Lookin' good!" That catchphrase from the late comedian Freddie Prinze pretty much sums up the national ad-sales outlook for 2003.
Indeed, the prognosis is so healthy that cable-network sellers may again — as comic Jerry Seinfeld might put it — become masters of their domain.
On the network and national spot-cable fronts, ad volume is on the rise this year, in sharp contrast to declines caused by 2001's dual whammy of a sluggish economy and the Sept. 11 terrorist attacks.
Following a $4.5 billion to $4.6 billion cable upfront marketplace — the period in which advertisers secure schedules for the TV season ahead — network sellers have enjoyed a brisk scatter climate.
Buyers have paid 15 percent to 20 percent above upfront levels — with volume up 15 percent from the 2001 Madison Avenue bazaar, according to industry observers. Calendar-year business has also been strong.
The reason: the broadcast television networks, in amassing a record $8.3 billion bonanza in last summer's upfront — surpassing not only last year's $7 billion, but also the previous high of $8 billion garnered in the 2000-01 upfront — reportedly sold an average of 85 percent of their primetime avails. That resulted in a significant tightening of the inventory available to scatter buyers.
That hefty lift in post-upfront pricing may well give the ad community more incentive to steer additional money into commitments during next year's upfront, rather than save cash for the scatter marketplace.
The upfront surge caught the crystal ball gazers totally off guard. Discovery Networks U.S. executive vice president Bill McGowan, who offers a forecast each year, proved way too conservative in his broadcast projection of a flat $7 billion. But he was on target with his $4.5 billion prediction for cable.
Strong into Spring
Most cable-network sales executives and some agency buyers believe the strength in cable's scatter marketplace should endure well into next year — perhaps even into spring, when the 2003-04 upfront negotiations will get underway.
"I continue to be really very bullish on scatter," Hallmark Channel executive vice president of ad sales Bill Abbott said, anticipating that the momentum should be sustained through the second quarter.
"There's no end in sight, unless there's a dramatic change in the economy," he said, citing the strength in calendar-year sales, plus the fact that clients have exercised only minimal upfront options to date. Just 1 percent of Hallmark's upfront commitments were reduced during the first quarter, he noted.
Option pick-ups have been strong so far, agreed MediaVest president of U.S. broadcast Mel Berning.
Maintaining that a healthy scatter marketplace historically bodes well for a strong upfront, Abbott predicted that the 2003-04 upfront "should be very strong."
Others would not look that far ahead. MediaCom Worldwide executive vice president Donna Speciale said that second- and third-quarter sellout levels are high at the broadcast networks, but cautioned that third quarter "could be out of sight" — unless marketers start exercising their upfront options.
Lifetime Television executive vice president of ad sales Lynn Picard also anticipated that inventory will be "extremely limited" during the first two quarters of 2003. Some clients are already acting on that expectation by looking to buy both first- and second-quarter avails, she said.
Cable buyers feasted on first-quarter scatter avails, continuing the brisk momentum of the fourth-quarter scatter marketplace, according to several sources.
Hallmark's Abbott said the first-quarter 2003 scatter market has been bolstered by hefty spending in the automotive, retail, pharmaceutical and packaged-goods sectors.
ESPN/ABC Sports president of customer marketing and sales Ed Erhardt said the automotive, fast food, retail and movie categories have fueled the strong scatter market. Citing significant ratings gains for sports programming, he noted that "clients are migrating dollars to sports" from other dayparts.
In mid-October, Jack Myers Report said that primetime costs per thousands (CPMs) for the Big Four broadcast-TV networks — ABC, CBS, Fox and NBC — rose an average 7.5 percent, led by CBS's 11 percent and NBC's 8 percent.
Turning to cable's upfront, Myers estimated that CPMs for the major niche networks climbed 4 percent, as did those for the cable-news services. But CPMs for broad-based nets fell 2 percent.
Myers noted that MTV: Music Television, E! Entertainment Television and Comedy Central averaged an 8 percent rate of CPM growth, followed by a 6 percent rate for ESPN.
In the negative column, USA Networks Inc. (now Universal Television Group) made deals early in the upfront market by slashing CPMs by 8 percent to 15 percent, Myers said. Lifetime also sought to increase revenue share by cutting CPMs to the low single-digits, he added.
Will the ad market continue to strengthen? Noted forecasters from Universal McCann and Zenith Optimedia Group are slated to release their latest ad-spending forecasts at the UBS Warburg 30th annual Media Week Conference today (Dec. 9).
Earlier this fall, Myers released an optimistic projection which held that the broadcast and cable networks' ad-sales results should remain "robust through 2004," cable jumping 8 percent on its own in 2003, while over-the-air TV records a 3 percent uptick.
Momentum seems to be on the side of those media, based on other recently released spending estimates for the year.
The Cabletelevision Advertising Bureau and PriceWaterhouseCoopers, for instance, said that basic-cable network ad revenues rose 3 percent to $2.58 billion in the third quarter, and by 0.45 percent to $7.62 billion for the first nine months of 2002. The latter figure set a new record for the nine-month period.
Nielsen Media Research's Nielsen Monitor-Plus service two weeks ago put ad spending across 11 major media at $69.3 billion through September, up nearly 4 percent.
Over nine months, cable ad volume grew 3.3 percent to almost $9 billion, said Nielsen, while broadcast rose 7.9 percent to $14.2 billion.
The rosy sales projections also spill into the spot-cable realm, where rep firm National Cable Communications reported that spot sales jumped 16 percent through September, and projects that growth will reach 19 percent by year-end.
Watching current events
Despite all the optimism, several buyers and sellers were mindful that the uncertainty surrounding current events could easily cloud the sunny outlook for scatter — or all ad sales.
Rainbow Advertising Sales Corp. president of national network sales Arlene Manos declined to make a forecast as to the long-term outlook for 2003 scatter.
"I hesitate to hazard a guess," she said. "We live in a world that's a bit uncertain these days."
MediaVest's Berning called the second- and third-quarter scatter outlook "a question mark. We need to see what happens in the Middle East and its impact on the [U.S.] economy."
Speciale also said the ad-sales marketplace could change dramatically if there's war in Iraq or a dramatic drop in consumer confidence.
Added Initiative Media North America executive vice president Tim Spengler, "A really bad holiday retail season also could change [the] second quarter."
Observed Speciale: "[The ad-sales marketplace] is so much like the stock market, it's not even funny."