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UPFRONT BAZAAR

5/22/2005 8:00 PM Eastern

Cable has wrapped up most of its kids’ upfront business, but so far, there hasn’t been much action in the general marketplace.

That could change this week.

With the broadcasters conducting their upfront presentations in Manhattan last week, cable-network sales executives said their talks with agencies hit a lull in the annual Madison Avenue bazaar, in which the shops secure schedules for their clients in the upcoming TV season.

Looming Upfront
How each segment may fare:
Medium 2005/2006 [1] % change 2004/2005 % change
Broadcast $9.09 billion +2% $8.9 billion -2%
Cable $7.3 billion +11% $6.6 billion +17-20%
Syndication $2.89 billion +5% $2.75 billion +15%
Kids $970 million +7% $910 million +12%
[1] Projected.
Source: Merrill Lynch Research

Now, with the Memorial Day holiday looming at the end of this week, some cable officials are predicting a burst of upfront activity.

“We’ll most likely start to see things heat up,” said Greg D’Alba, chief operating officer for Cable News Network ad sales and marketing.

Overall, the cable upfront is projected to be strong and yield more than $7 billion this year, up from an estimated $6.2 billion to $6.6 billion a year ago.

Still, it seems unlikely that cable will match its fast pace from last year, when a number of the larger cable-programming groups had closed much of their upfront activity before Memorial Day.

In fact, several top-tier programmers — like Turner Network Television and TBS, USA Network and MTV Networks — set the pace in 2004 by beating the broadcasters to the punch with agency deals.

“Last year may prove to be the anomaly. I think what you’ll see are some cable networks moving simultaneously [this week] with the broadcasters,” said Bruce Lefkowitz, executive vice president of ad sales at Fox Entertainment Sales.

Despite reports late Friday that ABC had cut a deal with OMD, some cable sales chiefs think business will actually wait until after the holiday this go-around.

Joe Abruzzese, president of ad sales for Discovery Networks U.S., said the cable-upfront market is probably lagging two weeks behind where it was a year ago.

If business doesn’t start moving by the end of this week, “the following week will be gangbusters,” according to Abruzzese.

Last year, 85% of E! Entertainment Television’s upfront business was done by Memorial Day, according to Comcast Network Advertising Sales president Dave Cassaro.

“This year, it will be more on a continuing basis,” he said.

According to several sources, USA Network and Turner — who couldn’t be reached for comment — have done the second year of their multiyear pacts with OMD. Lefkowitz reports that FX has done a handful of client deals, including finding a sole sponsor for the third-season premiere of plastic surgeon series Nip/Tuck in September, but has not totally closed business with any agency.

Meanwhile, executives at such services as E!, Discovery Channel, A&E Network and Lifetime Television are in talks but haven’t closed deals yet, sources said.

CLOSING IN ON KIDS

On the younger side of the marketplace, several cable programmers said they had nearly finished up with their upfront.

“On the kids’ side, we are in the negotiation process,” said Tricia Wilber, senior vice president of ad sales and promotions for the Disney ABC Cable Networks Group. “And I believe our competitors are in the same ballpark. On the adult side, the process is really just beginning. We’re planning and working with the agencies there.”

Wilber handles ad sales for Toon Disney, ABC Family and the Saturday-morning kids block on ABC.

“We have closed a good number of deals and are almost complete in terms of the kids upfront,” she said. “In terms of the categories, it’s what we had planned for, in terms of the toy business, the movie business, the packaged goods, the food and beverage industries.

“We are actually pleased with the deals that we’ve closed and they are certainly as we had planned, if not slightly better.”

She expects the kids’ upfront to be totally tied up in a week or so. Nickelodeon said it has made some headway.

“We have a significant amount done, but we’re not finalized yet,” a Nick spokeswoman said.

Kim McQuilken, executive vice president of sales and marketing for Cartoon Network and The Kids WB, last week said he’s “90% done” with his kids’ business.

“We had been talking to folks for a couple of weeks, and it kind of dragged out a bit in the beginning, as everybody was feeling everybody out,” he said. “Then all of a sudden last week it just went in a flurry.”

In that kids market, Cartoon Network enjoyed double-digit revenue growth, according to McQuilken.

“Our network had nice growth, and I think that we were clearly rewarded for the growth of the network,” he said. “We actually exceeded our revenue goals in this upfront.”

In terms of price increases, Cartoon divides the market into two segments, according to McQuilken. The first is the high-demand “hard 10,” or 10 weeks before Christmas, and the six weeks before Easter.

“We were able to achieve double-digit growth of CPMs in those high-demand periods,’ he said.

For inventory outside of those periods — what Cartoon calls the “out quarters” — the network saw mid-single digit growth, McQuilken said.

MARKET PROJECTIONS

Last week, Merrill Lynch analyst Jessica Reif Cohen issued a report forecasting that the kids market would grow 7% in volume to some $970 million from $910 million last year.

Reif Cohen projected a robust cable upfront, with an 11% increase to $7.3 billion this year, up from $6.6 billion last year. She expects broadcast to only grow 2%, to $9.1 billion from $8.9 billion a year ago.

“With ratings climbing and CPMs still at a significant discount to the broadcast networks, we project a continued share shift to cable television [plus 10% overall],” Reif Cohen wrote. “The biggest gainers should be MTV Networks [Viacom parent company] and Fox Networks [News Corp. parent company].”

Categories that could impact the upfront are domestic autos, which are expected to be soft; and studios and telecommunications, both of which most observers anticipate will be strong. Packaged goods remain a question mark.

Executives like Cassaro and Abruzzese don’t expect any surprises or wild swings for the cable upfront.

It’s not going to be a bad one or a runaway market, according to Cassaro, who expects solid CPM gains. “There’s a bit of a logjam right now, but it could break at any moment,” he said.

Discovery has been in discussions with a lot of clients, with many of those for renewals, according to Abruzzese.

As for the overall cable upfront, Wilber said: “We’ll probably begin the process, really start to negotiate, in the next two to three weeks. The broadcast upfronts are happening this week, and it really depends if the agencies feel they’re going to do cable or broadcast first, or simultaneous, which is what happened last year. Assuming it’s similar to last year, I think we’ll start in the next two to three weeks.”

She’s bullish about prospects for both cable in general and ABC Family in particular.

“Cable ratings as a whole are up,” Wilber said. “For ABC Family, we certainly have a very strong position in that our ratings are up significantly. Agencies and clients have been very pleased with our new programming and marketing.”

CROSS-PLATFORM DEALS

Cartoon Network still has to sell its late-night Adult Swim block. It moved some of that late-night inventory in conjunction with the kids upfront, but McQuilken said, “We still have a good bit of Adult Swim business in front of us.”

Since January, in the scatter market alone, Adult Swim has picked up 60 new advertisers.

“Consequently, we are expecting an extremely robust Adult Swim upfront,” he said.

CNN is “coming to terms on a few deals out there we have,” said D’Alba. “It’s a similar process and pace that we saw last year.”

The all-news network is pressing its integrated cross-platform options. For example, CNN has a new broadband product where advertisers can run 30-second and 15-second creative on a digital platform, D’Alba said.

“One thing we will see in the upfront is an ability, and an intention, to purchase multimedia, to partner up with marketing platforms and not just straight point buys, and that may be one of the reasons why you’re seeing a regrouping by the agencies and the clients,” D’Alba said. “And that’s going to work out well for multimedia companies like Turner Broadcasting-Time Warner, because we are in the marketplace pursuing such depth as far as the breadth of our services.”

September