• by Wayne Friedman , Staff Writer, April 8, 2005

It's the same old song - cable is taking money from broadcast networks. But the real picture isn't always realized, nor does it seem advertisers get the right exposure.

Discovery Networks has predicted another $500 million will shift from broadcast to cable during this year's upfront, while other pro-cable prognosticators say that number could be as high as $1 billion.

Every year predictions are that cable will gain heavily at the expense of network. Yet these scenarios aren't always completely fulfilled. Broadcast networks had a pretty good upfront last year gaining in overall revenue to $9.4 billion and averaging 7 percent price increases for the 2004-2005 season.

Cable also did well - up to $6.4 billion, according to estimates. But CPM increases varied wildly, with some smaller networks only getting low single digit percent price increases.

Discovery itself has already admitted some problems in this season, specifically because of heavy ratings declines on TLC and Animal Planet. But Joe Abruzzese, president of advertising sales for Discovery Networks U.S., says business has been steady in the recent scatter periods. He has already sketched out a scenario that the Discovery Networks would probably sell 50 percent of its inventory in the upfront.

Cable network executives are calling on advertisers see the light again, that a lower supply of network ratings points will mean better deals for advertisers and more money for cable. The chief culprit this year is NBC's 15 percent ratings drop that overwhelmed gains made by ABC.

Cable's broadcast network theory is that less should mean less. But cable never seems to take into account economic theory; a more limited supply of ratings points goes right to supply and demand math. Advertisers tend to pay even more for what they deem are still valuable, but diminishing, rating points.

Cable? It's got tons of ratings points, and is always growing. Supply and demand should then work in the other direction to lower program price. But that doesn't happen. Cable network sales executives say good-rated shows are always in limited supply.

Syndication? It's limited more, in terms of time periods and other issues. Though the business can't launch many new shows, the old ones - somewhat boringly - continue to be enough to reel in steady pricing gains.

Okay. So what have we learned here?

That network, cable, and syndication business all have their limitations. And in strict TV business logic, that's good news. All TV programmers need to foster the notion that their programming is precious and limited - in order to jack up prices.

Advertisers then scratch their collective heads. Shouldn't a flood of ratings everywhere mean price declines?

Not in TV economics. For advertisers, their TV price logic means there are no limitations.