Below key top tier, a real dogfight

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Cable will again break first in the annual sprint for upfront dollars, both media buyers and sellers agree. But after that, there is little consensus.

"Based on some of the opportunities cable offers and the value vis-a-vis the other alternatives, they'll have another good year," says Tim Spengler, exec VP-director for national broadcast at Interpublic Group of Cos.' Initiative, New York. Cable sales executives are confident with most industry estimates expecting to be up about 10% from last year's $6.3 billion haul.

"Whether it comes from broadcast or syndication, money will shift from other markets," says Lifetime Exec VP-General Manager Lynn Picard.


"The broadcasters will not lower their" costs per thousand, predicts Steve Gigliotti, exec VP-advertising and emerging media at E.W. Scripps Co.'s Scripps Networks. He estimates as much as an $800 million increase in cable volume.

"They can't add inventory, they can't necessarily do more product placement and ratings are flat or down," Mr. Gigliotti says. "The only thing they can do is pull back inventory, and that's why advertisers will go to cable first-to scare [broadcasters] into not doing that."

Indeed, while price and value continue to be a reason buyers seek more cable inventory, David Levy, president-entertainment sales and marketing at Time Warner's Turner Broadcasting, predicts the CPM disparity between broadcast and top-tier cable networks will continue to shrink. Joe Abruzzese, president-advertising sales at Discovery Networks U.S., says overall cable rates will rise 6%-7%. Last year, Turner's TBS/TNT reportedly commanded 9%-12% increases and Discovery Networks rose 9%-11%; broadcast network CPM increases ranged from 5%-11%.

"We've reached a new tipping point in that cable can do the heavy lifting inside a media plan," says Sean Cunningham, Cabletelevision Advertising Bureau president.

Several cable sales executives are also buoyed by a healthy second-quarter scatter market-much stronger than that of the broadcast networks. In many cases, cable networks have been selling out inventory by mid- to late April, thanks to spending by such categories as beer, travel, telecom and import autos.

Yet even surrounded by ideal conditions, sellers will face challenges increasing their share of the potential $7 billion market. The number of options continues to increase-Nielsen Media Research now measures 68 ad-supported cable networks, and the Federal Communications Commission reports 388 national cable networks.

One major media buying executive suspects the market will remain flat with "isolated rises here or there, based on whether base-level CPM is low enough. WB used to have that advantage in broadcast."

Who's got that advantage this year in cable? Scripps for one, says the executive.

Scripps Networks, which counts Home & Garden Television, Food Network, DIY Network, Fine Living and Great American Country in its stable, is known for offering niche audiences and a slate of non-traditional packages, including video-on-demand and broadband offerings, and cross-channel interstitial opportunities.

Even though ratings for HGTV have fallen 9% in the crucial 18-49 demo, such categories as do-it-yourself retail- Lowe's and Home Depot, for example-rely on the highly targeted audience Scripps offers. "Our networks don't travel in the same circles as everyone else," Mr. Gigliotti says. "We have such strong endemic categories."

When it comes to cable ratings, swings of less than 10% don't trigger much buyer reaction. Yet a few networks have had huge year-over-year gains in their 18-to-49-year-old demos. A&E Network is one of the past year's biggest gainers, up 32% in 18-49s. It's also down 10 years in its median age, thanks to a slate of fare including "Growing Up Gotti" and "Dog the Bounty Hunter." ABC Family saw 12% gains and will sell original programming this year. In the news sector News Corp.'s Fox News Channel is up 38%; Time Warner's CNN is up 17%.

If the second- and third-tier networks have a big ratings story, says Mr. Spengler, "they have a new story to tell and might be able to steal share from some of their competitors."

Midtier networks making ratings headway include National Geographic Channel, which in 18-49s is up 78%, due to a surge in distribution and a heavy reinvestment in programming; Crown Media Holdings' Hallmark Channel, up 15% in total viewers; and Rainbow Media Holdings' AMC, which has grown 21% in 18-49s.

A few may struggle to grow their revenue in an off ratings year. Says a media executive at one of the major agencies: "TLC has had a tremendous ratings drop. There's a huge crisis in confidence with the programming there."

Yet Mr. Abruzzese says that his networks, with TLC down 40% and Discovery down 14% in 18-49s, are still highly desirable to blue-chip marketers-and that they've been able to make up for those drops with price increases.


"We're still selling September to September," says Mr. Abruzzese, who with Discovery U.S. President Billy Campbell introduced TLC's new reality slate during the upfront presentation.

Dave Cassaro, president of Comcast Network Advertising Sales, says that even though E! is down 19% in 18-49s, he's confident the numbers will bounce back. (Comcast Corp. owns 51% of E!.) "We've got targeted young, affluent audience in what is pretty good contemporary programming environment," Mr. Cassaro says. "[E!'s] Style Network is off the chart in terms of young, affluent demos watching it."

It doesn't just come down to ratings and price. "Price is important, but it's also the ability to deliver on innovation," says Shari Cohen, co-executive director of national broadcast at WPP Group's MindShare North America.

Clued in

MindShare's Shari Cohen looks for more than price. With so many cable choices, she values sponsorships and strong marketing relationships as well as VOD or wireless innovations

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