Flat market expected: Kids' upfront growth spurt ends on obesity, toy woes

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After four years of growth-and a torrid 2004-the kids' TV upfront market is hitting a wall.

Toy retailer consolidation, stringent Federal Communications Commission regulations on advertising to minors and marketers' anxiety over the obesity issue are all conspiring to stunt growth in the kids' TV market, expected to languish between $800 million and $850 million this year.

Last year's kids upfront saw price increases of 15%-20%. But as Cartoon Network and Kids WB kick off upfront presentations this week, the outlook is flat.

"Toys is in the toilet. Food is on the ropes. I don't see any consistent growth category," said Shelly Hirsch, CEO of Summit Media Group, a media agency with billings of $158 million. He noted that last year's buoyant market was the first big rise in four years and that buyers wouldn't stomach such hikes again.

Mr. Hirsch, whose clients include California-based toy firm Jakks Pacific, said, "The whole upfront idea is something of the past." He contended That five toy retailers essentially control the kids' TV market, naming Wal-Mart, Target, Kmart, Toys `R' Us and KB Toys. "By the end of this year there might be three."

The weak toy category is just one of the unknowns threatening this year's kids' market. New FCC rules include, for the first time, networks' own promos as part of their commercial load. The Children's Television Act requires that kids' programming include no more than 12 minutes an hour on weekdays and 10.5 minutes on the weekend during shows aimed at kids under 13.


Tricia Wilbur, senior VP-ad and promotions at Disney ABC Cable group, said that while she expects a robust market, there is uncertainty at both the network and client level in light of the FCC rulings, even though changes don't take affect until next January.

"We are being very conservative in the way we count promotional and ad spots in light of FCC. It will tighten up supply," said one TV executive, who added that kids' gross rating points are flat.

Kraft Foods' recent announcement that it would end advertising of less healthy food products to young kids could affect other advertisers. "The pressure groups are not going to let up," said one buyer. TV executives countered that Kraft's kid spending will remain strong but will move behind other product lines. Healthy living and fitness messages will flood children's programming later this year, they predicted.

While the market won't shake out until April, some marketers have struck early deals with Nickelodeon in a move to snap up what's likely to be limited inventory. "We have some business we've already done in key categories, upfront money we've already written from significant players in major categories including autos, toys and food," said Sue Danaher, exec VP-general manager, sales at Viacom's Nickelodeon, which also sells CBS's morning block. Nickelodeon is, not surprisingly, bullish on upfront prospects, predicting a 10% rise to around $935 million.

Ken Ripley, VP-ad sales, Discovery Kids, a digital network, has also fielded an increased number of early inquiries. Mr. Ripley, who also sells the Discovery-branded block on NBC on Saturdays, said broadcast networks still command a premium price, though Nickelodeon is closing the gap. Spots on the Viacom-owned channel can run to $70,000 at the top end, while other smaller rated cable channels might charge less than $1,000 for a :30.

At least one buyer thinks the market could shrink, citing the lack of a breakout toy during the 2004 holidays. But toys are just one part of the kids TV ad mix. Microsoft and other software companies remain players, and Nickelodeon reports growth in retail, fashion, beauty and wireless telecom.

Mr. Hirsch said TV has more competition for those dollars than ever. "We are starting to see toy manufacturers use the Internet to a larger degree. Disney Radio is drawing dollars. In-theater advertising is another way to reach kids." n


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