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Cable Nets’ Upfront Disappoints

8/26/2005 8:00 PM Eastern

The numbers are finally tallied, and they support what the industry feared: This year’s cable upfront was disappointing. Last week, the Cabletelevision Advertising Bureau issued its figures, which put this year’s cable upfront market at just over $6.5 billion, a 5% increase or $300 million more than $6.2 billion a year ago.

Those tallies were “based on deep input from a full range of our network members,” Cabletelevision Advertising Bureau CEO Sean Cunningham said in a statement.

SOFTER THAN THOUGHT

This year’s cable-upfront total — and increase — was much softer than industry experts and Wall Street had originally projected. Some initial prognostications called for cable to hit $7 billion or more in this year’s upfront by registering increases in the 10% range.

The final cable-upfront estimates from Jack Myers, editor of Jack Myers Media Business Report, were roughly in the same ballpark as the CAB’s. Myers pegged this year’s cable upfront at about $6.65 billion, up 4%, or $250 million, from last year’s $6.4 billion.

Last year, the cable upfront registered gains of 17% to 20%, according to figures from Merrill Lynch analyst Jessica Reif Cohen.

Myers believes programmers such as Turner Broadcasting System Inc., who fared better in terms of both price and dollar-volume increases, probably pulled up the numbers for the whole cable industry.

“I think a lot of networks were flat, down a little, or up a couple of points,” Myers said. “Also, the mix changed for a lot of networks. A lot of networks had to take less attractive CPM business. They were less able to generate higher CPMs just by focusing on higher CPM advertisers like the entertainment, the pharmaceuticals, the automotives.”

He estimated that cable’s CPM increases this upfront averaged in the 1% to 3% range. “Some nets did a little better than that, but a lot of networks did a little worse than that,” he said.

LACKLUSTER SALES

That all adds up to a lackluster performance by cable.

“When you’re going into a market expecting worst-case scenario to be 7% or 8% [increases], and it’s 4% to 5%, that’s not good news, especially when you see that money did not go to broadcast,” Myers said.

The broadcast upfront fared worse than cable, in that it was actually down 2.5% to 4% this year from last year’s $9.825 billion, according to Myers.

The upfront-ad dollars that broadcast lost went to video alternatives such as the Internet, cinema advertising, in-store television, mobile advertising, and digital video recorder and video-on-demand advertising, according to Myers.

Upfront Estimates
Basic cable networks’ final tallies from upfront auction sales, on an estimated basis:
Source 2004 2005
CAB $6.2B $6.5B
Jack Myers $6.4B $6.65B

September