Cable Faces Tough Upfront Market

Marketers Plan to Buy Shorter List of Networks

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NEW YORK (AdAge.com) -- As the broadcast networks gear up for what's shaping up to be their most challenging upfront yet, the picture for cable is clouded with the same economic uncertainty that's already prompting advertisers to cancel as much as 10% to 14% of their first- and second-quarter upfront commitments. The cable upfront, which last year increased by 9.3% to $7.65 billion, according to the Cable Advertising Bureau, is working overtime to maintain its momentum as advertisers cut back on everything from volume of inventory bought to number of networks.

As one media buyer told Ad Age, "If you bought eight or nine cable networks last year, you're probably only going to buy four or five that really work for you this year."

But CAB CEO Sean Cunningham said so far some cable networks are doing fine, thanks to what he characterized as a "flight to quality, a flight to the right kind of value in that it's properly priced as an offering that only gets better with every week, month and quarter."

Ratings growth
Cable's relative strength will also be a direct result of its continued ratings growth, as it now controls 58% of season-to-date prime-time viewing compared with broadcast's 36% share, according to research from Interpublic Group of Cos.' Magna Global. That's up from cable's 56% share of prime time vs. broadcast's 39% share last season.

Mr. Cunningham acknowledged that cable's canceled upfront deals may have been "a bit more than typical," but oftentimes advertisers who pulled dollars out of their broadcast buys were shifting them to cable. "There's a lot of clients who want to preserve as much flexibility as possible with their TV dollars. It's predominantly more about redistribution than it was about taking money out of TV advertising in general."

In certain cases, such as Time Warner's CNN, networks that have large online audiences are seeing upfront redistribution from their TV properties to the web. Greg D'Alba, CNN's exec VP-ad sales, said, "Even if we do have a fluctuation in terms of options, we're seeing a lot of that money stay in-house and move from platform to platform."

Rate cuts as scatter tightens
With cable writing cost-per-thousand increases at an average rate of 9% to 10% last upfront, most network groups are seeing those rates cut in half in the first and second quarters as the scatter market tightens. "Everyone's dollar has to work harder, but it's the targeted networks that are providing the most value for clients right now," said Jeff Lucas, exec VP-ad sales for MTV Networks' entertainment networks.

Networks with broad reach but spotty track records launching new shows, such as Turner's TNT and A&E, are leading the market in upfront cancellation rates, at 10% and upward of 15%, respectively. Even Scripps, which caters to niche audiences with HGTV and Food Network, is reporting first-half cancellations as high as 20% from some advertisers.

Those outperforming the market thus far are demographically targeted networks such as MTV Networks' Comedy Central, Spike and TV Land, which cater to young adults, young men and baby boomers, respectively. MTV's Mr. Lucas said Comedy and Spike are outperforming the market thus far based on little exposure to automotive cutbacks and strength in thriving categories such as video games, fast food, movies and home entertainment. "Targetability -- getting the audience you need to get to move the product with little waste in an efficient manner -- is what's winning out this year," Mr. Lucas said.

Boost for Turner, NBCU
That approach is also benefiting Turner Entertainment's prime-time block, Adult Swim, which will finish the first quarter of 2009 with a revenue increase based on a 17% boost in ratings among adults 18 to 34 and a 15% lift in men 18 to 24. Adult Swim sales chief John O'Hara recently told Ad Age, "We are growing our business in the face of these conditions. The Adult Swim brand and our property are showing growth year over year."

"Each brand has a very clear identity and knows its audience inside and out," said Jeff Gaspin, president-chief operating officer of NBCU Television Group. "Cable for years has had an added value, but this is one area where cable has a slight advantage over broadcast based on a legacy with targeted audiences."

New targeting platforms
NBCU is adding two additional targeting platforms to its upfront offerings this year: Women@NBCU, a multiplatform initiative that incorporates NBCU properties such as iVillage, Bravo and Oxygen, and Green is Universal, the company's eco-friendly marketing division. Since launching in 2007, Green has attracted Subaru and Walmart as major sponsors, while Women@NBCU recently hired former Univision Chief Marketing Officer Maryam Banikarim to lead its ad sales.

Perhaps most immune from the uproar are kids' networks such as Nickelodeon and Cartoon Network, which, like their young-adult peers, have little exposure to the automotive and financial sectors and continue to post double-digit growth in on-air ratings and in unique users online. Nickelodeon, which was the first cable network to go to market with its upfront event last week, is seeing first- and second-quarter cancellation options on par with previous upfronts, in the low to mid-single digits, sales chief Jim Perry told Ad Age.

He said he's uncertain, however, about this year's upfront market. "It's a different market than we've seen in the past," he said after the Nick upfront event. "The main thing I'm seeing is advertisers are being a lot more careful in their planning and will be in their spending compared to the year before. What we're hearing, especially after a show like today, is people want to put their money in the safest, most reliable places."

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