This year, advertising buyers expecting a frenzy in the broadcast upfront market are turning to cable. By the end of March, some of the major cable entertainment networks will have written 40% to 50% of their upfront business. Turner, which earns 23 cents of every dollar in the cable market, expects to write 33% to 40% of its business before the upfront breaks in earnest, according to sources in the ad sales department.
"Early buyers are hedging, believing they're going to get slaughtered in broadcast," says one advertising executive.
Broadcast television, which traditionally moves in June, will break in May this year.
Cable networks once waited for the leftovers of broadcast. Now buyers are coming to cable first to lay the groundwork for broadcast deals. One way they do that is through expansion options: An advertiser may lock down a $10 million deal with a cable network with the option to spend an additional $3 million within 60 to 90 days, during which they shop the broadcast upfront.
"Basically, cable networks are used as an opportunity for agencies to negotiate against broadcast networks," says Bill McGowan, executive vice president of advertising sales for Discovery Networks. "A smart agency will come in and say, 'I just want to hold a major schedule on Turner, Discovery or USA,' and negotiate with the broadcast network. If the network doesn't bring in a CPM at the desired level, the agency will go back to cable."
Usually, frequent requests for options indicate a hot scatter market. Last year was one of the hottest scatter markets ever, and this year is expected to be no different. Dotcoms created a run on last year's market, and the category remains strong in this year's upfront market despite taking a beating in the stock market over the past two weeks.
"Much of the dotcom business is not necessarily start-ups," McGowan points out, "but established businesses wanting to market their online product."
Financial services, automotive and pharmaceuticals remain strong, while traditional package-goods makers, such as Procter & Gamble, have lost footing in the advertising market. P & G, once the mainstay of television advertising because of bulk buys, now takes a back seat to a glut of smaller companies willing to pay top dollar for time.
Another factor driving advertisers to buy cable early is audience delivery. Broadcast market share is shrinking as the number of cable networks grows exponentially faster than the number of eyeballs watching television.
Ratings are down this year for all the broadcast networks except ABC, which was on the verge of issuing audience deficiency units (ADUs) until Who Wants to Be a Millionaire? pulled its bacon from the fire.
Under-delivery is common across broadcasting and cable because networks plan for it. Typically, 15% to 25% of the inventory is held for ADUs, according to Brad Adgate, vice president of research for Horizon Media Inc., New York City. Ratings are pumped up in every way imaginable to justify the highest CPM possible, because networks get nothing for over-delivery.
"Take original movies," Adgate explains. "The network may estimate a 5 rating, although they may know it won't do any better than a 2.5, because they know they get a higher CPM. You want to estimate your ratings high, because advertisers don't have to pay for a higher delivery. ADUs are more prevalent than over-delivery."
Sources say FOX Family was rife with under-delivery last year in the wake of its network makeover, which slashed ratings by as much as 33%. The network is slowly recovering, targeting kids and young families. TNN also slid in ratings in the midst of a makeover but wasn't hurt so badly because NASCAR kept it afloat, according to one media buyer.
Overall, the upfront market is expected to see another boom. Turner sales executives predict a $4.6 billion cable upfront, a 28% increase over last year.
McGowan is sticking by the $5 billion he predicted earlier this year. "Absolutely," he says. "It's in the bank."