MTV nears $250 mil OMD deal

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Omnicom Group's OMD USA is nearing an agency-wide $250 million cable upfront deal with Viacom's MTV Networks, striking early in what is expected to be a frenzied market that already has networks asking for pricing increases as high as 19%. The deal is expected to close this week, according to executives close to the companies.

OMD USA has a number of key young-skewing clients that already buy a lot of time on the MTV Networks. PepsiCo's Pepsi-Cola and Frito-Lay brands spend $50 million on MTV Networks alone. Other marketers on the cable channel include Sony's PlayStation, Wm. Wrigley Jr. Co., Vivendi Universal's Universal Pictures, MGM Distribution Co., and McDonald's Corp. MTV Network annual events include "The Video Music Awards," and "MTV Movie Awards."

For the last several years, MTV Networks has commanded higher cost-per-thousand viewer price increases vs. other similar-size cable networks, thanks to its highly coveted audience of teens and young adults. During last year's upfront, when some mature cable networks struck lower-priced deals over the year before-such as USA Networks and Lifetime-MTV Networks improved by some 9% in its CPMs.

Two weeks ago, MTV Networks held its first-ever upfront presentation. The idea behind the combined network presentation was to demonstrate to media buyers that MTV properties are competitive with broadcast networks for highly coveted younger-skewing viewers.

John Swift is the OMD senior media executive who negotiates Viacom cable network advertising deals. Executives at OMD wouldn't comment. An MTV spokeswoman would only say the two companies did not yet have a deal.

Overall, sharply higher TV prices are expected this week as TV's advertising upfront market gets under way, with broadcast networks asking for hefty 12% to 19% increases on CPMs.

Media-buying executives said deals will be settled for somewhat less, with 5% gains for UPN, 6% for ABC, 9% at CBS, 11% for NBC, 11% for Fox and 15% for the WB.

Industry estimates are that overall ad dollars could be up more significantly than previously thought for broadcast networks. At the low end, up 9% over last year's upfront to $8.7 billion; at the high end up 13% to $9.3 billion. NBC could rake in the most at just a shade south of $2.6 billion.

"The [broadcast] networks are just starting to count the house," said Mike Drexler, CEO of Publicis Groupe's Optimedia USA. "Budgets are going to be submitted [this] week, plans will probably start coming in. The nets don't want to push the market because they want to make sure they get a firm fix on the dollars."

past mistakes

Last year the networks made a strategic mistake by selling too much inventory in the upfront, leaving little to sell in the quarter-by-quarter scatter markets which witnessed 30% to 40% price increases over upfront pricing. Networks also don't want to misstep by driving money to non-network TV media.

"They don't want to make any mistakes," Mr. Drexler said. "If more money comes in than expected, and the networks try to get into double-digit increases, that will signal a pause [among advertisers]. Then more will flow into cable and syndication if that happens. A lot depends on how much money flows in."

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