Some Cable Nets Lower Prices to Close Deals

Jul 24, 2006  •  Post A Comment

Some cable networks appear willing to take small cuts in ad prices in order to appease media buyers who feel they have the upper hand in an upfront advertising sales market that continues to move very slowly.

Buyers and sellers say that Lifetime, A&E Networks and Comcast Network Sales have done deals that call for small price cuts compared with last year on a cost-per-thousand viewers (CPM) basis.

Those networks declined to comment, but one cable ad sales executive said networks are offering what is being called a “cosmetic negative,” or a CPM that’s minus 0.5 percent, to close deals. In some cases, networks willing to give buyers the price cut they’re looking for-even if it’s mainly a symbolic cut-are seeing increased spending, above the original budgets presented by the buyer.

“A half-point doesn’t mean much, but psychologically it’s important to the buyers,” said one sales executive. “At this point the market won’t accept flat.”

Other big networks, including Turner Broadcasting, MTV Networks and Fox Cable, are holding firm for deals that are flat or higher in terms of CPM.

One reason the price negotiations are dragging out is a difference of opinion between buyers and sellers over how much money is in the market.

“I think it’s very clear it’s a soft marketplace, as was the broadcast marketplace,” said Rino Scanzoni, chief investment officer at Mediaedge:cia.

“The dollars are down in cable and the vendors don’t want to believe it,” said another buyer. “We are looking for low-single-digit negative [CPMs], not a huge push.”

But sales executives believe that buyers are holding back money and that once prices have been driven down, the total dollars in the market will be flat to slightly up. Two network executives said they were seeing increases in volume. One is getting increases in CPMs, the other is accepting slightly lower CPMs.

One sales executive called the current market a “stalemate,” adding that while buyers and sellers see the market differently, for the most part discussions are not acrimonious. At this point, the sales executive added, the pendulum appears to be swinging in the buyers’ direction, and they’re demanding bigger and bigger negatives in order to get deals done. Eventually, however, the buyers are going to feel a need to complete some business with some of the key networks. Then pricing might swing back to flat.

“It’s basically a slow process,” Mr. Scanzoni said. “There are a lot of cable networks that we have to deal with. Deals have gotten relatively complicated because they go beyond just dots and spots. So we’re going through it relatively slowly, but meticulously. But that’s the way I think it should be done.”

Some syndication deals were getting done as well.

“We are writing business-actually more business-but it’s just taking longer and it’s later than usual,” said Bo Argentino, senior VP of advertising and media sales at NBC Universal Domestic Television Distribution. “This year buyers are looking for more than just CPMs. They want billboards, sponsored segments and branded integration, all of which we can offer. And it’s because of those added elements that everything is taking a bit longer.”