Turner Broadcasting faces tough upfront

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The reorganization of AOL Time Warner's Turner Broadcasting Systems, with WB network CEO Jamie Kellner moving in as chairman, comes not a moment too soon for its advertising future. Mixed ratings and a weak ad marketplace will make ad sales a rough trip for Turner going into May's upfront market, according to media executives.

The first change since Mr. Kellner took over in March is putting together sales efforts for some AOL Time Warner cable and broadcast networks. Turner's Cartoon Network and the WB's Kids WB! programming block will sell some inventory together in the coming upfront kids market. Jed Petrick, president-chief operating officer of the WB, said, "We are not merging, but are working together." The upfront market refers to TV time that advertisers lock up ahead of the fall TV season.

Additionally, Brad Turell, exec VP of Turner, said there will be some coordination in ad sales for adult programming. "Bill Morningstar [senior VP of media sales for the WB], Jed Petrick and Joe Uva [president of entertainment sales and marketing for Turner Broadcasting Sales] are talking together," he said.

Media agency executives expect additional efforts. "You'll probably see more of this as part of the AOL Time Warner deal," said Stacey Shepatin, VP-director of national broadcast for Interpublic Group of Cos.' Hill, Holliday, Connors, Cosmopulos, Boston. America Online in January bought Time Warner, which owned the WB and Turner.


Corporate advertising shifts like this should help improve Turner's overall sagging ad efforts-something all Turner cable networks will need. For instance, in the recent fourth quarter, general-interest channel TBS's ad revenue dropped 22% to $132 million and drama network TNT sank 10.2% to $125 million, according to Taylor Nelson Sofres' CMR.

Turner's news networks also suffered in the fourth quarter. CNN sank 13.6% and Headline News lost 21.2%. The only Turner cable network to see a fourth-quarter ad revenue increase was Cartoon Network, up 17.8%.

Turner's networks were hit harder than the industry average of 37 networks, which dropped 4% in ad revenue in the fourth quarter.

TBS grew only 2% for the entire year to $560 million; TNT did better, moving up 13.5% for the year, also totaling $560 million. CNN was up 6.7% to $364 million. Headline News dropped 2% to $151 million.

The industry average for the top 37 cable networks was up 16.7% for 2000.

Right now, in the second-quarter scatter market (time bought close to air date), one media buyer said pricing for Turner has fallen 15% in cost per thousand viewers from upfront pricing a year ago.

Still, Turner isn't the only cable seller facing a tough market. For example, two other general-interest networks-USA Networks' USA Network and women-oriented Lifetime, controlled by Hearst Corp. and Walt Disney Co.- were down 19.9% and 17.1%, respectively, in fourth-quarter revenue.

In the last couple of years, Turner executives have taken great pride in being the first cable player in the upfront market-and grabbing some big deals. But Turner executives-led by Steven Heyer, the former president of Turner Broadcasting who has since taken a post at Coca-Cola Co.-have admitted that much of the sales activity was in securing "share" of media budgets. That means Turner was not looking for higher price increases for each of its shows, but rather was seeking to take away dollars from competitors.

Last year, Turner executives claimed they did the market one better by selling 85% of Turner's allotted upfront inventory by May 17, well before the broadcast networks had even starting selling. Turner, however, never would say how much of its inventory it had allotted for upfront.

Typically, cable networks sell 50% to 60% of their overall inventory during the upfront, so many media agency executives were astonished and disputed Turner's claims. "Turner was perpetuating the myth that they were so well sold," said one veteran media agency executive. "When I had called X, Y, Z media buyers, they didn't do any deals. And people called them on it."

This year, Turner may not be so fortunate because the marketplace, for the first time in nearly a decade, is definitely weak. And Turner, having priced aggressively to grab share in an up market, now could find itself having to get more aggressive on price as the entire TV market scrambles for share in a down market.

"Turner has a huge amount of low-rated inventory," said one media agency executive.

Turner pulled in big dollars in previous years because-in spite of mediocre ratings-the ad market was strong. But now, with industrywide weakness in TV advertising, it will be harder for Turner, as well as other cable networks, to make their numbers. A silver lining for Turner is that its ratings climbed in the first quarter for its entertainment networks.

At the same time, higher ratings can cause other problems. "Cable networks are saying it's going to be flat in total advertising dollars, and if cable overall has grown their audience a couple of percentage points [including Turner], there is more supply," said one media agency executive. "They [Turner] could be in trouble. "

In the future, media agency executives believe Turner will look for other efficiencies among its networks. For instance, they say Turner one day could follow airings of the WB's older-skewing dramas, such as "Gilmore Girls" and the coming series "Smallville," with reruns of those shows on TNT, now billing itself as a drama network. Synergy helps here: Another AOL Time Warner unit, Warner Bros. Television, produces both "Gilmore Girls" and "Smallville."

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