In Depth

ABC’s Upfront Fightin’ Words

In Cable vs. Broadcast, Mike Shaw at ABC Likes His Chances

Broadcast is firing back at cable networks that are trying to take a bigger slice of the upfront advertising pie.

Reacting to bold statements from cable executives that advertisers are overpaying when they buy commercials on the broadcast networks—and buyers who predict that money will move away from broadcasters—Mike Shaw, president of ad sales and marketing at ABC, felt the need to state his case.

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“It’s no more cable’s year than it was last year,” Mr. Shaw said bluntly. “I’m having a hard time seeing how I’m going to lose money in this marketplace.”

Given the struggling economy, advertisers need to ensure their marketing dollars are working as hard as they can, Mr. Shaw said. He advances an argument on ABC’s behalf that CBS, Fox and NBC might also make: Compared to cable, their networks’ audiences are both bigger and have a higher concentration of viewers who can still afford to buy branded products and services, rather than generics.

“For advertisers looking for a place that they’re going to go to reach their best customer prospects with the least amount of waste, ABC is increasingly the answer,” Mr. Shaw said.

David Levy, president of sales and sports for Turner Broadcasting, wasn’t available to comment, but in a recent interview he declared that advertisers pay too much for commercials on the broadcast networks. Turner considers its original programming a suitable replacement for run-of the-mill broadcast shows, yet advertisers pay nearly twice as much for broadcast on a cost-per-thousand-viewers basis.

Mr. Shaw counters that a closer look at cable reveals characteristics that make it look less suitable as a replacement.

“Take money away from ABC and buy cable? I think that’s a ludicrous strategy. That’s the last thing I would do,” Mr. Shaw said.

It’s Not Unanimous

Not all media company executives share Mr. Shaw’s analysis.

“I think we’ll see a trend continue where we see some money moving from broadcast TV into cable,” said NBU Universal ad sales President Mike Pilot. Cable sales executives for USA, Sci Fi, Bravo and Oxygen report to Mr. Pilot, as do broadcast ad sales staff.

Some clients may wonder whether they’re better off buying broadcast or cable.

“I love to get that question,” Mr. Pilot said. “We have the luxury of having a broad portfolio of assets that we can be more solutions-oriented in our discussions with agencies or with marketers and really orient ourselves to what’s going to help your clients—our clients—achieve their objectives most efficiently. We’re positioned to win either way.”

Representatives for Fox and CBS declined to comment.

That makes Mr. Shaw the most vocal advocate for broadcast as the May upfront approaches.

As part of his pitch for ABC, Mr. Shaw suggests that instead of looking at viewers in the 18-to-49 demographic that media buyers focus on, the buyers should look at viewers in that age group in households that make more than $100,000 a year.

A lot of the people in households than earn less than that already are buying generic products rather than brands, he said.

ABC audiences have 15% more people in households making $100,000-plus than the average for television. Turner’s TNT, TBS and truTV have 16% fewer viewers than average in the income group buying branded goods and services, Mr. Shaw pointed out.

“Who is buying branded goods and branded services? People with $100K, right?” Mr. Shaw said. “How many of your marketing dollars would you move off of ABC to go chase somebody who indexes at 84 with one-fifth the ratings? That’s not a strategy. That’s a path to nowhere.”

Turner representatives declined to comment on Mr. Shaw’s statement.

A Relative Bargain

Mr. Shaw acknowledged that buyers and clients are under pressure to lower the cost of their media purchases. But in taking other marketing factors into account, ABC could be seen as cheaper than cable.

Mr. Shaw started with a theoretical $35 CPM among viewers 18 to 49 for ABC and a $20 CPM for Turner’s networks. Having an index above 100 among viewers in households with incomes above $150,000 effectively lowers ABC’s CPM to $28.50. Conversely, because it indexes below 100, Turner’s effective price goes up to $26.08. Add on ABC’s engagement scores (from Nielsen’s IAG Research) and Mr. Shaw comes up with a CPM of 23.36 for ABC and a 28.35 for Turner.

While few advertisers can afford to buy only network TV, Mr. Shaw argues those purchases are more substantive than cable buys.

“You need that hamburger helper to make your overall number look good. I get that. But you’re not buying hamburger, you’re buying the helper,” he said. “The only thing that matters is whether your branded goods and services are being sold, not how you look on some plan that’s adults 18-49. Nobody buys that simplistically anymore, and if they do, they’re not going to be in their job very long.”

Complicating matters for cable networks is the internecine competition for ads.

“No other medium, particularly cable, should assume that all the money is just going to come to them. They need to be reasonable too, given the many alternatives within their own competitive set,” said Jackie Kulesza, senior VP and broadcast activation director at Starcom USA.