Abruzzese: Hold the Line on Pricing

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Chicago -- In his keynote speech Tuesday, Discovery Networks U.S. president
of ad sales Joe Abruzzese told the Cabletelevision Advertising Bureau Cable
Sales Management Conference here to hold the line on pricing.

"We don't close the [cost per thousand homes, or CPM] gap [with broadcast] by
lowering our prices," he said.

Moreover, he warned, when cable networks cut rates, clients "put that money
back in their pockets," rather than buying additional ratings points.

Abruzzese recalled that a few years ago, ABC and NBC rolled back their rates,
but not CBS, where he had headed sales before going to Discovery six months
ago.

Similarly, during the last upfront, some cable networks he didn't identify --
but other sources said last year were USA Networks Inc. and Lifetime Television
-- cut their prices. That strategy, he said, undercut the industry's contention
that cable is more valuable.

"We can close the gap [with broadcast] if you believe in your product," he
told the CAB conference audience. "Agencies have done a great job of buying
efficiencies. We have to do a better job selling value."

Looking at the current upfront, Abruzzese predicted that market leader NBC
may hike its CPMs by 15% but, with its ratings decline, it's basically standing
still.

To advertisers that feel like they're paying for broadcast networks'
programming failures, he advised, "Buy less [broadcast time] and prices will
come down."

Despite broadcasters' contention to the contrary, Abruzzese also felt that
the reality-program genre -- less prevalent in the fall lineup -- will continue
to be a quick-fix strategy for broadcasters once primetime-series flops emerge
in the season ahead. "Get ready for it," he added.

Responding to a question from the audience, Abruzzese said the apparently
strong upfront market will "trickle down" to the spot and local cable
levels.

Even as cable programmers prepare to battle for a greater share of ad sales
in that marketplace, Abruzzese's advice to the cable industry was, "Target
broadcast networks and not each other."

Several MSO panelists made similar points later in the day.

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