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McGowan upfront forecast: cable rise

Apr 15, 2002  •  Post A Comment

Early buyers will get the lowest prices, and when the smoke clears from this year’s upfront, broadcast will be flat at $7 billion compared with 2001, while cable will rise dramatically, up 12 percent, adding $500 million to last year’s $4 billion take.
In all, this year’s upfront market will be up 5 percent in dollars compared with last year’s stomach-churning 14 percent drop.
That is the word from Bill McGowan, executive VP of ad sales at Discovery Networks, who made his annual pre-upfront forecast at last week’s Discovery press presentation in Manhattan.
By comparison, in 2000-the industry’s upfront high-water mark thus far-broadcast took in $8 billion and cable took in $4.8 billion for a total take of $12.8 billion. Looking ahead to next year, Mr. McGowan predicted that in 2003, the industry will see another $12.8 billion upfront, only this time cable will substantially increase its dollar share, taking in $5.5 billion to broadcast’s $7.3 billion. Cable, which claimed 36 percent of the dollars in the upfront market in 2001, will increase its share to 39 percent this year and reach 43 percent in 2003, he said.
Last year was the most pivotal year in TV’s history, Mr. McGowan said, with its cascade of unpredictable events, from the dot-com collapse to the Sept. 11 attacks to the Enron debacle, all leading to the “collapse of traditional marketplace fundamentals.”
This year’s upfront will mark a new chapter in television history, Mr. McGowan predicted, with the May-June selling cycle giving way to a “year-round” market and-for the first time-with cable leading the market rather than following. “The traditional upfront died last year,” he said.
“My point is that over time it’s going to diminish in importance and be replaced by this year-round marketplace,” he said. “We’re seeing this already. We’re getting money right now, in 2002, that normally would have been bought last May as part of an upfront. What do you call elongated scatter money, a nine-month deal that’s booked in January? Is it upfront or is it scatter? I would argue that it’s upfront. I would argue that the definition of upfront really means a long-term commitment that’s made in advance.”
In the era of consolidation, he said, control has shifted from the broadcast networks to the agencies and their clients. This year “opportunistic advertisers” will buy quickly, he said, and the networks will be eager to conclude deals quickly, too, “to lay in a base.”
Mr. McGowan also predicted that cable in the aggregate will beat broadcast for share of prime-time viewing this season, two years ahead of his prediction last year.
While he expects cable to increase its dollar volume significantly this year, cable costs per thousand generally will not increase, he said.
CPM increases this year are more important for broadcast than for cable, he said. The broadcast networks are “sold out of inventory … like a hotel that’s at full capacity. You’re supposed to be charging $250 a night, so [if] you start selling rooms at $150, you’re going to lose money.
“The difference is that cable has not historically run at the same sellout level as broadcast, so [the cable networks] don’t have the capacity issues.”
Cable’s big issue is just the opposite, Mr. McGowan said: The burgeoning cable world is like the Las Vegas strip, where in recent years hotel after hotel has been built. “And the hotels have been built so quickly that they’re adding a lot of rooms to the marketplace,” Mr. McGowan said.