Cable could take bigger upfront bite

Apr 9, 2001  •  Post A Comment

In the imminent upfront battle for advertising dollars between ad-supported basic cable and the Big 4 broadcast networks, cable will take a $500 million bite out of broadcasting’s upfront revenues, driving the Big 4’s aggregate revenues down by a projected 6 percent in what overall will be a flat marketplace.
That’s the bottom-line forecast from Bill McGowan, executive vice president for advertising sales at Discovery Communications, who consults his data (and perhaps a crystal ball) in his annual pre-upfront forecast.
Mr. McGowan cites the “soft” recessionary economy, the threat of strikes by Hollywood writers and actors, the premiums that advertisers will be loath to continue paying for diminishing broadcast network ratings and the cable networks’ own success in establishing ever-more-important brand identities as the major factors motivating the national advertisers to write ever more and bigger checks to the wired medium.
“This is the era of the brand; strong brands will thrive,” Mr. McGowan said. “The broadcast networks have focused their strategy on delivering eyeballs, not on delivering brands.”
ABC, CBS, NBC and Fox have no brand identity in viewers’ minds, Mr. McGowan contended, calling ABC, for example, just an “amalgamation of various programs,” while cable networks like Discovery, MTV, Lifetime and the all-news networks all are strong brands.
On the broadcast side, The WB, recently linked with the Turner cable networks inside the AOL Time Warner corporate structure, has best taken a page from cable’s branding playbook to establish a significant identity that attracts advertisers looking to reach the network’s younger, more tightly focused target demos, Mr. McGowan said.
According to Mr. McGowan’s data, in 1993 the Big 4 broadcast networks attracted an aggregate 69 share of households, while ad-supported cable was receiving only a 21 share. For the 2001 fall season, there will be a mere 3-share-point difference in broadcast’s favor, 48 to 45, Mr. McGowan predicted, adding that by the following season, the shares will be dead even, and by 2004, “basic ad-supported cable will surpass the four broadcast networks.”
And within seven years, predicted Mr. McGowan, one of the basic cable networks will outperform one of the Big 4 in the aggregate ratings for the first time.
Advertiser and agency buys across those large cable groups will be increasingly attractive this year, especially in light of the premium that advertisers have been paying to reach the broadcast audience. In 1992-93, cable cost per thousand (CPM) stood at 55 percent of broadcast’s, Mr. McGowan said.
By 1996-97, the cable CPMs had risen to two-thirds of broadcast’s. “In the season we’re just finishing, cable’s CPMs have slid back … [to] only 60 percent of broadcast,” he said, citing the hot economy of the late 1990s as the reason advertisers were willing to pay a CPM premium to broadcasters.
The relative bargain that cable represents in a slowing economy, he added, is “one of the reasons that the broadcast revenue is going to go down by a half-billion dollars” in the upfront.