Cable Upfront Rises Just 5%

Aug 22, 2005  •  Post A Comment

This year’s cable upfront grew 5 percent to $6.5 billion compared with last year, according to the Cabletelevision Advertising Bureau. The growth is relatively small compared with the double-digit increases cable enjoyed in recent years and may be a sign of moderate increases for cable upfront markets in the future.

This year’s upfront dragged on for months, with some deals still being done as recently as last week. And some sellers say advertisers continue to push more money into already agreed-upon deals. But CAB President Sean Cunningham said his group has pulled together numbers from his members that are fairly comprehensive.

The numbers show that cable attracted $300 million more than last year, which means it was a slow market, but not a soft one, Mr. Cunningham said. “The other pieces of the market don’t have an up story to tell,” he said, referring to broadcast and syndication.

Mr. Cunningham pegged price increases at between 1 percent and 3 percent, but those figures were harder to calculate because different networks target different demographic groups.

Some buyers concurred with the CAB’s view of the market.

“I agree with those numbers,” said Elizabeth Herbst, senior VP and director of broadcast investment at Starcom USA.

“I’d call it $6.4 billion,” said Rino Scanzoni, chief investment officer at Mediaedge:cia, “but that’s splitting hairs, given how difficult it is to manage a precise number, given all the players.” He put cost-per-thousand increases at flat to up 3 percent.

Other major buyers maintained that the cable market was flat at best. “Overall, the money was down in the marketplace. Cable could have been up slightly,” said Andy Donchin, director of national broadcast at Carat.

But from a buyer’s point of view, the small increases were the big news.

Things to Come?

“For me the big thing is, is this a one-year phenomenon or is it a sign of things to come?” Mr. Donchin said. “I think in some ways it’s a trend. We can’t go back to our clients anymore with these big increases. They can’t afford them. So we’re always going to be challenged to find ways to minimize any inflation.”

“You will see, at least for the foreseeable future-the next 12 to 24 months-a significant moderation in the growth of television advertising versus what we’ve seen over the last three years,” Mr. Scanzoni said.

“Clients are looking at all consumer touch points as media, so they’re looking to redeploy their investments,” he said. Marketers are also looking at aspects including product integration and branded entertainment, which don’t show up in the CAB figures. “That money comes from media, and there hasn’t been huge growth coming out of any of the core categories. So you put that all together and I think that probably bodes to a market that will definitely grow, but at a much more moderate pace than we’ve seen over the last couple of years.”

Clearly, the cable network expected to do better, buyers said.

“I would say if you were to canvass the cable networks most of them would say, ‘We did fine,’ which they probably did,” Ms. Herbst said. “And if they were honest with you, they would say, ‘We did a little less well than we thought we would do initially, but we did fine.'”

Some networks took longer to recognize that the market would absorb only moderate increases, buyers said. “Expectations were unrealistic,” Mr. Scanzoni said. “We’ve seen pretty consistent double-digit revenue growth [in cable]. You can’t sustain that.”

Mr. Donchin said some networks resisted and held out for the big increases they expected, but eventually fell in line. “I don’t think anybody did better” by holding out, he said. “It was more of a buyers’ marketplace. Any increase was moderate.”

“Clearly, the networks that went into this year with reduced ratings probably got hurt more than those that had a better story, but clearly, I think they were all affected in generating levels that were below what they expected,” Mr. Scanzoni said.

The increases were so moderate that some clients seem to be putting more money into the market. Some network sales executives said agencies are coming to them asking if they can add money to their upfront deals.

“Some clients are doing well. They see an uptick from sales and they’ll put money into marketing,” said one senior media buyer.

“If I had a client that had more money at the time I was going to order, I would try to do that,” Ms. Herbst said.

But not all of the recent changes have been positive. “Some people have been coming back and saying, ‘I’m sorry but I’m making an adjustment,'” Mr. Scanzoni said.

With budgets not growing fast, many clients have narrowed the number of cable networks they buy. “People will look to concentrate their money to maximize their leverage. That clearly happened this year,” Mr. Scanzoni said. “If my budgets are flat or up a little bit, maybe I need to direct them to some key partners to basically get what I’m looking for programmingwise, promotionwise, costwise.”

The slow pace of this year’s market was also a welcome change for buyers.

“Some markets that go at lightning speed, and then you’re forced to take care of all those issues that we have to take care of in a more after-the-fact manner,” Ms. Herbst said. “But what I thought was very productive about this upfront is both seller and buyer were able to talk about all the different pieces of every individual buy carefully before it was agreed to, and that tends to create less churn after the fact.”