Cable Upfront Showing $500M Spending Decline - Broadcasting & Cable

Cable Upfront Showing $500M Spending Decline

A handful of programmers may buck the trend
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Slowly but surely, cable networks are finishing their upfronts.

Discovery’s Joe Abruzzese, Fox Cable’s Lou LaTorre (pictured) and NBCUniversal’s Linda Yaccarino say they are finito. Sources say Scripps Networks and Discovery Communications are done. Most of the other big players have an agency or two to close. In this upfront, being down less than the market is being considered a win. It’s not quite clear where that bar will settle.

Broadcast may have been down $800 million to $850 million in volume compared to last year’s market. And it’s looking to some observers that cable will end up down at least $500 million, or about 5%. That makes how much of that money will show up later in scatter a billion dollar question.

Most cable players will likely settle in close to that minus 5, but there appear to be a small handful of winners, even in this market. NBCU said its cable volume was up. Sources pointed to ESPN, with its expanding set of sports rights, and AMC Networks, which is adding original programming to all of its channels and has the final season of Mad Men due in 2015. Viacom also seemed to be showing positive volume. Some smaller programmers may also have benefited from having more efficient (cheaper) pricing, but most of those smaller programmers are still working on their upfront sales.

The rest though saw volume fall as marketers reduced their upfront commitments. A large chunk of the cutbacks came from big spenders including Procter & Gamble, who sources said gave a $20 million haircut to Lifetime alone. Others pulling back significantly on their upfront spending were Walmart, Diageo, Kellogg’s and General Motors. Some other automakers are said to have cut back as well.

The strategy being employed by advertisers seems to be to preserve cash to have flexibility later. “If you can make the media companies vie on a best idea basis for the money that’s been held back, you look like a pretty smart buyer,” said one market observer.

That strategy was enabled by a soft scatter market in the first and second quarters in which advertisers did not have to pay a larger premium for not buying in the upfront.

Fox’s LaTorre, who in April had publicly predicted a better upfront for cable, said the market was affected by sputtering economic growth and cautious consumer confidence. “Clients are saying let’s wait and see. If it looks like consumer confidence is back and there’s evidence they’re spending, then there will be a release of the money," he said.

LaTorre said three of his networks, FX, FXM and National Geographic Wild were up in volume, but FXX and National Geographic Channel were lower.

FXX in its first season failed to deliver the ratings it forecasted and was recalibrated by buyers. It was helped by The Simpsons, which will launch with a 522 episode marathon that attracted five sponsors. NatGeo also had ratings issues.

Overall, Fox’s cable portfolio finished the upfront down 2%.”We did well relative to the market,” LaTorre said.

What happens next? “The scatter market will be up,” he said. “To what degree, mildly or significantly, depends on how consumers start spending their money.”

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