Cable TV 2010

With Scatter Market Booming, Media Cos. Bullish on Upfront

A Slowly Awakening Economy May Encourage Advertisers to Spend More, Lock in Lower Prices

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NEW YORK (AdAge.com) -- An emerging economy and a healthy scatter market have cable executives licking their chops at the idea of being able to turn in a better performance in the upfront marketplace than they did during last year's brutal ad-selling session.

Winners and Losers chart
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Winners & Losers: Many cable outlets saw ad revenues decline in 2009.

By most estimates, cable networks last year gave up pricing rollbacks, agreeing to reductions of 2% to 6% in the cost of reaching 1,000 viewers, or CPM, a common measure used in the annual talks. Meanwhile, 2009 total upfront ad-dollar commitments by marketers was expected to be down between 10% and 15%, falling to a range between $6.5 billion and $6.9 billion, compared with 2008's $7.65 billion.

Yet things have changed. Last year's market was clouded because the troubled economy made it tough to read consumer trends and willingness to spend. But this year should offer better visibility, said one ad-sales executive. "People understand their business far better than they did in last year's upfront," said David Levy, president-sales, distribution and sports for Time Warner's Turner Broadcasting System. "They are able to go back into the marketplace and try to gain back the market share they may have lost or increase the market share they have already gotten."

And some advertisers may want to put money down now to avoid paying higher prices later, should the economy continue to improve. "Last year, there were a lot of advertisers who didn't feel comfortable making long-term commitments and felt they would, because of their business necessities, make more short-term commitments," said Steve Mandala, exec VP-cable entertainment sales, NBC Universal. Yet in the "scatter" market, he added, "they are paying prices that are probably higher than what they would like them to be."

Evidence is already in place that media outlets have more wind at their back. The Dow Jones Industrial Average is up. And that scatter market, in which advertisers buy ad inventory much closer to air date, has seen price increases of 20% or more above the costs of inventory in the upfront across the board, according to analysis from John Janedis of Wells Fargo Securities. "We expect the double-digit increases in the scatter market (vs. the upfront) to continue through the summer," he wrote in an April 1 research note, "with overall cable/TV network ad revenues approaching double-digit gains."

Caveats
As usual, every story has two sides to it. Ad buyers predict any upfront market won't go as smoothly as media sellers would have you believe. Marketers are still cautious, they warn, and aren't able to open their purse strings on a whim. They are still on the hunt for good deals and may award more dollar volume to those outlets that can deliver decent value.

That won't stop cable outlets and others from being aggressive. Already, CBS Corp. CEO Leslie Moonves has sounded a gong: Advertisers that think they can grudgingly agree to a single-digit percentage increase in CPMs after getting rollbacks last year aren't going to get much attention, he suggested in recent talks with investors and on conference calls.

With that in mind, cable executives list a number of strategies they might follow. One ad-sales executive suggested running alongside broadcast-TV outlets; if those outlets go out seeking double-digit percentage increases in CPMs, this executive said, then so can top-tier cable. A second executive predicted cable outlets might wait to see how high broadcast outlets try to go, then position their properties as having better value. A lower CPM with a decent rating could be positioned as a potential "replacement" for broadcast, one executive said, especially because cable programs often run several times during a week, and ads that accompany them during that time can aggregate a good-sized viewership.

Another executive suggested some cable programmers might simply hold back ad inventory unless they get a certain price; if scatter trends continue as they have been, prices are likely to increase in the fall and winter, this executive said, so those advertisers who want to get decent prices now for a substantial chunk of inventory will want to deal.

The bruised economy will continue to play a role in the proceedings. One of the cable executives said some outlets might go out seeking percentage increases in the high-single-digit percentage range, but agree to mid-single-digit increases for advertisers willing to put down a significant amount of money.

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