In Difficult Upfront Market, Cable Networks Look For Psychological Edge

by Wayne Friedman, May 20, 2009, 12:45 PM

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Cable networks will finally go head-to-head with broadcast networks in one major area this year:  total upfront advertising revenue.

For the first time ever, total cable networks' upfront revenue looks to be virtually equal to the broadcast networks'. That's according to a Credit Suisse estimate that cable networks will end up with $7.8 billion to broadcast's $7.9 billion during the upcoming upfront advertising market.

This comes at the expense of broadcast networks, which, according to Credit Suisse analyst Spencer Wang, will see a 15% drop in their total upfront take -- versus flat dollars for cable (a drop of 0.6%).

Why the changes? Media buyers increasingly pressured by their clients to save costs -- especially this year -- will trim back on high-priced network shows with a cost-per-thousand (CPM)  for 18-49 viewers of $30 to $40, in favor of  the cheaper $15 to $20 CPMs of cable's best prime-time fare.

Still, this may be just a psychological victory for cable channels. The key financial metric comes with those cable CPMs, which are still below that of broadcast. Most of cable networks' original shows (with the exception of the likes of TNT's "The Closer," which may rival some network shows in the mid-$20 range) still don't get close to network pricing.

Making matter worse, cable networks will take a hit in their CPM pocket, a slip of 2.5% on average of the CPMs, according to Credit Suisse. While media buying executives complain about broadcast's high price, they also moan about cable's ever increasing ad inventory, a main ingredient in the expected CPM drop.

Broadcast networks continue to mention -- as Fox's Jon Nesvig noted during Fox's upfront presentation this week -- that cable shows still don't index well against upper-income families, and if they do, they are skewing to older viewers.  Cable executives would disagree with most of this analysis.

Still, there will be bad news for the broadcasts: They'll sell 5% less inventory, says Credit Suisse -- all in an effort to stop pricing rollbacks. Credit Suisse predicts that  as a result broadcast program prices will indeed stay flat. But overall dollars will be down everywhere. CBS, doing the best of the worst, will be down 8.6% from last year, to $2.285 billion; ABC off 14.9%, to $2.127 billion; and Fox doing 15.2% less, to $1.655 billion.

NBC and The CW will sink further than average -- with NBC's losing ground by 18.1%, to $1.556 billion and The CW almost losing a third of its upfront take of a year ago, 29.8%, to $256 million.

In high-priced markets, you can find big boasting about the upfront from all TV buyers and sellers. But down markets find a different loquacious style. This year any crowing will be at a lower volume.

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