Cable’s top advertising executives are more bullish than Wall Street about how the upfront is shaping up. In a recent report, analyst David Bank of RBC Capital Markets predicted that media budgets will be up just 2%, with spending in the broadcast upfront dropping about 2% and cable spending increasing 4%-5%. Last year, cable upfront volume rose 5% to $9.8 billion, according to the Cabletelevision Advertising Bureau.
UBS analyst John Janedis sees money moving from broadcast to cable. “Marketers continue to look for efficiencies and cheaper CPMs, particularly with CPM deflation across some media,” Janedis said in a recent report. “As we approach the upfront, we expect incremental share to shift to cable relative to broadcast, particularly smaller cable nets with strong audience trends.”
Executives on the sales side see bigger things brewing for cable. Lou LaTorre, president for ad sales at Fox Cable Networks Group, sees the cable upfront crossing $10 billion for the first time, topping out at $10.3 billion or $10.4 billion. He also expects cable volume to rise 5%-7%, adding that it could do better if GDP growth improves. By contrast, he sees broadcast down 2% in terms of traditional TV ads, but up 2% with “fluid” digital inventory counted. “It’s a healthy market. Pricing’s been strong all year,” LaTorre said.
That would be a good jump, though not enough to push cable prices to parity with broadcast. That would require a tidal wave, according to Joe Abruzzese, Discovery’s president for ad sales. “If broadcast went from $8 billion to $6 billion and cable went from $9 billion to $11 billion, if there was a $2 billion swing from broadcast to cable, cable would be forced to raise their rates because it wouldn’t fit the inventory,” he said. “Broadcast would look at it and say, ‘There’s not enough money. I need to get more sold out and lower the price.’”
Abruzzese says that scenario is unlikely to happen this year. “If that was going to happen, I would have gotten some phone calls already. I would have gotten pressed with some early deals.”
Looking ahead, Abruzzese says things are only getting stronger. “We’re having a [very strong] second quarter. Lots of volume. We’re getting very sold out,” he said.
David Levy, president of ad sales, distribution and sports at Turner Broadcasting, also anticipates a strong upfront. “I’m seeing double-digit scatter pricing in the second quarter. I saw it in the first quarter as well. I see no cancellation options,” Levy said. In fact, he added, “It’s been a long time since I felt this confident about an upfront.”
Digital will be a factor, but Levy doesn’t see it stealing money from TV. “A lot of the brands we have here at Turner—CNN, Funny Or Die, Bleacher Report—are certainly going to play a role in this upfront, and I think TV Everywhere is really starting to take shape and move in the right direction,” he said. That means more content being viewed on different devices and more opportunities for marketers to advertise on that content.
“When dynamic ad insertion is universal, budgets will gravitate to it because it will then accommodate the creative and timeline flexibility most clients need,” added Fox Cable’s LaTorre.