Upfront watch: Nets may lose $465 mil to cable

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Broadcast networks could lose half a billion dollars this year to cable TV and other media options if buyers' early estimates of the upfront marketplace hold up.

Broadcast and cable sales executives began to aggressively court media buyers last week amid growing indications that marketers could shift their spending patterns in this year's upfront. That follows a dismal season of ratings declines and increased frustration with the upfront process.

"No one is giving up on broadcast, not yet," said a leading media buyer who attended the Discovery Networks' upfront presentation. "But we expect our clients to pull back about 5%." The buyer, who requested anonymity, said the money could be moved from broadcast to cable or out-of-home media.

Several other media agency executives echoed the idea that marketers could shift about 5% of their broadcast budgets this year to other options. That's no small amount; the broadcast upfront last year rocketed to a record $9.3 billion. Five percent of that number equals $465 million.

Cable networks sold about $5.4 billion in upfront inventory last year, and the Cabletelevision Advertising Bureau predicts that number could rise by $1 billion this year. "We see the shifting of dollars coming from upfront broadcast," a spokesman said.

agressive pitches

In Los Angeles last week, broadcasters made aggressive pitches to marketers during their annual development meetings, which offer sneak peeks at programming prior to the official upfront presentations in May. At the same time in New York, cable companies unveiled bullish upfront presentations and said they expected more advertising dollars to finally shift to their side of the ledger.

Joe Abruzzese, president-ad sales of Discovery Networks, said he expects a 10% increase in sales at the company's premium networks.

Still, there are skeptics. Some buyers and sellers anticipate that broadcast spending could rise by as much as $700 million, which would up the networks' upfront haul to $10 billion.

"Despite all the talk, broadcast is still the medium that delivers the mass audience," said Michael Gallant, a media analyst at CIBC Worldmarkets. "The big advertisers and the agencies just can't take that out of their media plan."

not `spectacular'

Some observers, including Mr. Gallant, said the fact that the scatter market is down is not encouraging. "The upfront pricing will still be up," Mr. Gallant said, "but delivery will be down, so the overall revenue number will not be all that spectacular."

Faced with such projections, ABC, Fox, NBC and the WB made unusually aggressive presentations last week at development meetings. (CBS once again sat out, simply sending a list of new programs to media agencies.) In the past, the meetings were simple sneak peeks at the new programs before their official unveilings at the upfront presentations. This year, broadcast programmers and sales executives mounted assertive presentations, and promised to remain flexible and to work with advertisers to meet their marketing objectives, according to several buyers in attendance.

ratcheting up process

"The broadcasters are ratcheting up the whole development-meeting process this year," said Marc Goldstein, CEO of WPP Group's MindShare, who was in Los Angeles last week. "There has been a lot of talk about audience defection, fragmentation and loss of viewership, and a lot of talk about money moving out of network television to alternatives."

"The networks said they want to be buyer-friendly," said Andy Donchin, senior VP-director of national broadcast for Aegis Group's Carat North America "They want to find ways to make deals work. "

Unlike other years, according to Mr. Donchin, the presentations from NBC and Fox were "very upfront-ish. They had lots of stars, lots of clips."

Mr. Gallant noted for some companies, such as Viacom which owns CBS and leading cable properties such as MTV, it's all TV. "[Viacom] will come out in great shape. That's fair to say for Time Warner as well, given the size of Turner Networks vs. The WB. ESPN at Disney will do fantastic, but ABC will offset some of that success."

Ed Ehrhardt, president of ESPN and ABC Sports, said his sales team is in a good position, not only because it sells for cable and broadcast, but also because his programming captures young male viewers. "We've taken the lyrics of an old Connie Francis song for our upfront slogan this year: `We are where the boys are."'

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