BURNETT OPENS UPFRONT FOR CABLE WITH USA BUY: CPM INCREASE OF ONLY 5% IRKS SOME RIVAL EXECUTIVES

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The first major cable TV ad deal was consummated in the upfront marketplace last week, as Leo Burnett Co.'s Starcom Media Services put down $25 million to $35 million on USA Networks at cost-per-thousand increases of just 4% to 5%, according to media executives.

As word of the deal spread down Madison Avenue, the low CPM increase pleased buyers and angered some rival cable network managers.

At the same time, the Big 4 broadcast networks are approaching the advance selling season with extreme caution, worried primarily about movie and auto advertisers and the increased usage of "optimizer" buying and planning software.

They're also hoping for a windfall from pharmaceutical marketers' direct-to-consumer TV ad spending.

A BAD DEAL FOR CABLE

"The USA deal isn't good for cable," said one disgruntled cable network executive. "Last year, it was Turner Broadcasting Sales going for share at the [expense] of CPM increases. By not holding out for decent CPM increases, it just makes it harder and harder to achieve parity with broadcast. At least Turner is looking for significant CPM growth this year."

CABLE CPM INCREASES

Traditionally, a relatively soft upfront for broadcast prime time -- which many observers think this year's will be -- means that buyers can load up on broadcast at the expense of cable. This year, however, many cable networks are prepared to dig in their heels and demand significant CPM increases.

"The continued erosion of viewing on broadcast has empowered us," said the cable executive.

With most cable networks looking for healthy CPM increases reaching high single digits or double digits -- and buyers balking -- both sides are saying it will be a long hot summer.

Chicago-based Starcom declined comment on the USA Networks deal; John Silvestri, exec VP-advertising of USA, could not be reached.

Burnett was the fourth-largest agency buyer of cable TV time last year, spending $243 million in the medium.

BROADCAST NETS STUNNED

The broadcast networks have been stunned by the marketing cutbacks at General Motors Corp. and Chrysler Corp. "And that was even before the uncertainty created by last week's Daimler-Chrysler deal," said one network executive.

"If the automakers continue to push rebates and discounts, that money has got to come from somewhere, and that somewhere could be ad budgets," he added.

HOLLYWOOD SLOWDOWN

The Hollywood studios also have the broadcast networks running scared; they have given indications they're going to be making fewer movies, and some big-budget productions have been canceled.

"The movie situation particularly worries NBC, which will be going without `Seinfeld' next year and has to pay a lot of money for `ER,' " said one agency media buyer. "They've come to rely on big movie spending on Thursday nights."

The increasing use of optimizers has the broadcast networks spooked as well. The computer programs aim to help agencies make buys for their clients more efficiently.

"What the broadcast networks do, historically, is package," said one top agency media executive. "Everyone wants a `Seinfeld,' so an NBC will give you a certain number of spots on `Seinfeld' and mix that up with a lot of programming that doesn't draw those numbers. But, with optimizers, agencies may insist on not buying the lower-rated shows and shift that money to cable.

"I think that will start to happen to a certain extend this year. That's what Turner's been advocating."

6% CPM INCREASES?

With a soft second quarter, "the networks will be happy to average 6% CPM increases during the upfront, which would be down considerably from last year's double-digit increases [achieved] in a seller's market," said another media buying executive.

Of course, it's a buyer's job to paint the picture for the broadcast networks as bleakly as possible this time of year. But there's no doubt the networks face an uphill battle this year, as ad buyers sense weaknesses not seen in the last few years.

If pharmaceutical marketers come in strong with upfront purchases, however, "it could offset a downturn in auto or movie spending," noted one network manager.

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