Ad sales executives will tell you it’s hard to negotiate for higher prices and higher sales volume at the same time—you have to focus on maximizing one or the other.
With this year’s upfront expected to be strong, the handful of cable networks whose ratings are up this season would appear to be in an especially good position.
AMC Networks and Crown Media Family Networks have both been successful with original programming, but they will be trying to push media buyers in different directions. One will settle for moderate price increases to get more volume. The other will be more selective about the business they take, cutting deals that include more aggressive price increases.
AMC’s ad sales were up 24% to $945 million in 2015, driven by The Walking Dead, TV’s top-rated scripted series. While it’s generally true that cable programming commands lower prices on a cost-per-thousand viewer basis than similar shows on broadcast, AMC has been able to win premium rates for its shows, in some cases higher than broadcast.
“We’ve been lucky going back to the Mad Men and Breaking Bad days—we had a lot of CPM adjustments along the way,” said Scott Collins, executive VP for ad sales at AMC Networks. For the Walking Dead, CPMs have climbed as the show became a massive hit.
“There are lots of times that buyers tell me ‘Gee, these Walking Dead units are expensive.’ Well that is the No. 1 show on television in the demo you’re buying it on, so don’t you think it should be? I think we’re pretty fair with what we deliver,” Collins said.
In past years, AMC has been a top network in the quarters when Walking Dead aired, then dropped while the zombies were between seasons. The net has added more original series with high ratings—Fear the Walking Dead, Better Call Saul, Into the Badlands and the upcoming Preacher. (Collins said the May 22 premiere episode of Preacher is sold out.) Now AMC expects to be near the top every quarter.
Originals are also gaining popularity on AMC Networks’ BBC America, IFC, SundanceTV and WEtv. So rather than trying to push up its prices, AMC is looking for volume. “We want agencies to know that we’re able to year in and year out absorb a lot more of their money because of the growth in our GRPs in certain quarters,” Collins said.
“We have the girth of originals that really deliver broadcast prime replacement,” he continued. “As there’s a tightening of the marketplace in scatter and some softness in some of the broadcast ratings, we are a great alternative for those GRPs because we deliver the scale.”
Things are different at Crown Media, where the Hallmark channels also are registering higher ratings and reported an 18% increase in ad revenue to $386 million last year, thanks in part to holiday events like Countdown to Christmas and original series.
For the first time in several years, Crown is inviting buyers and clients to an upfront event—a dinner at New York’s Rainbow Room. Naturally, Crown expects its guests to pay in the form of higher CPMs. “Historically, our CPMs are efficient,” said Ed Georger, executive VP of ad sales at Crown. “The ad community knows that, and what we’re encouraging them to do is recognize the growth and the success that we’ve had. And I think they will. They certainly have been in the scatter marketplace.”
Efficient is advertising-speak for cheap. Georger estimates that in some cases, CPMs for spots on Hallmark Channel are half those of networks with similar ratings. And the difference is that Hallmark has been achieving its ratings guarantees, while other networks are losing viewers and owing sponsors make-goods.
In scatter, advertisers are paying more than 30% above upfront rates. Georger thinks advertisers also will pay more this upfront. “We have a track record of delivering value. We’re delivering schedules in the quarters against the guarantees in the quarter where [the advertiser] bought it, in the weeks where they bought it,” he said. “I imagine that’s a tough thing for a lot of competitors to do, given the challenges they’ve had from a ratings point of view.”
As a result, when the range of price increases get set during the upfront, Hallmark Channel should be at the high end, Georger said.
Even with that, Hallmark will remain relatively inexpensive. “A large percent of a small number is still a small number,” he said. “But Crown Media is still going to be able to deliver for clients in the upfront, despite being at the top of the market.”