Cable TV 2009

Top-Tier Cable Networks Set to Take on Broadcast

Don't Expect a Whopping Increase Compared With '08, but Those With Ratings Traction Could See Gains

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NEW YORK ( -- There's little reason to smile during these troubled financial times, but certain cable programmers might soon show their pearly whites.

It's been a grim parade of ratings and circulation declines and cuts in production costs at print and broadcast properties. Top-tier cable outlets, however, are poised to do relatively well in this year's upfront TV market negotiations, which many buyers suggest will be onerous and protracted.

"What I'm hearing is cable is definitely going to be better than broadcast. They've been stronger throughout this recession and from the media buyers I've heard their clients are more interested in the cable networks," said Marci Ryvicker, a media analyst at Wachovia Capital Markets. Ad commitments for cable ad time sold during last year's upfront -- when networks sell a large portion of their ad inventory for the coming season -- were estimated at $7.5 billion, a 10% to 15% increase from 2007's $6.9 billion.

Mind you, cable isn't necessarily due for a whopping increase. Buyers suggest top-tier cable networks -- those that produce original programming that have gained ratings traction -- could see just a few percentage ticks upward in the cost of reaching 1,000 viewers, or CPM, a common measure of ad time during the upfront market. What happens to overall dollar volume is another matter altogether. In a time when marketers are holding on to their dollars ever more tightly, however, such a forecast is cause for tepid optimism for cable.

Top-tier cable outlets in the upfront "will be able to hold CPMs, or maybe see just a minimal increase relative to last year," said Mary Price, principal-brand media at Dallas independent Richards Group. Others? Well, the going will be rougher. "If you're a stand-alone, third-tier network, well, I don't think I would advise my clients to go and play in the upfront market with those types of networks. This is another year where you can hold back dollars and still get some deals."

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Cable TV 2009

Hitting targets
What's driving the big cable consensus? For one thing, more advertisers are interested in reaching large slices of audience who flock to a particular topic -- food aficionados who watch Food Network or kids who dash to Nickelodeon.

But there's also ratings erosion. The broadcast networks continue to be the best draw for millions of consumer eyeballs in one fell swoop, and advertisers that need to reach a mass audience at particular times -- especially the fourth-quarter holiday season, when marketers will continue to need broadcast ad inventory to drive movie openings, retail sales and fast-food purchases. But fewer broadcast programs bring in the audiences of the medium's heyday, and NBC's introduction of a five-days-a-week talk show featuring Jay Leno at 10 p.m. brings broadcast's power to draw the biggest audiences even further into question.

"While overall TV viewing remains remarkably stable, the broadcast networks' share of the pie continues to shrink. Depending on the demo, all broadcast viewing for the week among adult age groups is down between 5% and 10% from last season (the declines tend to diminish as the demos age)," wrote Steve Sternberg, exec VP-audience analysis at Interpublic Group's Magna. He added: "Ad-supported cable has picked up virtually all of the defecting broadcast viewers."

All this talk prompts speculation that cable could lead upfront sales this year, something that happens rarely and hasn't happened since 2004, when Ford Motor Co., among others, started making deals with cable outlets including Viacom's MTV Networks and Time Warner's Turner channels. The diminishing gap between broadcast's share of ratings and ad dollars could give cable a chance to lead the marketplace in this year's upfront, said Steve Lanzano, chief operating officer of Havas' MPG.

Selling cable
Some cable executives have picked up on this trend and are using it in their sales pitches. In a upfront presentation for Discovery Communications' cable networks, Joseph Abruzzese, president-ad sales, pointed out that a marketer could buy time on four of his networks during prime time for the same amount it would spend on a single broadcast network.

Given the state of the economy, however, cable's ability to notch a win in this environment is not a sure thing. "The cable networks are not in as dismal a [ratings] supply situation as the broadcast networks. There's going to be a good number of cable ratings points to buy, with demand that is likely going to be lower in the upfront," said Ed Gentner, senior VP-group director at MediaVest.

But there are some positive signs in the ether. Analysts often look at second-quarter ad sales as a barometer for the health of the upfront market. The theory is that if pricing for ad time bought much closer to air date is robust, then marketers will put more money down in the upfront as they seek to lock down prices. Weak scatter pricing means marketers have less impetus to secure a cheap roost, since prices are already attractive. When it comes to scatter, "the cable networks are even to slightly up from the upfront, and broadcast is flat to slightly down," said Wachovia's Ms. Ryvicker. Whether that's a sure bet in this enervating ad economy is anyone's guess.

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