CNN Tackles Fox News Head-On

But impending war brings special uncertainty to cable news upfronts

At a recent CNN ad-sales pitch, an on-screen logo proclaimed CNN as "News. Not Noise." It was a swat at rival Fox News Channel's talk-radio style, not a new on-air slogan. Still, it was an uncharacteristically aggressive message for CNN, once the king of cable news in viewers and ad dollars.

This year, not only is there a fierce battle between CNN and Fox News, but, with the upfront selling season approaching, the cable news category is saddled with a special uncertainty: the possibility of war, which would play havoc with ad schedules.

Sales executives are plotting both war contingency plans and their upfront strategy. The hope is that the two won't meet and that war, if it comes, will end before the upfront unfolds (usually May to July for cable networks).

If there is a war, Fox, CNN and MSNBC expect to suspend ads for at least several days. Some clients—notably, travel and tourism advertisers—will likely sit out, and some other commercials may not feel tonally acceptable.

"The war is the wild card," said one media buying executive. "Once it begins, the best-case scenario is that it lasts a week and everyone can get back to selling ads."

The worst case: Uneasy advertisers keep commercials off for weeks and possibly even revamp their upfront plans.

Count on this: Fox News should do big business. For the first time, Fox marches into the upfront as the top-rated cable news outlet, having bested CNN in ratings for 14 consecutive months.

Fox's prime time schedule—led by bombastic Bill O'Reilly—drives the appeal, but Fox also is weakening CNN's lock on breaking and hard news. During the coverage of the Columbia shuttle disaster, Fox News nearly matched CNN's ratings And attracted 5.6 million viewers for President Bush's early-March news conference, more than double CNN's take.

Last year, in a similarly sluggish economy, Fox raised costs per thousand (CPMs) 15%, according to Morgan Stanley analyst Richard Bilotti. CNBC and CNN/Headline News cut pricing 5%; MSNBC's rates were flat. (Some industry executives put the average cable news CPM around $10.)

Both CNN and Fox expect to raise rates this upfront.

Fox News Senior Vice President of Ad Sales Paul Rittenberg ventures that Fox News should come close to erasing the CPM gap with CNN: "It would defy belief if this is the first market where money doesn't follow the ratings." In 2002, Fox News says, it took in $200 million in ad revenue. Depending on the war, Rittenberg expects as much as $300 million this year.

CNN, meanwhile, will try to sell advertisers on its interpretation of ratings.

"What's embedded in a CNN rating point is more valuable than others' [ratings]," said CNN President of Ad Sales Larry Goodman. He contends that CNN's viewers are largely upscale, well-educated and male, and the most desirable. (But Fox News viewers have a higher median income, according to freshest Nielsen data.)

In part as the oldest, CNN does enjoy advantages. Its CPMs have grown steadily over 20 years, and it has also had time to cultivate relationships with advertisers. Sold with Headline News, it's still expected to generate higher sales than Fox in the upfront. In 2002, CNN and Headline News grabbed $350 million to $450 million.

Buyers want both Fox and CNN. "Our clients still look at them as two types of services," said Tom DeCabia, of media buying firm PHD.

CNN and Fox share 44 advertisers, according to Goodman. Both experienced robust ratings growth since 2000: Fox's prime time ratings are up 265%; CNN's, 43%, according to Nielsen data.

Then there's barely breathing MSNBC, which Morgan Stanley estimates took in about $180 million in ad revenue last year. It's marred by sluggish ratings and a prime time schedule in disarray.

James Hoffman, senior vice president of sales for NBC News and MSNBC, says prime time plans will be set by the upfront. He contends that MSNBC enjoys some advantages in packaging about 15% of its sales with NBC News.

Despite steep declines in ratings, corporate cousin CNBC is "still a must-buy for upscale viewers," said a veteran buyer. CNBC grabbed the most ad revenue last year for cable news—$440 million—according to Morgan Stanley.