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$350 Mil Gain Possible for Syndie Advertising

Apr 12, 2004  •  Post A Comment

As cable network executives crow about the possibility of gaining $1 billion in advertising revenue during this year’s upfront advertising market, syndication-TV’s other national distribution system in addition to broadcast and cable-also is poised to add big ad dollars.
Syndication advertising executives and media industry analysts are setting a 2004 target of an additional $350 million, or 14 percent more than the industry’s $2.5 billion 2003 upfront revenues. Earlier estimates were that cable networks could see a $1 billion, or 20 percent, gain over its $5.5 billion upfront take in 2003.
These big advertising projections are attributed to the fallout from last year’s sticker shock over the cost of ad time during broadcast network programs-what media buying executives called onerous increases of 15 percent to 20 percent. “Clients are saying they are frustrated,” said Mitch Burg, president of the Syndicated Network Television Association. “Money should be coming to syndication.”
Looking to gain leverage against the broadcast networks, advertisers, said media agency executives, will be seeking early deals with cable networks and syndicators. The effect is to force broadcast networks to offer modest price increases for the upfront selling season, which starts next month.
“Syndication is a viable option,” said Donna Wolfe, executive VP and director of national broadcast for Universal McCann. “Everyone is talking about money leaving broadcast and going to cable. But it’s really where I can find the best value. Where it lands is based on evaluating what the other opportunities are. Money could move out of television completely.”
Split Ratings Erosion
An audience shift from network to syndication could help sell syndication to advertisers. Of the 40,000 adults 18 to 49 gross ratings points lost by broadcast network this season, half moved to cable TV and half moved to syndication, Mr. Burg said.
“We equally split the network rating erosion,” Mr. Burg said. All syndicated TV pulls in a total of 180,000 adults 18 to 49 ratings points versus 800,000 for broadcast networks, according to estimates. At press time, the total number of cable network adult18 to 49 rating points could not be determined.
Current market conditions are also a good omen for syndication. For the first quarter of 2004, syndication was second only to local cable in advertising gains, according to Lee Westerfield, media analyst Harris Nesvitt, a New York brokerage and investment banking firm owned by the Bank of Montreal. Mr. Westerfield said syndication advertising grew by 8 percent to 12 percent during that period.
Moving more money to syndication and cable would seem an easy decision on paper. Media agency executives said the average prime-time cable show is priced 30 percent below that of a broadcast network; a comparable prime-time access show in syndication may be 15 percent below that of a broadcast network.
Upscale Viewers
But syndication and cable have their respective downsides for advertisers as well.
Media agency executives complain syndication is limited to only about 10 top off-network and first-run shows, including “Friends,” “Seinfeld,” “Entertainment Tonight,” “Wheel of Fortune” and “The Oprah Winfrey Show.” Not only that, but syndication also lacks in some major areas-particularly the breadth and financial wherewithal of its audiences.
“Syndication has very few upscale viewers,” said one veteran media buying agency executive. “It is mostly dominated by women 25 to 54 demographics in daytime shows. With cable you get a variety of audiences.”
Mr. Burg countered: “People have acknowledged there is a first tier in syndication. But when I talk to buyers, every one has a different answer about how big that tier is. It could be 10 or 20 shows.”
Cable networks have their own problems-lower-rated shows and lots of advertising inventory to sell. Cable’s heavy supply situation should keep program prices from rising, media agency executives said.
Syndication sometimes takes a back seat to cable in the press, but not necessarily when it comes to the price of its major programs. Some of the top syndicated shows, such as “Friends” and “Seinfeld,” command big price premiums, one media agency executive said. Unit prices for top off-network syndicated sitcoms can range from $100,000 to $150,000 per 30-second commercial.
On a show-by-show basis, syndication still commands major ratings-much higher than the average cable show and closer to those of network shows. During a typical week this season, “Friends” in syndication posted a 4.3 Nielsen adults 18 to 49 rating; “Oprah” pulled a 3.2 rating; and “Judge Judy” earned a 3.1. In contrast, the highest-rated network show on a particular Friday night, ABC’s “20/20,” earned a 3.3 adults 18 to 49 rating.
Syndicators, like broadcast networks, are bound by limited shows and inventory, restrictions that do not afflict cable networks. Syndicated programs run in daytime, early fringe, prime access, late fringe and some weekend time periods but not in prime time, early morning or overnight. Nonetheless, syndicators are witnessing strong growth in gross ratings points this year.
“I personally have more ratings points [to sell],” said Howard Levy, executive VP of advertising sales for Buena Vista Television Advertising Sales and chairman of SNTA. “`Live With Regis and Kelly’ is up 16 percent; `[Who Wants to Be a] Millionaire’ is up 36 percent.” As head of the SNTA he also notes other syndication shows have rating gains, including “Dr. Phil,” “Oprah,” “The Ellen DeGeneres Show” and “Family Feud.”
Early predictions are there could be more ad money in the marketplace this year as the entire economy slowly improves, with a larger piece of the pie going for syndication and cable. “People are feeling better about the economy,” Mr. Burg said. “There will be some shift in dollars to syndication and cable.”
During the upfront period last year, networks pulled in $9.3 billion for prime-time programming; cable networks grabbed $5.5 billion overall and syndication posted $2.5 billion for all programming. For the entire 2003-04 broadcast season, estimates are that for all dayparts broadcast networks pulled in $28 billion; cable networks grabbed $12.5 billion and syndication earned $3.7 billion.
In an era of TV uncertainty, Mr. Levy said, syndication offers great consistency-and not just one night at a time, as with the broadcast and cable networks.
“We have so many good first-run shows and so many good sitcoms,” he said. “We offer great shows and most are on five days a week.”