The more that advertisers fear an actors strike, the better cable will do in the upfront. That's about the only generally agreed-upon assessment of cable networks' leverage in the market as the upfront advertising season looms.
Otherwise, expectations and forecasts are all over the map, from cable executives generally predicting modest growth in a weak market to some analysts forecasting a savage downturn for everyone.
The question is, in a bad economy, do cable networks gain because they're relatively cheap, or do advertisers put their reduced budgets in what they generally consider the best outlet, broadcast networks?
"At this point, it doesn't look like there will be any inflation," said Chris Geraci, senior vice president, national broadcast, for Omnicom Group's BBDO Worldwide. "The one thing about cable is, it's still a relatively low-cost base, so it could show some gains. But the runaway inflation in cable over the past couple of years won't be seen again."
In his annual forecast of the upfront market, Discovery Network's ad-sales chief Bill McGowan predicted that the slowing of the economy will spark a "major correction" for the broadcast networks, with spending falling 5%, from $7.8 billion last year to $7.3 billion this year. He believes that the $500 million difference will shift to cable nets, whose sales should rise 11%, to $5.2 billion.
McGowan contends that, with basic cable's ratings going up and broadcasters' falling, a recession should break the network's leverage over ad buyers. "The price/value relationship is not there." He has an obvious ax to grind but also has a good track record in forecasting upfronts.
So at the end of the day, McGowan expects advertisers' combined upfront commitments to cable and broadcast to be about the same as last year.
Morgan Stanley media analyst Richard Bilotti, however, paints a bleaker picture, predicting that the overall market will plunge 15% as advertisers hesitate to spend in a crumbling economy. "Advertisers that have been hurt most by the slowing U.S. economy may opt against long-term contracts to increase the flexibility of their advertising budget."
The good news is that cable's ratings are up strongly. An analysis crunched by Turner Broadcasting System research chief Bob Siebert shows that basic cable networks' household viewership increased 9% during the first quarter ended April 1. Among the broadcast networks, CBS posted a 5% increase, Fox a 2% increase; the other major services dropped, though, with ABC losing 18% of its audience. The three largest broadcast networks lost an average 8%; the four largest, 7%.
The one thing that offers leverage to cable is a strike. If a strike shuts down production of TV series, industry executives believe, viewers are unlikely to watch stale reruns on NBC and CBS.
Cable networks, on the other hand, already thrive on reruns and old movies. Also, some of them have original series already in the can. TNT, for example, has its new urban action series Witchblade, which begins this summer, and the second season of Wall Street series Bull, which was so poorly received it probably won't emerge unless there is a strike.
"Cable networks are going to play into the fear of the strike, and that will probably cause some shift in spending," said an executive with one ad agency. "The broadcasters will counter with reality stuff in the fall, but some advertisers aren't comfortable with reality shows."