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The Loyalty Factor

The upfront posturing by broadcast and cable has begun. Broadcasters shot first, launching a network-backed print ad that mocked the meager viewer reach of cable advertising.

This week, the Cabletelevision Advertising Bureau is firing back. It has statistics it says prove that viewers tend to be more loyal to particular ad-supported cable channels than to broadcast. In research it will roll out through July, CAB will try to sell advertisers on its research that says cable watchers think everything on cable is just more interesting—from the shows to the commercials themselves. CAB will use the NCTA National Show in New Orleans this week to make its big first splash.

CAB went a half dozen media research directors who helped form the questions asked by Knowledge Networks/SRI. Called How People Use TV, the resulting study determined, for starters, that 39 % of viewers claim a higher loyalty to cable networks than to broadcast networks, 21% were loyal to broadcast networks, and 11% said they're devoted to both equally.

So what does that prove?

In CAB's view, the residual value that viewers attribute to cable networks is transferred that advertisers who appear within that environment, according to Sean Cunningham, president and CEO of the organization.

"Because cable and broadcast are interchangeable, according to viewers themselves, by buying more cable, you are getting a better ROUI—return on upfront investment," he reasons. "We're telling the people we've visited to use cable as your reach vehicle, take advantage of better pricing, and buy yourself more advertising."

The study makes some extraordinary claims. For example, 48% of the respondents say they "look forward to time watching" cable, compared with just 20% who say that about broadcast networks or programs.

A full 68% think cable networks have programs they can't find anywhere else. Certainly, cable sells itself that way, quite consciously. South Park, The Daily Show, The Sopranos
are virtually the definition of cable. But so are endless repeats of off-net Law & Order
and Golden Girls.

Another 42% say "recent new programs make me want to watch more" cable. And 46% think cable networks "complement my lifestyle." The corresponding percentages for broadcast-network TV aren't even half that.

The respondents even think the commercials on cable are more interesting than broadcast commercials, 51% to 32%.

Both cable and broadcast sellers are, of course, posturing as media buyers get ready to negotiate in an upfront that faces essentially the same situation as last year: Broadcast rates go up as viewership declines because broadcast networks are still so much bigger than everyone else. Cable rates go up but not as dramatically because, well, there are a gazillion cable networks.

Last year, agencies agreed to spend more than $9 billion of advertisers' money on the six broadcast networks for the 2003-04 prime time season. That figure was roughly $1 billion more than they committed to the year before even as viewers continued to gravitate toward cable channels as well as to other media, such as the Internet.

Now broadcasters are getting a little noisier about their numbers advantage. Throughout the upfront season, which will unfold for cable in May and June, ABC, CBS, Fox, NBC, UPN, and The WB are fronting a $300,000 campaign to make the claim "People who need people buy broadcast."

The first ad, already firmly embedded in the memory of some cable-ad execs, shows a crowded street scene with an arrow pointing to one faceless man in the herd. The headline: "This guy saw your spot on cable."

The cable upfront market last year brought in an estimated $6 billion, up from about $4.8 billion the year before. While nearly everyone expects this year's upfront spending commitments to top last year's, advertisers, caught in the middle, are increasingly looking askance at cable's overall potential, say several media buyers and advertising consultants.

"There are 300 cable networks at this point," says a media consultant who asked for anonymity, "and, while they have half the viewers of broadcast, that's a lot of inventory spread very thin, even if you account for the top 20 networks obviously constituting the lion's share of that. Still, you need to buy a lot of cable networks to substitute for broadcast."

And so it goes. Cable is the land of plenty, which also can make it a somewhat unspecial buy for advertisers.

Sales executives believe that the ever-growing audience share and ability to more easily develop content around marketers will carry the day when it comes to getting price increases. In short, cable's niche markets are just the ticket for advertisers trying to hit a target audience with laser-like intensity. And, because a few companies own most of the cable networks, it's easy to arrange broad cross-network promotional efforts.

Cable networks are more able to deliver viewers to advertisers through initiatives like cross-platform deals because of their distinct identities and strong relationships with the audience, says Joe Abruzzese, president of ad sales for Discovery Network and a former CBS sales executive.

"An advertiser is likely to say to a broadcaster, 'You charged me 15% last year over a high base, and I'm not getting any value from this on top of the commercials you're running. So I'll take more money over to cable, plus get access to all sort of cross-marketing integration efforts as well,'" Abruzzese says. "That's a big reason why more money is moving from broadcast to cable."

But it's not moving in large chunks. One media buyer, who also declined to be named, says, "It's simply an inventory issue with cable. Also, it's not as oligarchic as the broadcast side; you don't have five main players. In cable, there are dozens of players, so it's hard for them to come up with a unified strategy."

Over on the broadcast-network side, though, a kind of united front seems to have emerged more forcefully this year, a few media buyers note.

"Networks have a decided advantage over the market: They're often willing to take the risk of holding back inventory," says one buyer. "There's always scatter. And they seem ready to let CBS take the lead on that and take the gamble later in the year if necessary."