Upfronts 2009: Cablers Bullish As Upfront Talk Heats Up

But questions abound regarding economy's impact on selling season

With the upfront selling season quickly approaching and the economy showing no signs of a turnaround, tension is beginning to mount. While it's too early for even the most bombastic prognosticators to start throwing out their best upfront guesses, the chatter has begun about how negotiations will shake out in an economic maelstrom.

“How big the total marketplace is remains a significant uncertainty heading into the upfront,” says John Rash, senior VP and director of media analysis for Campbell Mithun. And the blustering is already beginning from all sides, especially the cable networks.

As broadcast networks continue to lose audience share, cable execs say they have an improved negotiating position because cable offers better value than broadcast.

“For many years, advertisers have been paying more for broadcast networks that have lower ratings, more for less,” says David Levy, president of Turner Broadcasting Sales and Turner Sports. “Can that continue in these challenging economic times?”

Last year's upfront market posted CPM (cost per thousand) increases between 5% and 10%. This year, some observers are predicting that overall price decreases may be on the table.

“It is not going to be pleasant for suppliers; everybody is starting to posture,” says Peter Knobloch, president of media services outfit R.J. Palmer. “The cards aren't stacked in their favor. I'm not looking to piss anybody off; we're going to be looking at negatives.”

Ad-supported cable has continued to stake out increasing market share with original series, especially dramas. So AMC executives hope the effusive critical praise, and Emmys, for Mad Men and Breaking Bad may actually pay real dividends.

“We go into these meetings, and [buyers] know our product and like it,” says Bill Rosolie, the network's ad sales chief. “We have good product on the air.”

The cratering automotive and financial services industries have meant that some networks, including male-targeted channels such as ESPN, have been hit harder than others. But none have been immune from above-average option taking in the first-quarter scatter market.

However, some of those declines were offset by a flurry of business for March, which indicates that marketers, after hunkering down in the first two months of the quarter, had cash to spend in the third.

For instance, National Geographic Channel has virtually sold out its inventory for March. And WE, seeing packaged goods and beauty products holding steady, had its busiest week of the quarter last week and continues to book business in the final weeks of the first quarter.

“For us to be booking March in March, it shows you what is happening,” says WE ad sales executive Scott Collins. “But the positive thing is advertisers are continuing to spend. I would not say [packaged goods] is recession-proof, but it has been the least affected.”

Spending down to the wire

But the late spending is also strategic. Network executives are hoping that deep second-quarter options don't necessarily reflect cuts to marketing budgets, but rather opportunistic deployment of dollars.

“They're not cutting money; they're sitting on money,” posits one cable executive. “They want to have the flexibility to spend in the market. Second-quarter scatter is also a setup for the upfront, and if the agencies can make it feel softer, they'll feel like they're in a position to push for the upfront.”

Still, how much money flows into the upfront is the major uncertainty everyone is talking about. The packaged-goods sector may be strong, notes Aaron Cohen, chief media negotiating officer for Horizon Media, “but virtually everything else is in a wait-and-see what next week's business is going to be.”

There may be one silver lining in the gray economic outlook: Desperate times have historically incited innovations in the business. Cablevision announced last week that it is expanding its addressable advertising capabilities to 500,000 homes in the New York area. The technology allows advertisers to deliver commercials targeted to consumers' demographic data. The deployment follows an 18-month trial in 100,000 homes. Addressable advertising has long been the Holy Grail for the industry, but implementation has come in baby steps.

“One of the transforming things in our industry right now is the impact of research,” says Henry Schleiff, president and CEO of Crown Media Holdings, which owns Hallmark Channel. “If someone's marketing budget is cut in half and they've got to move product, they have to know the best way to do that.”

Claire Atkinson contributed to this report