable market kicked in and yielded about $5.5 billion over six weeks. There was a lot of wrangling over price increases, which ranged from single digits for some networks and to high teens for others.

But buyers have vowed not to engage in the usual buying frenzy sparked by fear of missing out on the ads and programs ordered by their clients.

Calculating precise numbers is difficult because the market is still in progress, but NBC is expected to be down perhaps $200 million, to approximately $2.8 billion. The network is commanding price increases ranging from 5% to 7%, less than half the 16% gains it received for its prime time spots last year.

A year ago, NBC sold $3 billion worth of spots in the upfront market, but that figure included $100 million in Olympics spots. The other $100 million decline is due largely to the loss of Friends
and Frasier, according to ad buyers. NBC had sold between 50% and 75% of its inventory at press time and is expected to wrap up sales this week.

CBS was selling at a slower pace and was only 50% complete at the end of last week. But the network was also demanding and getting higher rate increases—ranging from 9% to 11%—than the rest of the networks. CBS's total take will depend on whether its sales team succeeds in selling the rest of its inventory at similar rates. If it's successful, total sales could surpass $2.4 billion, or $200 million more than a year ago.

If it can't get the rates it wants, CBS may just stop selling and take its chances in the scatter market, which is TV sales jargon for the buying and selling of spots during the season rather than before it. Typically, spots sold upfront are less expensive than those sold in the scatter market, providing incentive for advertisers to buy early. The network may bet that demand for ad time during the season will drive prices significantly above upfront rates.

ABC is also halfway through its upfront and getting rate hikes of 5%-6%. Last year, the network's total prime time upfront take was $1.8 billion. This year, given its steep ratings decline, it is expected to end up with between $1.6 billion and $1.7 billion.

Fox sources said that network was about 75% sold last week and commanding price increases in the 7%-8% range. It wrote $1.6 billion in business last year, and its executives expect to write about as much this year.

UPN, thanks to America's Next Top Model,
rebounded in the ratings after two tough years and is posting sales increases of 8%, according to buyers. UPN, more than 75% sold last week, was on track to bring in at least $325 million in sales, up from $300 million a year ago.

The WB, which saw a 15% drop in its ratings this year, is still managing to command price hikes of 7%-8%, given the appeal of its younger-female audience to a core group of advertisers. Still, the rate hikes won't make up for the entire ratings drop, and the network expects to be down in total sales, to between $650 million and $675 million, compared with $700 million last year.

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