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Syndication Tells Its Story

Major program syndicators think they have not been getting their fair share of national advertising dollars—and they aim to do something about it. That something is the first annual conference of the Syndicated Network Television Association. During the two-day event this week in New York, the majors (all except Sony Pictures Television) will showcase their programming for advertisers and their creative agencies and media planners and buyers. The goal: shift ad dollars from the broadcast and cable networks into syndication winners like The Oprah Winfrey Show, Dr. Phil, Judge Judy, Jeopardy, Seinfeld and Friends.

On the eve of SNTA 2003, Broadcasting & Cable Deputy Editor Steve McClellan sat down with the top sales executives of five of SNTA's member companies and discussed the conference and the state of their business. The consensus: Things are looking up—way up—for 2003-04.

The five players: Bob Cesa, executive vice president, advertising sales and cable programming sales, Twentieth Television; Elizabeth Herbst, executive vice president, advertiser sales, Universal Domestic Television; Marc Hirsch, president, Paramount Advertiser Services, and chairman of SNTA; Clark Morehouse, senior vice president, advertiser sales, Tribune Entertainment Co.; and Michael Teicher, executive vice president, media sales, Warner Bros. Domestic TV Distribution.

How will you know if SNTA is a success?

Bob Cesa: I will say that we already are very successful because the number of attendees [from the advertiser and agency side] for the event right now is higher than at any NATPE. More than double.

Marc Hirsch: And some of the early feedback we're getting is that we have succeeded in making the event very easy for these agencies to send the junior buyers and planners and research people that we are targeting.

Michael Teicher: This has an opportunity to be enormously successful because it has an exclusive focus—the sales part of syndication. So all stake holders—agencies, clients, and sellers—stand to benefit by it.

Elizabeth Herbst: And we've also tried to make it serviceable for the client. All they had to do is say they wanted to come, and the rest is taken care of for them. It's sort of a full-service event, if you will. Some of the agencies that took a rather blasé point of view, have now all of a sudden woken up and want their people to be there.

How much actual business might get done at this show?

Clark Morehouse: When was the last time anybody wrote business at NATPE? If somebody wanted to buy something from any one of us while they were there, they wouldn't be turned away. But the real success is predicated on turnout, how we move people around and some of the logistical issues. But as far as writing business, I don't think that any of us have a high level of expectation that we'll do that.

Hirsch: There's no business written at the CBS upfront presentation. And that's in May. There isn't going to be any business written at this event in February.

Herbst: It's an informational forum.

So you're simply laying the groundwork for later business.

Cesa: Yeah, they will have a chance at one point to just concentrate on the syndication business and see all the options that they have available. And that's what the plan is: to inform them. And then also, obviously, to follow up with other meetings as questions arise out of the presentations.

Morehouse: Now the scatter market is pretty hot for the second quarter, so you never know who might feel the necessity to put some money down.

So, when do you expect the syndication market to break this year?

Hirsch: For a number of years, syndication was pretty much writing business before the network [upfront] presentations in May—in fact, as early as early April for daytime. In the last two years, that's kind of been reversed, and the networks have gone first, syndication second and cable last. There's no way of knowing, because we're not in charge of that. If the buyers decide that they want to purchase syndication first, all of us, I'm sure, will be ready to sell. If they decide to do the networks first, then we'll go late May, early June, which is what happened last year.

Do you care what the order is?

Cesa: Personally, I'd like to go first. If the networks are extremely aggressive [in pricing], then [advertisers will] come to us first because we do have limited inventory. Unlike cable, which has a vast amount of inventory, we have very little inventory. And if you want to buy our shows that are highly rated and well distributed, you have to move sooner rather than later, especially if you think the market's going to be very strong.

Okay. Let's go around the table. Forecasts: syndication upfront 2003. What's your prediction?

Morehouse: I think it will be strong. I don't know about timing. A couple of people tell me in Chicago, people on our side of the equation, that they thought it would go early, and that would be fine. There's already in the trade press lots of speculation about conversations going on between advertisers and networks, much of which is being denied. But there's a drum beat right now that I think is very real. It will be a strong upfront.

Single-digit strong or double-digit strong?

Morehouse: For some programs, double-digit strong; for other programs, single-digit strong. And for programs that, God forbid, have lost rating points over the year and have declined, maybe low single-digit. But we are in a business where there's going to be great demand on a large number of the programs. I think, in general terms, the syndication business will be very healthy and very strong.

Anybody else?

Herbst: Ditto.

Hirsch: There are some people who were very surprised at the strength of the marketplace last year, especially for the networks that were in good shape, CBS and NBC. If you look at this past year, second-quarter scatter is a lot stronger than it was a year ago. We had a terrific upfront last year as opposed to an extremely poor one the year before. We've had a very strong scatter market, which is continuing— if anything, increasing—in intensity in second quarter. I'd be shocked to find out that we don't have an upfront that is at least as strong if not stronger than last year. I don't know why it would be different.

Cesa: Syndication is one of the best areas in which to spend your money, and a lot of people realize that. They're going to be back, and we're going to have a tremendous upfront. That's my opinion.

Morehouse: Second-quarter cancellations are probably at record lows across the board in our industry, and there are signs that the health in the media economy will continue to outpace the health of the general economy. But I think the whole industry as well as the whole world is holding its breath on exactly what happens in Iraq. That's the big wild card, a big variable that clearly none of us can control.

You apparently feel that syndication hasn't been getting its fair share of the advertising take. Why do you think that is?

Morehouse: Our industry was undersold, certainly at the planner level, for many years. And I think good times sort of mask a deficiency in a grassroots approach to selling our industry. When we hit the skids in 2001, we rededicated ourselves to selling ourselves at every level. I don't think we ever called on research people. We all have staffs that call very deeply into a buying unit. And we know the media directors, and we know the people that actually execute. But the decisions sometimes are made at different levels, and we weren't really getting to that.

Hirsch: For years, we kind of took for granted that people knew who we were and what we were doing, and more and more we heard from the heads of the buying agencies, the Jon Mandels, the John Muszynskis, the Marc Goldsteins. They would say, "Look, you really need to start talking to the planners more. More and more, they're beginning to take control of some of the dollars." And so we are really focusing on the planners and the clients and the research people who probably know our story least.

Teicher: Everybody is going back to the basics of media sales. And that is, go call on the people who have the most influence on the budgets. That's at the client level, and it's also at the planner level. A whole generation of planners grew up in the agencies without having been informed or educated about the merits of syndication. So today, all of us are very heavily focused on planners.

Hirsch: And that's one of the great things about this event in New York. I've gone to NATPE the last 20 years except for this year. And, in 20 years, I'm not sure I ever saw a research person or a planner. All of a sudden, this year, as we look over the invitation list and look over titles of people, we have as many planners and researchers as we do people from the buying end of the business. So, for the first time as an industry, we're putting on an event that's not just reaching the people who know who we are but also reaching the people that we've never been able to see before on a mass basis.

Herbst: Presenting the umbrella of syndication as a medium is one of the strategies that we've all gotten behind. And to show the full strength of the medium as opposed to just trying to focus on that individual program has been an important initiative, which will come together in this event.

Do you think syndication became complacent over the years?

Cesa: I don't know if I was so complacent, but I will tell you this: We went from four broadcast networks to six. And basic cable grew. Now there's arguably 20 to 25 basic-cable networks with close to 80-plus million households. So, obviously, the choices have broadened. And they have more sales people on the street, so we needed to get refocused.

And why do you think planners and researcher ought to shift money into syndication?

Cesa: I've been reading recently where the client and the agencies are spending huge amounts of money trying to determine exactly what their brands are and the consumers that purchase their brands. If the target audience that we deliver matches their brand's target audience, there's no guesswork. But, when they buy a network package of prime time, they have to be concerned about the kinds of programs they're going to be running in as the year goes on. Many shows are canceled, and other shows are brought in, and reality programs come and go.

Hirsch: There have been a lot of role reversals. We've gotten the off-network sitcoms and the dramas. More and more of our programs are scripted programs. And more and more of what the networks are selling is reality. Reality may be fine to reach a younger audience, but not every advertiser views what's going on the networks right now as content-appropriate.

Teicher: Another benefit that syndication offers is that these programs are on five days a weeks, 52 weeks a year. It doesn't take a genius to do the math to see how hard or how difficult it is to purchase a 30-second unit on a broadcast network show—and everything else that you have to buy along with it. That's not to say that we don't package things, too. But, if your target audience is to buy Friends
or to buy Frasier, advertisers know we air it five days a week, 52 weeks a year, and there's ample opportunity to get in. In prime time, you get limited opportunities to do that. So that's an advantage we need to exploit a little bit further.

Herbst: And you also have in the first-run shows between 190 and 195 original episodes that are going on every year. So, when you look at the broadcast networks, you have to ask how many of those episodes are actually original. Wheel of Fortune, Dr. Phil, Maury, Blind Date: Three-quarters of their episodes are original.

Hirsch: There are also a lot of people, honestly, that buy cable because the cable pricing is so cheap. The unit cost is so low because the rating is
almost nonexistent. I look at lists. Clearly, there are people who are buying cable and not buying us. I think there are a lot of people buying cable that couldn't afford to buy a single unit in Entertainment Tonight. It would be a year's budget for them. But they can go ahead and buy hundreds of cable units because almost nobody is watching and they can afford a national medium through buying extremely low-rated cable.

One point that a prominent syndication president makes is that cable has made fairly significant inroads in daytime. And he flat out admits that cable seems to have a more upscale, richer, younger audience.

Morehouse: Daytime as a daypart has really created challenges. And I would speak for my company where we've failed in three shots to really get traction. It's been a very frustrating daypart, very frustrating.

Herbst: I would say that daytime is a daypart in which syndication has had a fair amount of success.

Morehouse: Historically, yes.

Hirsch: A lot of success.

Herbst: Fifty-seven percent of the available broadcast GRPs are in syndicated programs. Some of the most compelling new shows in daytime have come from syndication. And there's been continued growth. Certainly, Universal has a lot of daytime, but so do my competitors. And I think it's been an area that the advertisers have embraced.

Cesa: Look, the networks are down in daytime, about 13% over the last four years. That is directly attributed to more options for the viewer. Cable is a little more upscale because the people that buy cable obviously have a little more income. And they have made some inroads and will continue to, because the more options you give the viewer the better. But the numbers are minuscule on cable, and our numbers are huge in daytime. Look at the success of shows like Dr. Phil
recently. We rolled out Texas Justice, we did a 3.6 rating last year, and we just started it last year.

Herbst:Maury's had growth the last five years across all key demographics for in daytime.

Teicher: Daytime actually represents enormous upside, particularly in two areas. One, if we do our job well, as [Herbst] alluded to, the reality is that any clients who aren't even considering daytime syndication have automatically boxed themselves in a position where they are choosing from a smaller pool of opportunities, and the law of supply and demand is governed by options. So opening up your pool to different programs, most of which are in syndication, provides new opportunities for advertisers. But the other point I like to make is that, obviously, the success of Dr. Phil
has really brought back the heyday of what daytime could be.

With all of this reality programming succeeding on the networks, how is that going to affect syndication three or four years down the road in terms of the availability of the great off-network product?

Hirsch: There's a positive and a negative. Clearly, if the networks put on fewer sitcoms, then you have fewer to choose from and in theory fewer to succeed. But, by squeezing the pool, you probably tend to make each of the sitcoms on the network more likely to succeed and, therefore, come into syndication. I think there's a benefit to all of this, which is that, for years, one of the knocks on syndication was that we do reality programming. Well, as advertisers see their choices in scripted programs becoming fewer and fewer on the network and more and more of them begin to embrace it, it creates a much more positive feeling for what we are and who we've been. The conversations about "I don't buy reality" are more than disingenuous right now. So it makes us more legitimate, if you want to use that word, than ever before with what we put on, because advertisers have come to accept the fact that reality is real.

Morehouse: Read the New York Times
today. There was a big article about reality television, quoting some of our biggest customers, and how clients who always thought of themselves as unwilling to go into that type of program now are embracing it. I don't know about Are You Hot. I watched a little bit of that last night. I'm thinking that they finally hit the bottom.

Cesa: Two things will happen. One, the scripted shows that last on the networks will be stronger. They'll be better, and they'll be the kinds of shows that will probably have great success in syndication going forward. But, if the supply of those tends to diminish somewhat, we will fill the gaps with first-run shows.

Who have the really big supporters of the medium been, and who are the ones that haven't been there that you're really targeting?

Hirsch: I can't think of a large packaged-good or drug company who's not supportive of syndication. The people who have, for lack of a better word, lagged behind are those in industries that traditionally didn't find a lot to purchase. We all do credit-card-company business, but I think we'd all like to see more of that. There are some automotive people that have been very supportive of syndication; others, less so. It's not so much categories that are avoiding us. It's individual advertisers that haven't yet gotten the message that this is a really good smart place for their money.

Teicher: The dichotomy within categories is fascinating. It really is. Because it does run the gamut, whether it's auto, retail, specialty retail. We can all identify clients who are overwhelmingly huge supporters of syndication. Yet, within the same category, there are companies with similar target audiences that don't support it. And those categories do range from auto to retail. There are some categories that are new, that are emerging, that are growing for us, such as the wireless category. The entertainment industry has generally been pretty good in our world, particularly in the off-net sitcoms, and programs like that. It is a matter of going client by client. But I would say syndication is probably underrepresented by most autos. We still have work to do there.

Hirsch: In some cases, it's really just a change of habit as much as anything. We find that there are a lot of advertisers who may not do an upfront with us that are buying us very heavily in scatter. And I think it's just a matter of changing that habit. As we continue to take on new advertisers in this very vibrant scatter market, I think we will find that a lot of those people next year are going to add syndication to their upfront network and cable buys. I'd be shocked to find out that they don't.