CABLE NETS COVET $500 MIL SHIFT OF THE UPFRONT PIE -- CABLE TV OUTLOOK: BROADCAST NOW THROWS A SMALLER SHADOW

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Cable still plays second fiddle to broadcasters when it comes to attracting the attention of media buyers, industry executives say. They argue that is in spite of continued improvements in programming, distribution and ratings.

Bill McGowan, senior VP-advertising at Discovery Communications agrees that broadcasters have traditionally received preference from media buyers -- but this year the industry will continue to see a change.

"Old habits die hard," says Mr. McGowan. "I agree that the whole way the upfront has traditionally moved is broadcast comes first. But the timing has started to shift towards cable."

According to Mr. McGowan, there are three types of advertisers who participate in the upfront season: the traditionalists who give preference to broadcasting; the innovators who actively use cable and the third group which has opinions in between the two.

Mr. McGowan says he thinks there will be a $500 million shift in dollars away from broadcasting into cable. He says that money will come from the increased spending that broadcasting would otherwise get. In other words, broadcasting will remain flat while cable will increase more than 20%.

This year cable operators and media buyers predict a drawn-out upfront season, claiming soft broadcast network inventories.

Advertisers will be dragging their feet looking for bargains because of the soft broadcasting market, says John Silvestri, exec-VP of advertising sales for USA Networks. Mr. Silvestri says it wouldn't be a surprise if upfront dragged out until June this year.

Mr. Silvestri expects a $300 million to $400 million increase in the national cable TV advertising market this year. Last year's cable upfront accounted for $2.2 billion in sales, he adds. "These numbers mean more people are noticing the continued growth of cable ratings," Mr. Silvestri says.

Although cable programmers expect another year of gains against their broadcasting rivals, they will have to wait to find out.

For example, John Lazarus, a senior partner at TN Media, New York, says he typically waits to see how the broadcasting market plays out. He says he spends whatever money is left over on cable.

"Until those biases are broken, you're still going to see broadcast networks drive the process," says Peter Demko, national cable manager of Media That Works, Cincinnati.

Cable programmers are once again trying to overcome advertisers' broadcasting preferences with such promotions as Turner Broadcasting Sale's "Media at the Millennium II," a study illustrating that cable can provide equally effective reach as broadcasting. Turner released the study in December 1997 as a follow-up to the original "Media in the Millennium" study released in January 1997.

The Turner report notwithstanding, the advertising community still shows greater interest in broadcasting networks during the upfront season.

"I don't think that study tells us anything we intuitively don't know, but it does validate cable a bit more," Mr. Demko says. "Unfortunately, no matter how much cable would like to be the first consideration of media buyers, it just isn't going to happen."

Still, ad buyers give credit to cable operators for improving their product. Mr. Lazarus described the 5 rating earned by A&E Networks' recent adaptation of "Moby Dick" as "an extraordinary step forward."

"It's changing," Mr. Lazarus says in reference to cable programming. "Cable is looking more like other networks."

Indeed, some cable programmers say they are starting to get the upper hand on broadcasting during the upfront season.

Joe Uva, president of entertainment, sales and marketing at Turner Broadcasting, says in the last three or four years big agencies such as Young & Rubicam, New York and Leo Burnett USA, Chicago, have negotiated media buys with Turner before dealing with broadcasters.

Most cable industry executives expect a healthy upfront season, whether or not they have to wait on broadcasters. Unlike broadcasters, cable has had tight inventories in the first and second quarters this year, Mr. Silvestri says.

"Most of us on the cable side anticipate more money coming to cable," says Arlene Manos, VP-ad sales for A&E Networks. Ms. Manos adds that the number of shows A&E sells out during the upfront season has increased each year for the last few years.

Last year A&E sold-out 65% of its time periods during the upfront season.

Ms. Manos is hopeful cost-per-thousand rates will increase as high as 10% this year.

Mr. Uva is particularly bullish about rate increase for his company's programming. He says he expects double digit price hikes as high as 15% or more.

He says fully distributed networks -- those major networks carried on almost all cable systems -- should do very well this year.

Turner is betting reruns of "ER" and an original sci-fi series "The Crusade" will help bring in more money this year.

Certainly, shows such as Comedy Central's "South Park" are helping cable's cause. The breakout show is creating a "tent-pole" effect for the network, helping raise ratings for lead-in and follow-up shows, in addition to improving the prestige of the network, says Tim Spengler, a senior-VP at Western International Media, Los Angeles.

"We can't ignore the numbers [ratings] it's delivering," Mr. Spengler says.

Strong ad categories vary from network to network due to the targeted nature of the medium. Family Channel, sold last year to Fox Kids Worldwide unit of News Corp., expects strong activity from videogames and home video companies, as well as direct-to-consumer pharmaceutical advertising.

A&E, on the other hand, is looking forward to heavy spending from telecommunications, computer vendors and auto marketers, in addition to pharmaceuticals.

The pharmaceutical category is cited by most programmers as a venue tagged for continued revenue in the wake of recent Food & Drug Administration ad-rule revisions.

A&E is trying to attract new advertisers to its mostly upscale audience by positioning its History Channel as a complementary purchase to any sports buy targeting men. History Channel attracts upscale men, which would go hand-in-hand with the broader male demographics attracted to basketball, football or other sporting events on other networks.

Expanding cable options could make it difficult for cable programmers to raise advertising prices more than a few percentage points, says Mr. Demko.

Mr. Demko, for example, only expects a 2% to 4% price increase in cable advertising this year.

"Right now there's so many alternatives -- networks and cable channels -- no one's saying `I must have this,' " Mr. Lazarus says. "Why pay a high price when you can go somewhere else?"

"Momentum has been building over the years towards a major shift of dollars," Mr. McGowan says. "I think this year is going to be the watershed year."

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