Kids' upfront outlook is grim

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In a probable prelude of TV advertising dealmaking to come, another dark cloud will hover over the kids' upfront market-a market that will see perhaps a 5% ad revenue drop from the overall $800 million in national advertising spent on kids' television last year.

The math is clear: There's an abundance of ratings inventory and a decrease in kids' advertising dollars. The result: It's a buyer's market.

"The market will be down," said Jon Mandel, co-managing director of Grey Global Group's MediaCom, New York. "The toy companies are [targeting older kids], and there are fewer of them. There are fewer food companies [following mergers]. It's not brain surgery to figure out budgets are down. This market's one that we don't have to negotiate in the press."

UPFRONT MAY BE EXTENDED

AOL Time Warner's Cartoon Network and Viacom's Nickelodeon will fare best in this poor market, possibly getting zero to slight single-digit increases in costs per thousand viewers. AOL Time Warner's Kids WB, News Corp.'s Fox Kids Network and Walt Disney Co.'s Disney Kids Network, meanwhile, will see CPM decreases, industry watchers say.

A soft marketplace will give many advertisers the leisure to extend the actual upfront period over several months-similar to last year, when the kids' upfront market started in April and moved slowly, with deals finally finished in August. The upfront kids' market refers to network time on children's programs bought before the fall season.

Companies spent about $800 million last year advertising on network, syndication, cable and local shows targeting kids aged 2 to 14.

While activity in the kids' upfront market doesn't necessarily affect the adult upfront market, the overall weakness of the economy likely will prompt a sharp drop in the $8.1 billion adult upfront market, according to analysts. The adult upfront market commences in mid-May.

On the subject of the kids' upfront, Shelly Hirsch, CEO of The Summit Media Group, New York, a media-buying agency specializing in medium-size toy companies, said: "I don't think there is going to be any upfront. What's the need?"

Industry executives like Mr. Hirsch say there's not much need for an upfront because in the current economic climate, advertisers can pick and choose from an abundance of inventory. More importantly, they can afford to stretch the period to its limits by holding off on buying until much later in the year, when they'll have a clearer idea of what their media budgets will be. For instance, most major toy companies know they will get specific orders from toy retailers in June and July, so they can defer decisions until then, instead of making their buys much earlier in the upfront.

Anticipating a weak marketplace, some TV sellers already are opening their doors, hoping buyers will take advantage of special multilevel advertising, which involves cross-marketing advertising and promotional deals across kid-oriented media, including radio, print and TV.

"We are open for sale right now," said Gary Montanus, senior VP of ABC/Disney Kids Network. "We are not going to wait for someone to start the market."

ACTING ACCORDINGLY

Mr. Montanus said with Disney's properties, including print, radio, Disney One Saturday Morning on ABC, Disney One Too, which airs on Viacom's UPN, and cable network Toon Disney, advertisers need to make early decisions to ready complex promotional and advertising deals.

The Cartoon Network, now the second-largest kids' player in terms of rating points with a 30% share to Nickelodeon's 45%, realizes the tenor of this market and will act accordingly.

"Let's assume there is not a whole lot of new money," said Karl Kuechenmeister, senior VP of advertising sales at Turner Kids Television, which includes The Cartoon Network. "Our job is then to take share [away from other competitors]." Concerning advertisers forgoing the upfront market, he said: "If you want to secure valuable real estate, that is what the upfront is all about. Advertisers want to have their [media] weight when they want their weight."

In the past, two main media agency players-MediaCom, New York, with clients such as Hasbro and Kraft General Foods, and Bcom3 Group's Starcom MediaVest Worldwide, Chicago, with McDonald's Corp., Nintendo and others-controlled the start of the marketplace, which, over the last several years, has begun in mid-April.

Now, there has been some shifting with the major accounts. This year, Kraft moved its kids' business to Bcom3's MediaVest, New York, and media spending with some of the big toy companies, such as Hasbro and Mattel (at WPP Group's MindShare USA, New York), has been severely cut.

Though virtually all kids' spending in all categories has been cut, Turner's Mr. Kuechenmeister reports other areas are slowly opening up. "The entertainment industry-major motion pictures and video games-are a good growth category," he said.

Sellers in the kids' upfront market are putting on a bold face-at least in current conditions. "In the kids' marketplace, the scatter has been fairly active-we saw that start to kick in in the last fourth quarter," said Barbara Bekkedahl, exec VP-sales for Fox Family Worldwide, jointly owned by News Corp. and Saban Entertainment. "In the pre-Easter timetable and now in the second and third quarters, we're very tight. I feel like we're experiencing a nice scatter season, and I don't anticipate the softness I see on the adult side [in the upfront]."

IMPORTANCE OF SCATTER

Scatter refers to advertising bought for the near term; for example, on a quarter-by-quarter basis, as opposed to ads bought well ahead of time in the upfront. Scatter advertising in the kids' market traditionally has been negligible, since virtually all kids' buying occurs in the upfront. However, considering the persistent softness in the past few upfront periods, scatter has become an increasingly important piece of the kids' advertising market. Still, the bulk of kids' buying goes into the fourth quarter-specifically, the "hard eight"-the eight weeks leading up to Christmas.

Toy companies have cut spending for three years in a row and are expected to do so again. In response to that, Ms. Bekkedahl said Fox, which operates kids' blocks on the Fox Kids Network and Fox Family Channel, is raising rates for its scatter market in hopes of encouraging more buyers in the upfront.

Sue Danaher, exec VP and general sales manager for Nickelodeon/Nick at Nite and TVLand, declined to say whether she expected an increase this year, saying only, "We feel good about business and we expect it to be a very positive year."

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