Cable-network sales executives must have wished on a star back in June —à la the song from The Walt Disney Co.'s classic Pinocchio
— since their dreams of a boom in the scatter ad-sales marketplace are coming true.
Several new series, such as ABC's 8 Simple Rules for Dating My Teenage Daughter, are off to promising beginnings. But, as buyers and sellers note, ABC and other broadcast networks could be in a bind if they're hit later with hefty make-good tabs for audience underdelivery.
Both cable's sales boom and broadcasts' potential for woes are rooted in the over-the-air networks' heavily sold position. Bear Stearns & Co. and others estimate that the six TV networks on average sold out 85 percent of their primetime avails for the entire 2002-03 TV season in that upfront last May.
Price goes up
As a result, cable networks are sitting pretty as buyers look to secure fourth-quarter inventory closer to air date, in the so-called scatter market. Cable sales executives said scatter rates are 15 percent to 20 percent above upfront levels.
"I can't remember when the broadcast networks were so heavily sold [in the upfront]," Comedy Central executive vice president of ad sales Hank Close said. As for cable, its volume is "so strong that that even 'robust' seems an understatement."
Added Lifetime Television executive vice president of ad sales Lynn Picard, "There's a lot of money working, and prices are up tremendously" compared to the upfront.
For those scatter-only advertisers, the price hike is far greater — in the 50 percent range, Picard noted.
"The [cable] scatter market is in a very strong place right now," added ESPN/ABC Sports president of customer marketing and sales Ed Erhardt. That's particularly the case for primetime, sports (especially National Football League coverage) and "top-tier" cable networks, he noted.
The brisk sales in those sectors have served to tighten basic-cable's scatter avails to some degree. Some industry sources estimated that Turner Broadcasting System Inc., Lifetime and USA Networks are among the cable entities with the fewest avails at present.
Categories fueling the scatter surge include movies, wireless communications, automotive and fast foods, Erhardt said. On the other hand, he said, financial, non-wireless telecommunications and the overall business-to-business field remain sluggish.
Hallmark Channel executive vice president of ad sales Bill Abbott added packaged goods, consumer electronics and retail to the list of categories boosting scatter, while Close cited video games and "malternative" beverages.
From a buyer's perspective, the overall scatter picture looks "very healthy," said Initiative Media North America executive vice president and director of national broadcast Tim Spengler.
"Many advertisers are looking to bolster what they put down in the upfront" by making fourth-quarter scatter deals, he said. "Cable is benefiting in its own right," and not simply because of the tightness in broadcast avails, he added.
"Advertisers are taking both options right now," he added. There's no problem yet in getting on" either the broadcast or cable networks.
The outlook for scatter in first-quarter 2003 is also sanguine. Earlier this month, the daily fax newsletter Jack Myers Report
said its latest survey indicated high levels of confidence in scatter spending into spring 2003, albeit somewhat less so than in the fourth quarter.
Buyers: less bullish
Myers found that 42 percent of all respondents — based on information from 225 industry executives — predicted the first-quarter scatter market would be greater than a year ago, versus 37 percent who believed it would be equal to the previous year and 21 percent who thought it would decrease.
A closer look at the responses, however, shows that the advertisers and agencies were far less bullish than those on the sales side. Myers reported that 35 percent of clients expected stronger first-quarter scatter sales, with 44 percent predicting it would be unchanged and 21 percent lower than a year ago.
Among the agencies, 36 percent expected a stronger market, 37 percent a weaker one and 27 percent predicted a flat marketplace.
Hallmark's Abbott was more bullish than most in assessing 2003 last week.
"I think the trend will be the same going forward into [the] first quarter," he said. "I predict the market will get even tighter as [the broadcasters] underdeliver their relatively aggressive [ratings] projections."
Even The Sopranos
on non-commercial Home Box Office would continue to drain ratings from the broadcasters, Abbott said.
But most sales executives were reluctant to predict the 2003 scatter outlook. Erhardt, who estimated that ESPN/ABC Sports' opening 2003 quarter is 20 percent ahead of the 2002 period, said the cable industry's first-quarter scatter business could be adversely affected if clients exercise their first-quarter upfront options.
That's unlikely at ESPN. "We don't see a whole lot of options being taken," he said.
Lifetime's Picard took a guarded view. Besides various industry developments, she said the outlook could be affected by breaking news, such as "if we bomb Iraq."
Comedy's Close likewise expressed concern about "the geopolitical stuff putting a question mark on things — the specter of war."