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McGowan: $500M Jump for Cable Upfront

11/01/2008 8:00 PM Eastern

Discovery Networks U.S. ad-sales chief Bill McGowan last week issued a bullish forecast for the cable upfront, but many disagreed with his sanguine assessment.

McGowan, the programmer's executive vice president of ad sales, projects that basic-cable networks will garner $5.2 billion, a $500 million or 11 percent increase from last year. That ratio would be basic cable's lowest percentage gain since 1992-1993, McGowan said.

Conversely, he predicted that the broadcast networks would amass $7.3 billion, down 6.4 percent or $500 million from last year.

One executive on the buying side offered a more bearish view. Cable's only silver lining is a possible work stoppage by either the Writers Guild of America, the Screen Actors' Guild, or both, said MediaCom Worldwide co-managing director Jon Mandel.

"If cable and syndication are up at all, it'll be because of the potential of a strike," Mandel said Otherwise, Mandel forecast that both cable and broadcast's upfronts will be down.

"The question is how much," he said. "Cable may be hurt less than broadcast, [but] cable has been living in a world of hurt" so far this year.

The Media Edge president of broadcast operations Bob Igiel also offered a glum assessment. "I can see broadcast being down, but I don't see cable rising that much," he said.

In the past two years, McGowan has made bullish upfront projections that largely proved true. Executives at Turner Broadcasting Sales Inc. and elsewhere maintained that actual upfront sales, while strong, were slightly below McGowan's year-ago estimates.

"Last year, our executives forecast $4.6 billion [for cable] and it was $4.7 billion," said a Turner spokesman. The company declined to offer a prediction at this point, and said it wanted to wait until it was "closer to the market."

Cable's upfront typically extends from May into early July.

Indeed, McGowan lowered his upfront estimates for last year, calculating that cable jumped 24 percent to $4.7 billion as broadcast grew 7 percent to $7.8 billion. The restatement, he said, reflected recent cutbacks in General Motors Corp.'s and Procter & Gamble Co.'s 2000-2001 upfront commitments.

To support his latest forecast, McGowan pointed primarily to cable's rise in the ratings and the continued erosion of broadcast viewership. He did not feel that the health of the economy or the vagaries of the stock market would play that big a role in moving the sales marketplace.

"The worst point of the marketplace was fourth-quarter 2000," said McGowan. The first quarter of 2001 "showed more strength."

He anticipated a modest uptick in the second quarter, and a rebound by the fourth quarter strong enough to tally "significant growth."

"Directionally, I think he's probably correct," said E! Networks executive vice president David Cassaro, who declined to offer more detailed projections. "The writers' strike is really the wild card and it's quite likely that would push even more dollars into cable."

In assessing Madison Avenue's annual ad-sales ritual, the outspoken Mandel said: "Most clients are up to the limit on their [credit] cards."

Networks that claim the kids' upfront should wrap late this month "are blowing smoke up your a—," he added.

Network cable's aggregate Nielsen Media Research share of the primetime audience will reach 45 this year, compared with the Big Four broadcast networks' 48 share, McGowan predicted.

However, cable should finish with 40 percent of the upfront dollars, while the balance will go to broadcast.

Over the previous five upfronts, cable has notched an average increase of 23 percent, he said, while broadcast has seen average growth of 7 percent over that span.

"No way they will be able to maintain that momentum," McGowan said. "This year will be one of major correction" in terms of media-buying patterns.

In other advertising-related developments last week:

  • Salomon Smith Barney analyst Jill Krutick last week projected a 4 percent uptick in overall U.S. ad spending, to $245 billion, though she said the upfront would feel the strikes' effect. "We estimate upfront pricing to be flat to up modestly," she said at The Big Picture, a conference co-sponsored by her firm and Cahners Television Group.

  • At the same conference, Salomon's Niraj Gupta predicted the upfront would be "one of the weakest in the last 10 years, although not necessarily the worst. Pricing might be up zero to 4 percent."

  • Viacom Inc. president Mel Karmazin told The Big Picture that he remained optimistic about its ad-sales growth this year, despite a difficult first half.

Mike Farrell and Monica Hogan contributed to this story.

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