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A Very Healthy Marketplace

May 5, 2003  •  Post A Comment

Cable expects to share in a bountiful and perhaps record-breaking 2003 upfront. But a rising tide of upfront dollars will not lift all cable networks equally, and so far advertisers are “hiding the budgets very well,” as one senior seller put it.
Dollar volume increases will be in the “high double digits for cable,” predicted David Levy, head of both Turner Entertainment Sales and Marketing and Turner Sports for Turner Broadcasting.
Expectations are that the Turner cable networks, which in the past have taken in around 22 cents of every ad dollar spent on cable, will soon conclude a large agency deal, on the OMD-Disney model, but Mr. Levy declined to discuss its particulars.
The most recent cable upfront prediction, from analyst Jack Myers, is for a 16 percent increase over the 2002 upfront, to $5.35 billion.
The key for both cable and broadcast will be broadcast inventory sellout levels, according to the canniest observers of the upfront ritual. With recent-quarter scatter prices trending well above 2002 upfront levels, buyers will want to get their money down now, while sellers will probably want to hold back inventory in hopes that the upfront-to-scatter pricing pattern will repeat again this year. Of course, cable has traditionally taken its biggest piece of the advertising pie from scatter, while the upfront has been a broadcast game.
“The theory is that it’s going to be marketplace,” said senior buyer Bob Flood, Optimedia International’s executive VP, director of national television. “But those tides could turn for futures if the marketplace takes a downturn, and that’s going to definitely impact any calendar-year deals and/or scatter marketplace deals.”
The consensus is that cost-per-thousand parity with broadcast is still a long way off for cable. But cable’s arguments about its rising share and the value of its original series, movies and sports franchises are making inroads on Madison Avenue, where the Nielsens are read as avidly as in Hollywood. In fact, the disparaging view of cable as merely “hamburger helper” is waning too. That process has been accelerated this year by Turner Broadcasting’s new analytic tool, the Turner Multidimensional Analytical Platform, which is intended to demonstrate statistically the argument that “schedules containing high levels of fully distributed national cable dispersed across the prime-time daypart can replace broadcast with no loss in reach and no increase in frequency,” as Barry Fischer, Turner’s executive VP of marketing and research, put it [TelevisionWeek, April 7, 2003].
CPM Important Factor
The cable upfront CPM differential may close a “bit” this year, said Joe Abruzzese, Discovery Networks’ ad sales president, but the important factor in cable is not the upfront, it’s the scatter market. Formerly, Mr. Abruzzese headed ad sales at CBS, and as more than one wag has observed, at CBS he did more than almost anyone to preserve the broadcast premium but now that he’s at Discovery he’s doing everything he can to make it disappear.
Most predictions for the broadcast upfront take have ranged from $8.5 billion to $9 billion and even higher, but for the networks to break the $9 billion barrier they will have to sell out to 90 percent levels, essentially locking themselves out of scatter, according to Mr. Abruzzese.
“Let them sell themselves out,” he said. “We’ll continue to get these 25 percent [per quarter] volume increases, because we’ll play scatter even higher.”
Optimedia’s Mr. Flood agreed that the broadcast networks could overplay their hands in the upfront. “If the networks are overly aggressive, you might see some dollars migrate to cable and syndication,” he said.
Like many of their colleagues, both Mr. Flood and Mr. Abruzzese predicted a short upfront. “I think it’ll be over by Memorial Day,” Mr. Abruzzese said.
So-called “top tier” cable groups-the MTV networks, the Turner networks, the Discovery networks, USA Network and others-“are very sold out,” Mr. Abruzzese said.
Many top-tier-network sellers and some buyers, all requesting anonymity, cited Oxygen Network and VH1 as examples of second-tier networks, but Gina Garrubbo, Oxygen’s executive VP of ad sales, took good-natured exception to the implication that being in cable’s second tier means a tough upfront is coming. “People don’t buy VH1 for reach,” she said, “they buy it for the concentrations. They kick ass.”
The top tier does get “first shot at the money,” she added, but Oxygen will see upfront dollars from several new categories, including the film studios, beverages, automotive and fast foods, that mostly didn’t buy Oxygen last year but are looking to reach 18- to 49-year-old women this year.
“I don’t want to say that these guys didn’t give us the time of day last year, but they kind of couldn’t be bothered,” she said, predicting as high as a 70 percent sellout level for Oxygen this time around.