Top cable networks are taking different approaches to squeezing the most out of the surprisingly competitive upfront advertising market. The strategies range from the quick, deliberate fire sales at USA Network and Lifetime to the hang-tough posture at the Turner networks.
Many cable network sales executives were euphoric after the rapid-fire broadcast upfront, despite stiff price hikes. Broadcasters grabbed a record $8.3 billion in upfront business. The syndication market also was up, with $2 billion in sales, 18% over last year. Surely, that meant cable would experience an across-the-board boom.
"Clearly, a rising tide raises all boats," Discovery ad sales chief Bill McGowan said after the broadcast market broke.
Not necessarily. It's raising some of the boats, but not all. The consensus among sellers and buyers is that cable's total upfront take will grow 5%-15%, to $4.6 billion. But, because of stiffer competition among cable nets, some are cutting prices and making it up on volume.
"Agencies paid more than they expected in broadcast," said USA Cable head of ad sales Jeff Lucas, "and they're looking to [cable] to go below and even it out."
Lucas created a stir in the first days of the cable upfront, taking his USA and Sci Fi nets to market at reduced cost per thousand (CPM), 7% to 12% less.
USA cut prices, in part, to get back in advertisers' good graces. Plagued by poor backroom operations and routinely miscalculated inventory, the network has seen some buyers shy away. Last year, USA managed to sell only 40% of its upfront time.
For Lucas, former head of NBC's Olympics ad sales, the task this upfront was two-fold: "We had to repair our image in the ad community and be smart about business." Some network execs grumbled that USA was undercutting and preventing them from getting increases. Lucas shrugs off those accusations. "If there were so much money out there, USA could get increased share by dealing on price, and everyone else could get their price increases."
Some popular channels, like MTV, Comedy Central and E!, have secured gains in sales volume and CPMs. Discovery's McGowan asserts that his nets, including Discovery Channel and TLC, are among cablers getting increases. But some buyers say Discovery has lowered CPMs.
MTV Networks execs said MTV is writing business with high single-digit gains in CPM. Even its entertainment nets like TV Land and Nick at Nite are seeing flat CPMs or tiny gains. Executive VP, research and planning, Betsy Frank contends buyers are giving MTVN's channels credit for stronger branding: "We are not getting mired in the double-digit-down territory of Lifetime and USA, and maybe some others."
Despite intense pressure, Turner officials say they are holding out for increased CPMs. Industry execs say Turner's new ad sales chief, Mark Lazarus, had marching orders from Chairman Jamie Kellner to stand firm. Other are "trying to hold the line," said one media analyst. "But if Turner caves, then the whole thing goes."
Some predictions call for cable CPMs to increase in the low to mid single digits. Even with those gains, the gap between cable and broadcast CPMs continues to widen, partly because of the proliferation of cable nets: 47 ad-supported, Nielsen-rated networks are "all scrambling to get money in a very competitive marketplace," said media analyst Tom Wolzien.
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