Hard charger hits the passing lane

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The cable upfront is already in swing, and the question on industry lips this year is "Will cable pricing finally catch up with broadcast?"

Now more than at any other upfront, it appears cable has the chutzpah and the numbers to really give broadcast a run for its money. Cable upfront ad sales are predicted to jump 12% to $5.13 billion, according to an informal Ad Age survey (AA, May 3).

It has been estimated that broadcast pricing, on average, is about 40% higher than cable, even though cable has been steadily stealing away broadcast viewership. In 2002, the number of cable viewers in a calendar year exceeded prime-time audiences for the seven broadcast networks (ABC, NBC, CBS, Fox, WB, UPN and Pax) combined by an average of 1 million homes, according to analysis of Nielsen Media Research data by the Cabletelevision Advertising Bureau. This is a first. And this year, in April ad-supported cable's average prime-time U.S. household share was 52.0 compared with 43.7 for the seven broadcast networks.

While cable's aggregate audience rises, broadcast viewership has fallen. In "TV Ratings Update: The Emperors Have No Clothes," a recent Morgan Stanley Dean Witter & Co. report, analyst Richard Bilotti predicts that in this coming upfront, advertisers, aware that they've been paying more for less, will factor in this erosion in broadcast ratings. That, of course, does not necessarily mean they will pay more for cable, but rather may pay less for broadcast, a downward adjustment.

There are at least three high-profile forces driving cable to capitalize on its strong numbers and close the pricing gap with an upward adjustment, asking clients to pay more for cable.

One force is Joe Abruzzese, Discovery Communications' influential new chief of ad sales, who was once the aggressive head of sales at Viacom's CBS. As David Verklin, CEO of Aegis Group's Carat North America, remarked at the Association of National Advertisers' annual TV conference, Mr. Abruzzese made a long career keeping the gap between broadcast and cable as wide as possible; now he's trying harder to bridge that chasm.

The second force: AOL Time Warner's Turner Broadcasting System, which is going out on its upfront calls this year with Media at Millennium III, a software gizmo that proves cable beats broadcast on reach.

And third, while broadcast may be pulling back on reality programming to appease more advertisers that find much of it repulsive, cable is investing a lot of talent and money on new reality shows. It hopes reality will draw in more viewers; although advertisers may have lost their appetite for this genre, viewers clearly have not, say the cable networks.

TAKES CABLE LEAD

In 2001 and 2002, Mr. Abruzzese and his former boss, Viacom President-Chief Operating Officer Mel Karmazin, held the line against advertisers that were trying to drive down prime-time broadcast prices. This year, Mr. Abruzzese is expected to do the same, only for cable. When he announced his move to Discovery in a conference call to the press last October, Mr. Abruzzese declared he was going to push greater parity between cable and broadcast pricing. At the Discovery Networks upfront, Mr. Abruzzese bullishly predicted that his operation, including all the Discovery cable outlets, would do $500 million in deals compared with $350 million last year.

While most cable networks held small upfront presentations and announced a door-to-door approach to selling advertisers, Discovery's lavish upfront event at the American Museum of Natural History inspired comparisons with typically extravagant broadcast upfront events, the type of hoopla Mr. Abruzzese presided over at CBS with network President Les Moonves.

"I fully expect them during negotiations to get closer to broadcast," says a media director who requested anonymity. "We've heard pitches in the past from Discovery in which they said you buy one unit on each of our networks and you take the aggregate rating of all those units and that can compete with broadcast. Well, that's really five units added up together, it's not one unit. It's not a comparable buy."

Also at this year's Discovery event, the cable operator said it was doubling its rate of programming production by spending $2.5 billion over five years on new shows for its 10 networks. Such a huge increase in production spending is usually associated with broadcast.

"They've got their work cut out for them," says Jason Maltby, senior partner and managing director-national broadcast at WPP Group's MindShare, New York. He notes that Discovery's ratings are down 17% to 20%, and it has lost one out of every five viewers.

"Joe will bring more focus to the channel and make sure the programmers pay attention. On paper, Discovery should do better than it does, based on what they spend on programming."

MILLENNIUM MAKES SPLASH

Turner's new toy, Millennium III, is making the rounds of ad agencies after it was first introduced to the press in April. According to Turner executives, Millennium III is the latest enhanced version of a software program Turner has been working on for some time. It attempts to disprove the long-held view that broadcast is effective for advertisers because it reaches more viewers, while advertisers on cable benefit from the frequency of their ad rotation. "Cable is truly a reach medium," says David Levy, president of entertainment sales and marketing and sports at Turner Broadcasting Sales. "It can be used as a substitute for broadcast. And in general, reach on cable is less expensive-you don't have to pay more for less."

Millennium III apparently proves advertisers that are paying large sums for incremental reach points on broadcast can achieve the same distribution on cable for less money. "It's really an incredible tool," says Joe Uva, CEO of Omnicom Group's OMD Worldwide. "They've done a lot of work on the program. It really shows the value of running your ad schedules on cable. Very persuasive stuff."

Meanwhile, cable upfront presentations this year are following the lead of broadcast by offering a heavy diet of reality programming. Even a cable network with a lingering reputation for being unoriginal, Walt Disney Co.'s ABC Family, recently unveiled a new development slate of seven reality shows.

DAVIES CHECKS IN

At a press meeting, Linda Mancuso, senior VP- head of programming, trotted out "Perfect Match: New York," a dating game from Brit showstopper Michael Davies; "Tying the Knot," a six-part series on the real wedding of actress Melissa Joan Hart and musician Mark Wilkerson; "Dance Fever," a dance talent contest program; "Knock First," about teens who redecorate their bedrooms while parents are gone; and "Bachelor Pads," a family-friendly version of MTV's "Cribs."

Even Bravo, acquired last year by General Electric Co.'s NBC, has a reality show about reality shows called "The Reality of Reality."

Despite these moves, agency executives still don't believe parity is in the picture this year.

"Individually, few of the major cable networks are really growing," says Catherine Warburton-Scott, senior VP-associate director national broadcast at Aegis Group's Carat North America. "It's the smaller networks with less distribution that are growing. There are more networks being watched every year so the audience is still very fragmented. And with the new networks trying to get share from the larger networks, it keeps the pricing down. So the gap isn't really narrowing-it is getting farther apart."

EXTENSIVE CABLE CHOICES

"I don't think cable will close the gap," says Aaron Cohen, exec VP-broadcast media at Horizon Media, an independent shop based in New York. "The ability to choose a wide selection of cable networks-unless every network will hold the line very strongly-will give us the upper hand in negotiations."

Some advertisers believe that for cable to get closer to the pricing of broadcast, it doesn't just need critical mass, it needs to re-create its networks as premium brands, much like the products marketed by advertisers.

"They need to create branded viewing that brings viewers back and creates loyalty," says Mel Berning, exec VP-national broadcast at Publicis Groupe's MediaVest Worldwide, New York. "That gives us an environment for our advertisers' brands that really makes these programs a place where advertisers want to be."

Many cable networks are taking his advice to heart this year. Rebranding is in bloom. Rainbow Media's music channel MuchMusic has renamed itself Fuse. Viacom's TNN will become the male version of Lifetime, rechristened as Spike TV. Vivendi Universal's Trio calls itself "pop, culture, TV."

"There are just a lot of cable networks out there," says Charlie Rutman, president of Carat. "Some are incredibly well branded and targeted and have loyal audiences, but others are just another programming alternative."

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