Cable's Q1 Scatter Sales Firm Up

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After months of Grinch-like bad news, the network-cable marketplace is getting some cheery reviews from advertisers this holiday season.

Sales executives from ABC Family, Bravo Networks, Comedy Central, Lifetime Television and Turner Broadcasting Sales Inc. have reported relatively strong scatter ad sales in a number of key categories, into the first quarter. They also expressed relief that few clients had canceled their first-quarter upfront commitments — in sharp contrast to last year.

Last spring's upfront selling season — during which agencies committed their clients to advertising inventory for programming running throughout the 2001-2002 TV season — paled by comparison to the 2000-2001 upfront. Not only did the selling period, hamstrung by a shrinking economy and Madison Ave. doldrums, unwind much more slowly, when all was said and done, network cable registered between $3.8 billion and $4.0 billion, according to various industry estimates. That's a far cry from the $4.3 billion to $4.8 billion the medium garnered the year before.

As such, cable networks had more remaining inventory to sell and significantly more dollars at stake in the so-called scatter market — where commercial units are held back and sold closer to air date — this time around.

"Fourth-quarter scatter money has been steadily coming in on a week-by-week basis, and first-quarter is happening, too," said Lifetime executive vice president of ad sales Lynn Picard.

The spending surge was unexpected, she said. "No one quite knew how fourth-quarter might go, especially after Sept. 11."

The primetime scatter gains might also be partly attributable to those events, she added. Some advertisers may have entered cable's scatter market because the Big Four broadcast television networks' inventory had been artificially tightened when news coverage of the terrorist attacks and subsequent air strikes in Afghanistan led to the re-expressing of inventory.

"I don't think cable had as much of that," she said.

Another factor: Poor ratings for many of its new and returning series have shrunk ABC's primetime avails.

"We're seeing an uptick in fourth quarter scatter the last two or three weeks," said Turner spokesman Mark Harrad. But that's not to say that this scatter market is stronger than a year ago, when such sales were soft, he stressed.

ABC Family executive vice president of ad sales Barbara Bekkedahl said her network's upfront customers received substantial scatter-market discounts, but scatter-only buyers tended to get only slight rate breaks.

"Scatter pricing has been flat with upfront, which is encouraging," said Bravo senior vice president of national ad sales Hanna Gryncwajg. "It's starting to look like — I'm afraid to call it healthy — a tremendous improvement over the past 30 days."

UNEXERCISED OPTIONS

The first quarter also seems to be shaping up well, especially with the dearth of upfront cancellations.

Generally speaking, media sellers said the market appears to be returning to pre-2000 normalcy, in that broadcast and cable networks have held on to most of the upfront dollars committed last spring.

"We did not see a lot of options — less than normal," Picard said. She attributed that to clients being more deliberate and realistic in their upfront buying than was possible during the buying frenzy of the 2000-2001 upfront.

With respect to its clients that targeted adults in primetime, ABC Family "didn't get hard hit at all with exercising options beyond accounts here and there," Bekkedahl said.

Likewise, fewer Comedy Central accounts have exercised the escape clause this year, said senior vice president of ad sales Hank Close

"Last year was real tough on the options front, because the upfront was a one-week affair," he said. "Clients had a lot better handle on budgets this year."

Close estimated that the option cancellations were at "a bit less than 10 percent," and closer to traditional levels.

Bravo's Gryncwajg noted that only two clients canceled orders "and one came back in scatter."

Turner has also seen fewer first-quarter upfront cutbacks, Harrad said.

Q1 HEATS UP

Perhaps more importantly, scatter activity is continuing.

"It's been kind of a nice ride since mid-October. We and the whole market have been able to firm up prices," said Close. "There's been broad category strength that a lot of us didn't expect."

Close listed some of the categories that have shown strength: "Video games — everything entertainment — movies, home video, cable networks have been drivers; also, long-distance telcos, a couple of ISPs and some auto."

ABC Family's Bekkedahl cited "a good bit of business from a video game client targeting parents, and really strong movie money targeting families and kids."

The network landed only "a bit of retail," but "a lot of packaged goods," Bekkedahl added, Companies in the latter category didn't allocate a lot of upfront money, Bekkedahl said, but are now calling upon reserve funds for scatter.

"We see more of that due in the first quarter," she said.

Lifetime's hot segments included movie studios, retailers and telcos, Picard said.

Hollywood also added Cable News Network to its usual Turner entertainment network buys, said Harrad. The programmer's most-active scatter segments included automotive, pharmaceutical, telcos and consumer electronics, and spending was up slightly, Harrad said.

Many clients have held back cash, planning to spend it closer to the launch dates for new products or campaigns, he said. Turner executives feel such conservatism is understandable in the face of an uncertain economy, an unsure ad-sales marketplace and the volatile world situation, according to Harrad.

Although Bravo saw some disruptions when films set to debut in the fall were shifted to the fourth quarter, Gryncwajg said the studios have been very active in fourth-quarter scatter "and even more so in first quarter." Other strong categories for Bravo included auto, packaged goods and wines.

Growth in calendar-year business is yet another positive sign, cable-network sales executives said.

"The calendar-year upfront also is moving forward," with more such deals registered at Bravo than a year ago, said Gryncwajg. That marketplace was delayed from November (which is when that segment peaked a year ago) into December, she noted.

Picard said she's now busy with calendar buys for first quarter.

Still, all the bullish signals seemed to be offset by bearish ad-spending forecasts from Merrill Lynch & Co. and Jack Myers LLC. Merrill Lynch doesn't expect any ad-spending turnaround until mid-2002.

Striking a more pessimistic chord, Jack Myers said two weeks ago in his daily Jack Meyers Report
newsletter that "media companies should continue to be conservative in their 2002 as well as 2003 ad-revenue forecasts."

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