Cable's Conundrum

Ratings are up, but upfront was a yawn

Cable networks will probably end the summer with their best ratings ever. Unfortunately, they're also finishing the upfront market with the weakest ad growth in years, sapping expectations for the coming year.

Smaller cable networks are completing the slowest upfront negotiations in years, and overall cable has lost momentum. After cable's long-time outpacing of broadcast networks, industry and Wall Street executives estimate that cable networks booked about $7.1 billion in ad sales, about even with last year, but that's $300 million-$400 million less than expected last spring.

The largest networks—TNT, TBS, ESPN and USA Network—secured 1% increases in cost per thousand viewers (CPM), or even less. Those with fewer viewers or weak ratings—such as Discovery, Court TV and Hallmark—had to trim CPMs 1%-2%. Even once-mighty MTV and Nickelodeon—which have traditionally enjoyed far greater price increases than other cable networks—were basically flat. Failing to get the prices they wanted, cable networks didn't sell as much inventory as last year, hoping for stronger prices in the scatter market.

Sanford Bernstein media analyst Michael Nathanson says cable networks are getting caught between a soft ad market and an ever increasing amount of inventory. “A clear supply/demand imbalance is taking place,” he told investors in a briefing last week. “It's created a buyer's market.”

At the same time, the syndication market also is weak, with sales totaling $2.7 billion. But industry executives say Sony, in particular, has strong sales, largely because it has new shows in the market, The Greg Behrendt Show and Judge Maria Lopez.

The ad market contrasts with cable's Nielsen momentum. For the sixth straight summer, ad-supported cable networks beat the seven broadcast networks in both household and 18-49 viewing. According to a tally by Turner Broadcasting System research chief Jack Wakshlag, through Aug. 20, ad-supported cable had a 62.1 share in households versus the broadcast networks' average 31.2, a record low. In the 18-49 demo, the split was 51.0 to 27.5.

With broadcast heavy on repeats and unviewed reality shows, several cable networks saw jumps. USA was up 22% over last summer in 18-49 viewing during prime, on the strength of wrestling, Monk, Psych and the 7.4 million viewers who tuned in for a mid-July showing of Pirates of the Caribbean.

The BET Awardsshow pulled in the most viewers 18-49—more than 3.7 million—of any cable program this summer. AMC's first original movie, Broken Trail, ranked as the most watched cable program of the summer, averaging about 10 million viewers over two nights.