• by May 18, 2004

THE ABCs OF 2004-05 UPFRONT AD NEGOTIATIONS - With ABC poised to unveil its new primetime schedule today, many in the media have already written off the alphabet network's 2004-05 season. But there's reason to believe advertisers may yet be writing ABC into their upfront ad plans. And it's possible they may even "heavy-up" on the network in anticipation of a turnaround. And if the other, slightly more stable networks dig in their heels as many expect, it's even conceivable that ABC might "lead" the market. "We believe advertisers will buy ABC, and thus establish 'base rates' for future negotiations," predicts Merrill Lynch equities research diva Jessica Reif Cohen in some just-released stock analysis notes on looming upfront ad strategies.

Noting that a series of factors could play into a stronger-than-expected market position for ABC, including the fact that it likely will have the most amenable relative CPMs of the major networks, and the "underlying belief that no one really knows where the next big hit will be (e.g. 'American Idol,' 'Survivor,' 'The Apprentice,' 'Who Wants to Be a Millionaire, etc.)."

Meanwhile, Cohen warns that cable networks had better hope that ABC does maintain its upfront ad price integrity. "Given the broad reach of network television, if ABC does not maintain some pricing discipline (although unlikely), it could adversely affect the cable networks' ability to win share."

Overall, Cohen is in line with the rest of the upfront prognosticators, calling for a 3-4 percent increase in total primetime ad dollars on "high single-digit CPM gains," though she does foresee "approximately $500 million of broadcast network advertising" going to cable for the 2004-05 season.

One of the biggest factors in the upfront could be the Hollywood movie studios, though not necessarily for the reasons you may think. While movies will continue to be the second largest ad category behind autos, 45 percent of the movie money is spent on just one night, Thursday. Given the fact that many studios require "pod exclusivity" for their new releases, Merrill's Cohen estimates that movies account for only 20 percent of the networks' Thursday night ad revenues. "In other words, there may only be three pods of advertising with five spots during a 30-minute show, with only one movie spot during each pod."

The wildcard in the studios' upfront advertising plans, says Cohen is their DVD budgets, which unlike theatrical releases, are not as tied to Thursday night plugs for weekend box office. "DVD advertising is more diffused between Saturday through Monday given many home video titles are released on Tuesdays," observes Cohen, predicting, "With DVD penetration expected to reach 65 percent-plus of homes, DVD ad spending could collectively reach $500 million in 2004, up from $200 million estimated in 2003 and $40-50 million only two years ago."

SOMETHING YOU WON'T SEE BEING PITCHED DURING THE UPFRONT - Using the network TV cancellation parlance of "hiatus," Martha Stewart Living Omnimedia has pulled the plug on its long-running syndicated TV series, "Martha Stewart Living." The show, which is syndicates via Viacom's King World Productions unit, has faced some affiliate defections following Martha Stewart's conviction of a federal crime. "I am deeply sorry that it has become necessary for the show to go on hiatus until my personal legal situation is resolved," said Stewart, holding out hope that the series, now in its 11th season, would resume production some day, quite possibly from a remote location. "I hope to resume our close collaboration just as soon as I am able to do so."