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Cable Upfront Warms Up Slowly but Surely

The cable-network upfront market is expected to reach at least $5.7 billion, up 20% from 2002, with price hikes for the top-tier networks in the high-single- to low-double-digit range on a percentage basis. Second-tier networks will do less well.

Negotiations are tough, as cable networks aggressively pursue the double-digit price hikes achieved by the broadcasters, and advertisers attempt to hold the line at high single digits.

"The cable upfront is going to take some time to complete just on the sheer volume of networks coupled with the fact that they're being bullish about rates and we're digging our heels in," said Andy Donchin, lead TV buyer for Carat North America.

David Levy, president of ad sales for the Turner entertainment and sports networks, said he has sold more than half the inventory set aside for the upfront. "I'm probably going to end up with double-digit price increases. It's still fluid but that's where I'm targeted as a whole."

Total ad dollars are up also for TNT and TBS, which are being sold in tandem, said Levy, adding that the volume gain is in the high teens on a percentage basis over last year.

Turner may be averaging double-digit gains so far but apparently didn't get them from Bob Riordan, lead buyer at MPG. He estimates that "top-tier" cable networks like Turner, USA and Lifetime are commanding 7%-9% rate hikes while second-tier networks get low- to mid-single digit increases.

"Cable is doing well," said Riordan. Volume is up "north of 15%," he believes. "I think it will end up somewhere between $5.5 billion and $6 billion," he said. Last year, cable raked in an estimated $4.8 in the upfront.

According to Donchin, "every single network seems to be asking for double-digit price increases. Some may get it. Some won't." As best he can tell with a fair amount of business still to be written, the average cable deal seems to have a price increase in the "high-single- or low-double-digit range."

"I can't blame them for being bullish," he said. "They see what the other guys have done, and they want to get in on that gravy train, too." One advantage the buyers have is that, "with cable, there are a lot of different ways to spend your money, slice up the budget, with so many networks to evaluate."

The pace of cable deals varies from network to network. According to Jeff Lucas, president of Universal Television Group ad sales, USA, Sci Fi and Trio have sold more than 80% of their upfront inventory. His networks were up 20% in volume with price hikes in the "low-double-digit range," he said.

"Cable's value in the eyes of advertisers has increased overall," Lucas added.

Cable may also be benefiting from the fact that advertisers had much more ad time to buy than the broadcast networks could handle. That hundreds of millions of dollars flowed to syndication and is now flowing to cable as well. In addition, advertisers are also getting fairly tired of year-in-year-out rate hikes across the broadcast dayparts.

Levy says Turner started its upfront concurrently with the broadcast networks. "We were used as a substitute for broadcast."

Turner and the other major nets pitch themselves now as an alternative to broadcast. "There's some validity to it," said Donchin. "These are things we have to look at, especially given the high rate increases across the board on the broadcast networks. We are looking for more-efficient ways to spend our money without sacrificing reach or effectiveness."

Joe Abruzzese, president of ad sales for Discovery Networks, said his networks were between 60% and 70% sold as of late last week. Discovery will reap total upfront ad dollars at least 50% higher than a year ago, he added. "The broadcast networks got maybe 10% to 12% more volume this year, and they got great price increases. We're going to get 50% more volume without discounting prices."

Cable's price hikes won't match broadcast, Abruzzese said, but, with a much bigger volume gain, "it's very positive for us."

Like syndication and broadcast network daytime, cable daytime sold well. "We've known we had a strong daytime lineup [including ER, NYPD Blue, Charmed
and Angel]," said Turner's Levy, "and advertisers really took advantage of it this year."