Content

Slow Going in Upfront

6/10/2005 8:00 PM Eastern

At least initially, cable’s payday this upfront is shaping up to be weaker than the industry expected, with minimal price increases and budgets tighter than anticipated.

“A lot of agencies have been calling and saying the budgets are down,” one cable ad-sales chief said last week. “Nobody knew for sure how many and how much. I think that’s been the big question mark.

“And now finally, everyone is now seeing that it’s true, that the budgets are down. There’s some very challenged categories, like automotive.”

As first reported by Jack Myers Report last week — and confirmed by several cable ad-sales executives — Procter & Gamble’s agency, Mediavest, was notifying cable networks to say it was “dramatically” cutting its upfront spending.

“It could be a real stick in the eye to the cable industry,” said Jack Myers, the newsletter’s editor.

As one cable-advertising official explained, “Procter’s always been a place that has very deep, deep pockets, and buys so deep in terms of the number of networks. This year, if a client’s budget is down, they need to make their money work hard for them, so they’re cutting back the number of networks.”

As of press time Friday, the cable upfront was still inching along, with observers saying it could take weeks for it to finish up.

MTV Networks, USA Network, Lifetime Television, Turner Broadcasting System Inc., Discovery Communications Inc. and FX are among those said to have booked upfront business as of last week.

“It won’t wrap for three more weeks,” one cable official said.

As it turns out, ABC’s kicking off the broadcast upfront with modest price increases — 4% to 6% — has had a ripple effect on broadcast and cable. Media buyers just aren’t going to shell out higher CPMs for cable than they did for water-cooler hits like Desperate Housewives and Lost.

“Once the broadcast networks were at 6%, there’s no way that cable is going to average the same numbers as broadcast,” said Bruce Lefkowitz, executive vice president of ad sales for Fox Entertainment Sales.

Last year, cable finished its hearty upfront before broadcast. It’s a far different story this year, where it looks like cable will have to settle for CPMs ranging from either less than last year to up to 5% gains, at the very best. One ad official expected cable CPM increases to average out at 3% to 4%.

In addition, initial predictions about the cable upfront’s overall volume being up 10% to 11% — to as much as $7.3 billion this year — were being somewhat tempered.

Some industry sources were now projecting cable’s increase as only in the 5% to 8% range.

With ABC only getting 4% to 6% price hikes, both CBS and Fox were only able to secure similar price increases, while ratings-loser NBC is being forced to endure a steep decline in upfront CPMs and revenue.

Several sources were comparing Discovery to NBC, in that the cable programmer has seen ratings for TLC and Discovery Channel decline, thus media buyers were asking for sizable price cuts.

Some claim that agencies are looking for a “market adjustment” from Discovery, which has historically had some of cable’s highest CPMs.

Discovery flatly denied all those assertions. “We have not rolled back prices,” Joe Abruzzese, Discovery Networks U.S. president of ad sales, said last Friday. “We have no intention of rolling back prices. We’re 20% done.

“By the end of the day we’ll be half done, either zero or north of 3[%], which is where the cable industry is anyway. And we’re not getting punished any further down than budgets being registered in the marketplace.”

September