• by Wayne Friedman , David Goetzl  @dgoetzl, January 25, 2006

LAS VEGASThe merger of UPN and The WB into a newly consolidated CW network will reduce the number of programming hours by more than 40 percent, depleting the supply of network TV rating points and commercial ad positions enough to drive prices up, especially for the highest demand programming, top agency executives said in the aftermath of Tuesday's announcement.

"The GRPs do go down slightly, but you're getting rid of the bad GRPs of each, and combining the good GRPs," said Doug Seay, senior vice president at Starcom.

UPN and the WB together account for about 8 percent of the prime-time network TV advertising marketplace. The merger will reduce the supply of prime-time programming hours - and presumably commercial ad positions - by 43 percent. It's unclear exactly what the fallout will be in the supply of rating of GRPs, because the combined entity will be a stronger programming and promotional player that will likely garner somewhat higher ratings. Overall, UPN and WB pull in about $900 million in total national advertising revenue. But the new CW isn't expected to hold onto that share in the 2006-07 upfront advertising marketplace.

"They might pull in about $750 (million) or so," estimated Irwin Gottlieb, chairman of Group M, adding that he doesn't believe the combination will dramatically affect the market. "If there was enough good content, if there was enough advertising, this wouldn't have happened," he said. "The marketplace couldn't sustain six networks."

Perhaps more importantly, media buyers questioned whether what The CW ultimately would become, and what sort of brand value it will offer. Still, other analysts said The CW should be a stronger player than either the WB or UPN was alone. Analysts say that since the launch of The WB and UPN in 1995, both collectively have lost some $900 million, and perhaps much more.

"The new network should improve profitability (i.e., reduce losses) by selecting the strongest affiliates, best programming and highest quality managers from each network," wrote Merrill Lynch's Jessica Reif Cohen.

"You go from four networks and two weblets to five networks," said Seay. "The ability to build a better, more promotable network is profound. That's why they're doing it."

Locally, there already is some turmoil in the business as some national spot buyers are looking to hold or cancel buys made on both the WB and UPN stations for deals that start in September. "I have phone messages from advertisers looking to get out of deals," said Greg Armstrong, president and general manager of KTVD, Denver, a UPN affiliate.

Honda Motor Co. was rumored to have pulled some national spot advertising in certain markets in the wake of the surprise announcement. Calls to American Honda executives were not returned by press time.

Many executives believe that the News Corp. group of stations have the most to lose, with many of their stations UPN affiliates. One analyst believes the Fox network might see improvement in its advertising picture. Fox will look to grab more dollars in the 18-34 demo, taking share from UPN and the WB.

Although the WB went through a boom period several years ago with shows such as "Dawson's Creek" and "Felicity," it has struggled recently, with ratings down 10 percent this season among the target female 18-34 demo. Meanwhile, UPN has been on the upswing, rising 6 percent in that area. The new CW is expected to skew slightly female and go after the 18-34 demo, allowing the other networks to battle it out for the 18 to 49 audience.

"The 18 to 34 demo is one that a lot of clients are interested in," said Lyle Schwartz, senior vice president and media research director for Mediaedge:cia.

Syndication, cable, and the Internet could reap the benefits of one less competitor. "It will help syndication and cable because some [ad] money earmarked for the sixth network will go to (The CW), but some will go other mediums such as syndication, cable, or the Internet," said Brad Adgate, senior vice president-director of research at Horizon Media.