Anxieties Wax as Upfront Wanes

By Jun 13, 2005

As cable television’s upfront buying season draws to a close, all eyes are on Turner Broadcasting and MTV Networks, the two largest programmers in the business. Turner, especially, has been holding out for higher rates from advertisers in what has proven to be an unexpectedly slow market for the cable networks.

The major question that remains is whether Turner – home of TNT, TBS, Cartoon, CNN, and others — will settle for the 2%-3% price increases that advertisers are willing to give or hold out for the 4%-6% CPM (cost per thousand homes) that ABC and CBS reportedly won. If it opts for the latter, advertisers will see more inventory than usual held back for the “scatter market.” Advertisers lock in prices and time on the most coveted shows in the upfront and buy the rest of their spots during the broadcast season in the scatter market.

The depth of cable’s problems was made clear when “The Wall Street Journal” reported on June 13 that Proctor & Gamble had cut back its upfront ad sales commitments to cable networks by 25% while slicing their commitment to the broadcast networks by only 5%. The company is moving much of its money to product placement and product integration opportunities – such as the use of Crest toothpaste as an integral part of an episode of NBC’s “The Apprentice,” the newspaper reported.

Meanwhile, ABC’s unexpectedly aggressive move to close deals early in the upfront season continues to roil the market. Notes one cable network executive, “Six weeks ago if you had asked us, we’d have predicted high- to mid-single digit [rate increases]. Then the broadcast networks moved first. No one predicted it, and prices started to fall.”

One cable network executive says that the volume of business at his networks has remained solid but that price increases were scattered in the low- to mid-single digits depending on the client. He blames the lack of spending from automobile companies for part of the slowdown, as well as the continued increase in oil prices.

What does that mean for Turner and MTV Networks?

Observers say that trying to time the market – hold out for better prices – could backfire if agencies pick up most of what they need elsewhere. One highly placed network executive says, however, that it is unlikely that advertisers would omit the Turner networks, which they consider among the most important in cable. Cable networks generally sell about 65%-70% of their inventory in the upfront, compared with upward of 80% for the broadcast networks, and the remainder in scatter.

Prior to the upfront, cable networks had talked of picking up around $500 million in ad commitments from the broadcast networks, but that optimism has waned, and executives predict those gains could be limited to $100 million-$200 million, the smallest in years.