Cable Cashes In - Statistical Data Included

Can the cable advertising marketplace finally stand shoulder to shoulder with the broadcast networks?

With the kids and syndication upfront marketplaces all but over, the stage is set for the big show--the general upfront. And if conventional wisdom holds true, cable's business is expected not only to grow, but to break close to or simultaneously with the broadcast network upfront.

Like a cosmic event, several market forces have aligned to allow cable's star to shine brightly.

"What we are seeing is cable coming into its own as a more mainstream media in a year where forces are converging to increase the demand for advertising time," says Sandra Kresch, strategy partner in PricewaterhouseCooper's entertainment and media practice. Kresch points out that 2000 is both an Olympic year and an election year and that the dot-com, technology, financial and pharmaceutical sectors continue to pour money into television advertising. At the same time, clients and buyers are beginning to get more comfortable with cable's targeted niches and audience environments.

"Five years ago, people had problems with cable because it was not ubiquitous and it didn't have mass reach. Now it's closer to being fully penetrated and is fully penetrated with the audiences that heavy advertisers are looking for," says Kresch. "The broadcast networks don't have the same kind of connection with their audience. So you are buying mass viewership--which is not so much more mass at this point--without as an attractive environment."

Predictions about the size of the market have been fast and furious, with Discovery Networks' top ad-sales executive Bill McGowan saying cable's 2000 upfront will climb by more than $1 billion dollars to $5 billion from last year's $3.6 billion. In the process of making his bullish prognostications, McGowan has earned himself the handle "billion dollar Bill."

Those aggressive predictions come as media buyers are speculating that the broadcast networks are going to be asking for slightly higher increases over last year. "If that's the case, the marketplace is going to want to have options as a wedge against the networks which, save for the big-ticket shows, doesn't offer the reach it used to," says one major buyer who spoke on the condition of anonymity.

Previously cable has been seen as such an option, but one considerably down the food chain. However, over the past few years, the industry's commitment to original programming has collectively grown ratings to within sight of broadcast. Discovery, Turner, Lifetime, Bravo, Nickelodeon, VH1, MTV, Sci-Fi and others have all pushed the original programming envelope. The result: their ratings have largely improved over the past five years to the point where hits on cable are genuine hits.

"We're looking for a healthy marketplace. Category to category, things are strong and the billion dollar increase seems realistic," says Hank Close, senior vp, ad sales for Comedy Central, who declined to reveal the level of CPM increases he will be seeking in the marketplace.

And with cable presenting a still-more attractive price than broadcast, "all these forces adds up to a very hot year for cable," says Kresch.

"We are confident that most major cable networks will be bought side-by-side with broadcasters," says Joe Uva, president, Turner Entertainment Group sales and marketing. Uva scaled down McGowan's prediction slightly to $4.6 billion, a 28 percent year-to-year increase. The broadcast upfront is expected to grow to between $7.7-8 billion over last year's $7.2 billion.

Also working in cable's favor is that basic services have become much easier to buy and track due to improvements in back-office software and administration. Optimizers are spitting out plans that give buyers demo information that allows them reach with viewers segments like affluent young men that are light television users by buying a combination of cable networks.

Regardless of how many billions of incremental dollars the cable market earns, sellers across the board say they are going to be asking for double-digit increases and high double-digit increases for their marquee off-network and original programming.

But it wouldn't be an upfront without posturing and buyers say there is enough cable inventory to find deals negotiated firmly on their terms. If cable gets overly arrogant, buyers say they'll either wait the market out or buy more broadcast. "We'll see about double digits," says one buyers, who says she won't tolerate bigticket increases from either broadcast or cable.

Cable also has the advantage of being closely tied to the Internet and other technologies that portend a new media landscape. Cross-media selling is increasingly a hot trend, with Discovery and Turner leading the way. Through their multiple branded networks and aggressive expansion onto the Internet, cable content companies are well positioned to offer new forms of marketing. Uva says Turner is facing a "tremendous time of opportunity" in selling packages of advertising over the company's wide spectrum of media brands.

That cross-media selling strategy could attract big advertising relationships with a fewer number of key advertisers such as Ford or Kraft, which have shown they are increasingly interested in integrated media plans. In the future, the interactive capability of networks' Internet plays will combine advertising and e-commerce. That marriage will lead to things like cost-per-lead or cost-per-purchase, which offers marketers information that they'd pay a lot more for than CPMs and VPVHs.

In his well received address during this year's Cabletelevision Advertising Bureau's annual conference in March, Steve Heyer, Turner Broadcasting System president and COO, declared cable the middle kingdom between traditional media and a more interactive future. At the conference, Heyer called on buyers and planners to reconsider their definitions of national media, saying it is no longer about cable and broadcasting hut about cable, interactive television and the Internet.

"We're witnessing the demassification of the mass market," said Heyer "As fragmentation continues, 15 ratings drop to threes and fours. The upshot of this trend will be the emergence of 10 to 12 television networks--some broadcast, some cable--that will become the new mass-market platforms of choice."

However, back down here on earth, buyers remain slightly less excited about committing to cross-media packages, which one media planner characterized as "buying a mixed bag" when it comes to reach and demo profiles.

As far as actual dealmaking, some networks such as Lifetime are close to cutting very early deals, but for the most part agencies and clients are discussing programming and preliminary cost figures.

"We've already had some agencies officially register some budgets, which suggests to me that it will either be an early marketplace or a simultaneous marketplace with broadcast," says Hanna Gryncwajg, vp, ad sales for Bravo Networks. "Cable, over the past several years, has proven itself important to clients and that it's not an endless stream of inventory. The networks and programs that are most desirable do get sold out," she adds.

As for categories, automotives are expected to kick off the market and spend aggressively, with the truck segments and luxury and near luxury sub-categories pushed hard. "There is a lot of new product there and no one at the car companies is saying their spending is going down," says one major network sales executive.

Other categories expected to be hot are smaller studios such as USA Films and Destination Films, which are spending aggressively on more releases to grow themselves into mid-level players. The financial category is also expected to be a strong spender across an increasing number of basic cable services as it chases upscale eyeballs on networks ranging from CNBC to Bravo.

The performance of the dot-coin category in the upfront is a wild card. Though they are mostly scatter buyers, some dot-com companies are expected to find their way into the upfront this year. Certainly the wild gyrations of the NASDAQ in April provided a wake-up call for over-valuated startups. But as the month ended, sellers were still expecting to see dot-coin budgets.

"The dot-coms will have a positive influence over the marketplace because the few handfuls of them that are making money now have their planning process done," says one network sales vp, who says he has signed business from 70 dot-coms in the past 12 months. "It will he about the same number as last year, but I'm willing to bet that half those will be different."

Beyond the possibility of having simultaneous broadcast and cable upfronts, there are rumblings that national spot buying could be thrown into the upfront selling model in the coming years. This is born out of frustration on the part of significant spot buyers who buy right before they need the time, which renders pricing largely out of their control.

If that happens, buyers could rethink their traditional commitments in the upfront season and move more money from one budget to another.

"If it becomes possible to make spot commitments upfront, if cable continues to grow in strength what we will see is people saying 'I need to get a certain amount of reach and frequency and I don't care where it comes from'," says Kresch.

Jim Cooper is Mediaweek's news editor. He's based in New York.

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