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Price Gap Between Broadcast, Cable Originals Gets Tighter Still - Broadcasting & Cable

Price Gap Between Broadcast, Cable Originals Gets Tighter Still

Increased spend on programming is paying off in advertising market
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The Walking Dead and other original cable series often win
their time slots against all competition, including broadcast entries. But the
gap between how much advertisers pay for broadcast and cable commercials simply
won't die.

The difference is,
however, narrowing: As the amount of original programming on cable continues to
swell and cable networks move to produce scripted shows, broadcast ratings
slide.

Cable spending on
programming is approaching $25 billion, with about 90% of that going for
original shows, according to the Cabletelevision Advertising Bureau. As the
upfront approaches, cable advertising volume is expected to increase while
broadcast revenue remains flat, with demand growing for sponsorship packages
built around scripted shows on a lengthening list of cable networks ranging
from TNT to BBC America.

Historically, broadcast
primetime ad rates, based on cost per thousand viewers (CPMs), have been on
average about double those on cable, making cable an efficient buy. The most
attractive shows on cable, scripted shows that generate millions of adult
viewers, however, are getting premium prices that approach those of broadcast,
buyers and sellers say.

In the scatter
market in last year's fourth quarter, one buyer said that spots in AMC's
monster hit The Walking Dead cost about $200,000 (the price includes
multiple runs), which translates into a CPM in the 18-49 demo of $30-$35. At
the same time, costs for CBS' Sunday-night show The Mentalist could be
had for $100,000, a $39 CPM; and ABC's cancelled 666 Park Avenue sold
for $120,000, with a CPM of $46.

"In scatter
especially, we are hitting broadcast-like CPMs due to the girth of the number
of impressions that [The Walking Dead] delivers," says Scott Collins,
executive VP for ad sales at AMC. "Anyone who bought in the upfront got a great
bargain because it's delivering 25%-50% higher than we thought it would."

'Dead' Makes Everything Rise

Collins says that The
Walking Dead
has added prestige as far as marketers are concerned.
"Advertisers are using Walking Dead to launch new creative," he says.
"So whether it's a new video spot for a game or a new theatrical release, it's
become a pivotal piece of advertisers' promotional plans."

Chris Geraci,
president for broadcast at media buyer OMD, says looking at the average price
for advertising on cable can be misleading. "It's a fallacy to think that all
of the shows in cable are such a bargain versus all of the programming on
broadcast," he says. "If you were to isolate primetime cable, particularly the
high-end stuff, and compare it to the broadcast stuff you would see cost per thousands
that look a lot closer than they'd lead you to believe."

If you take out the
handful of top broadcast shows, cable originals are competitive on both price
and reach, says Lou LaTorre, president for ad sales at the Fox Cable Networks
Group. "The reason broadcasting gets higher CPMs in the face of aggregate
ratings declines is agencies believe they need the top 15 prime shows in
broadcasting to maintain the cost efficiency of their reach curve," LaTorre
says. In fact, the pricing for the average broadcast network show is well below
the top 15 and more in line with cable's premium programs. "I think we're
getting close to the point where that axis will be crossed, and the top five or
six cable networks will be able to provide that reach at a lower cost-per-reach
point," LaTorre says.

"From originals to
originals to originals, I think the gap has closed," says David Levy, president
of Turner Broadcasting ad sales, distribution and sports. Outside of primetime,
Levy says, Conan O'Brien's late-night show on TBS has been getting
broadcast-comparable CPMs since it launched three years ago.

When History took
its first scripted show, the hit Vikings, to market seeking
broadcast-level CPMs, the market was ready, according to Mel Berning, executive
VP at A+E Networks. "When Hatfields & McCoys generated the kind of
numbers it did last year, it gave us credibility when we were selling Vikings
and The Bible," the miniseries that also drew high ratings.

Berning gives credit
to original programming pioneers Turner and USA for establishing a market.
"They've driven audiences," he says. "It's a high-quality scripted environment.
It's all the stuff advertisers say they want. So it's hard for [advertisers] to
say no, it's not worth it."

In Cable vs. Broadcast, Mind the Gap

What makes
comparisons with broadcast tricky is that original programming is only part of
what cable networks sell, even in primetime. "We still have an enormous amount
of content that is acquired series and things of that nature, and I think there's
still going to be a gap between that and original programming on broadcast,"
Levy says.

Some cable
programmers are willing to sell advertisers packages that include only
originals. Others prefer to use their originals to increase the value of all of
their programming.

"There's going to be
a variety of CPMs and a variety of different ways people cut and dice this, but
I do believe that with the original content and the original programming that
is drawing those type of numbers, and the continuing investment in original
programming, you're seeing the gap close dramatically, quickly on those
programs," Levy says.

0408 Upfront Central Cable chart

OMD's Geraci says
the investment in programming has been good for the networks and good for
advertisers. "Good ratings are good for everyone," he says.

Because much of the
original programming on cable is owned by the networks that produce it, they
are able to offer comprehensive deals that stretch over multiple platforms and
include integrations.

"If you look at our
top shows on all of our networks, those CPMs are comparable to what you'll get
anywhere," says Jeff Lucas, head of ad sales for Viacom's entertainment and
music networks. But more important than the CPMs or eyeballs, clients are
looking to buy a closer association to that great content. When a client like
Unilever wants to sell Choco Tacos to young men, it bought a multiplatform
association with the Comedy Central show Workaholics, a hot show on
college campuses. The campaign included an original Web series, The Other
Cubicle
.

"That's a great
example of knowing our audience," Lucas says. "Everything we do here is based
on research and knowing the audience, but also being ahead of the curve on the
audience."

Original content helps
AMC sell sponsorship packages as well. "It allows us to probably have an
earlier seat at the table when it comes to upfront discussions," says Collins.
"As early as now, people are coming in and asking what we can do. 'We love what
you did with Hyundai, we love what you did with Dr Pepper,' we love what you
did with whatever sponsorship they see on-air. They say they'd love to get a
piece of that as well."

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