AA: What sort of changes do you foresee in costs per thousand viewers in 1997?
Dan Rank, exec VP-director of national TV, DDB Needham Worldwide, New York: In cable, for households, ratings are up 11%. I think it's hard to raise the CPM. There's 11% more supply, in prime-time households. .*.*. If you raise the CPM 5%, theoretically, that's 16% more dollars, and that's unlikely.
What do I think? CPMs are going to be flat. They'll be lucky to be up at all. They'll have a lot of unsold inventory. It's going to be a bleak year, but not for everyone.
There's going to be a lot more supply. There will be pressure on price, but volume will be there. . . . It'll probably be anywhere from flat to 5%, maybe less in some, more in others.
AA: How will this prediction affect the way you and other buyers assess cable's value in the upcoming year?
Mr. Rank: Cable's CPMs are roughly half the networks'. Still it's a good deal-you can reach 75% of your audience for half the price and that's still very attractive. Buys are based on the ability to reach a targeted audience. Take MTV, Discovery or ESPN, for example. People want to buy them for a good reason. What about USA and TNT? With them, you can work around them and play a little more hardball [on CPMs] than specialty networks. But take adults [age] 25 to 54. A&E is up 23%-that's a main critical target for them. But they have more inventory, and they're not going to sell it.
Mr. With cable shares up 3% to 4% and networks down, it creates more supply and we as an industry need ways to sell it better. We need ways to re-educate advertisers on cable's strengths. . . . The broadcast guys are getting a bigger share than they deserve and it's our fault.
Larry Goodman, president-news, Turner Broadcasting Sales: The same way [buyers] have historically, using the same three criteria: distribution, audience size and quality, and value of programming, i.e. brand identity. Buyers will assess cable buys more on rating point gross than on CPMs year-to-year. The dynamics are unusual because broadcast is shrinking-there are fewer ratings points .*.*. In the long term if broadcast grows 8%, which would be aggressive, cable will grow 18% to 20% in [ad] revenue.
AA: Do you foresee clients' cable budgets changing much in '97?
Mr. Rank: I think cable's awfully mature and I don't see much change at all. If you take the top 100 advertisers, why would General Mills or McDonald's buy more cable? . . For cable companies there's a lot more to sell, and not a lot more dollars to chase it.
John Muszynski, senior VP-executive director, national TV buying, Leo Burnett USA, Chicago: As one continues to see lot of clients looking toward greater efficiency we will probably see a continued shifting of dollars [from network] into cable.
Mr. Goodman: Broadcast gets 78% [of combined advertising dollars] and cable gets 22%. It's going to get closer to 75%-25%. A lot of advertisers spending less than 22% [of their budgets on cable] will spend more and those spending more will spend even more.
AA: Do you foresee any hot cable buys or networks in the upcoming year?
Mr. Rank: The new stuff is highly overrated. The industry is not big enough to support all the cable news networks-ABC was smart not to get into it.
Steve Grubbs, exec VP-national broadcast buying, BBDO Worldwide, New York: There's no overall network I'd label as hot. But, Discovery has done very well and TNN's coverage of motor sports has done extremely well.
Mr. Divney: I'd say House & Garden, TV Food [Network] are really defining their niches. Also, the History Channel, the Learning Channel and Sci-Fi [Channel] have become major players. There's also a lot of noise about Animal Planet.
Mr Muszynski: What's really, really important is putting two pieces together: programming and pricing. If the networks that can do this will in turn generate larger audiences, they will be in the driver's seat.
AA: Do you see continued growth in direct-broadcast satellite subscribers?
Mr. Divney: Yes, it's higher than expected growth already. It's got its limits, though. I'm putting a dish in, and I live in Manhattan.
Mr. Very much so . . . DBS's rate of growth has been tremendous over the last couple of years and will continue. Cable, compared to DBS, is pretty mature.
Mr. Rank: Being a DBS subscriber, once you get it, you're hooked. The price is going to continue to drop and the price of the dish will be further rebated. It sounds better, the picture is better, there's 175 channels and it's only a little more expensive than cable.
AA: How important an ad category will liquor be in '97?
Mr. I don't foresee cable networks accepting liquor ads, so I don't think it will be that importatant.
Mr. From my perspective, there will not be more [liquor] advertising on national TV. I don't think that the well is going to be opened up. It's just too controversial.
AA: What's the most significant aspect of the business to keep an eye on in '97?
Mr. Rank: Ratings. The broadcast networks [in the] season to date are down 11% in ratings points. It's a supply and demand formula, or at least close to it: when supply is down 11%, and demand is constant, you can automatically raise CPMs 11%. The market sucks right now.
Mr. Grubbs: I'd watch the battle between the new sports and news cable stations. These are two markets that are completely saturated and it's interesting to see if there will be erosion [of existing channels' viewerships] from which the newer services will benefit. Cannabalization will most probably occur among ESPN and ESPN2, ESPNEWS, Fox Sports, CNN/SI and Newsport.
Mr. Divney: The dollars vs. the viewers. We must re-educate and show client planners the disparity between audience and revenue.
Mr. Muszynski: I think what I'm going to be looking for is dollars being shifted into cable. People have done so because of cable's pricing advantage. Cable must keep this significant price advantage, or we'll see shifting of dollars elsewhere.
Mr. Goodman: For a lot of people, new distribution opportunities as a lot of programmers across a lot of companies are waiting to get channel space. They're waiting to clear their service in more homes.