MSOs: We Want More Local Avails!

7/19/1998 8:00 PM Eastern

Denver -- Cable operators need more local ad-avail time
from networks, according to Ajit Dalvi, senior vice president of programming and strategy
at Cox Communications Inc.

Using the Cabletelevision Advertising Bureau's Local
Cable Sales Management Conference here last week as his bully pulpit, Dalvi fired the
first public shot of what could become the latest tense war of words between networks and

Dalvi's avails crusade garnered the support of two
other senior-management MSO executives on the same panel that closed the CAB's
conference: Julie Dexter Berg, executive vice president and chief marketing officer at
MediaOne, and Lou Borelli, executive vice president and chief operating officer at Marcus
Cable Co. L.P.

Borelli said he, too, would like to see the networks
"squeeze out a little more inventory" for affiliates. Berg concurred, but she
hinted that it won't be easy. Initial reaction from network ad-sales executives
confirmed her suspicions.

"The negotiating table has become increasingly
tense," as networks and affiliates haggle over programming issues, she observed.

Asked by moderator Filemon Lopez, senior vice president of
ad sales at Comcast Corp.'s Comcast Cable Communications, what networks could do for
operators beyond what they are already doing, Dalvi asked for one extra minute of local
time per hour.

Most networks now give affiliates two minutes hourly for
local sale. Exceptions include: Animal Planet, CNBC, Comedy Central, ESPN Classic Sports,
Fox News Channel, FX, Nick at Nite's TV Land, Sci-Fi Channel, Speedvision and Turner
Network Television (three minutes each); and CBS TeleNoticias (five), according to the
CAB's "1998 Cable Network Profiles."

When asked for his reaction to Dalvi's call, John
Silvestri, USA Networks Inc.'s executive vice president of ad sales, said,
"There are no plans to change our allocation to affiliates."

At Black Entertainment Television, Louis Carr, executive
vice president of sales, said, "I don't think that's happening at
BET." Others were less talkative. A vice president at an upscale network said,
"I know nothing of it," while another at a midsized network would not comment.

At a time when local sales are surging, operators are
hungry for more inventory to sell.

Of course, networks are reluctant to give up time when
they, too, are enjoying a banner sales year, having just about wrapped up cable's
upfront, with volume soaring from the year-ago level of $2.3 billion to as high as $2.8

In the absence of extra avails from networks, operators are
bolstering their local inventory in another way, Dalvi said -- by using digital
ad-insertion technology to increase the number of insertable channels. The extra time
would help operators to pay for the new equipment, as well.

Dalvi also complained that "a fundamental
problem" is that the networks' costs per thousand homes (CPMs) are "too

But network executives said that complaint was unrealistic,
and that it fails to take into account advertiser and agency resistance. Many major
networks, they said, asked for considerably higher CPMs during the upfront, with several
seeking increases into the double-digits.

Ad-agency buyers and their clients balked and bargained
those rate hikes downward, one network executive said. Consequently, as various buyers and
sellers have said during the 1998-99 upfront marketplace, the cable networks' overall
CPM-increase range wound up between 5 percent and 11 percent, with A&E Network and
Discovery Channel in the elite bracket, commanding upticks in the 10 percent to 11 percent
range. A year ago, some recalled, cable's CPM growth was closer to the 4 percent to 9
percent range.

Network cable's boom isn't over yet, said Dave
Cassaro, senior vice president of ad sales at E! Entertainment Television. The third- and
fourth-quarter scatter market is off to "an active and healthy start," despite
coming right after a hefty upfront, he said. But other sales executives worried that the
General Motors Corp. strike could hurt scatter sales.

In yet another sales controversy, BET has been pressing for
CPM upticks averaging 25 percent in this upfront, Carr said, as a way to eliminate what it
sees as the disparity between BET and other networks with similar delivery among teens or
other young demographic sectors, like MTV: Music Television and VH1.

"Just to get in the door and educate [buyers] on the
African-American audience, we had to do deals that weren't win-win or good for BET.
Now, we're asking them to be fair -- [as in] favorable adjustment in rates,"
Carr said.

He termed the nearly done upfront "pretty
successful," especially among packaged goods, movies and music clients.

An executive at another network said, "BET's been
selling so cheap for so many years, and now it's trying for big increases." Two
others agreed that BET had "undersold" itself for years, although one major
buyer said BET asking for hefty increases "has not been our experience." Most
likely, he said, BET -- like some other networks -- asked for bigger CPM hikes from
"bottom-feeders," or accounts previously paying low CPMs.

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