• by David Goetzl  @dgoetzl, July 9, 2007

MTV Networks, which at one time looked as if it might be among the last cable groups to move in the upfront, was writing business in earnest late last week. The Viacom-owned group sketched out a deal structure representing a sort of compromise with the buy side, which seemingly jump-started negotiations. Deals include program ratings as the currency for the fourth quarter, and commercial ratings for the ensuing three quarters.

That détente has apparently spurred deals with several large agencies, although other major buying entities were still going back and forth with MTVN on Friday, sources said. Agencies still negotiating were said to be haggling over price, not the now widely accepted deal framework.

Under the compromise, sources said MTVN has until December to continue using the program ratings it prefers, while buyers get the commercial ratings they believe are a better indication of whether spots are viewed from January through September 2008.

The upfront deal structure has multiple benefits for MTVN, which represents a huge chunk of the cable upfront market. While the new commercial ratings could hurt MTVN's revenues--since some channels (notably MTV and VH1) experience significant viewer defections during commercials--using the higher program ratings in 4Q essentially allows MTVN to bank on the flush dollar intake it's used to. That's because of the general rule that buyers' dollar commitments for 4Q are "firm," meaning that advertisers don't have the option of canceling a percentage of their purchases, even if their budgets change.

Also, it gives MTVN time to experiment with ad formats and other tactics to better retain viewers during commercial breaks. The group is looking to shorten the length of its pods, as well as ways to turn the breaks into more than a blizzard of traditional spots.

For example, it has teed up a series of 12 mini-films lasting three minutes each to promote American Eagle (the young stars will wear the retailer's clothes) and occupy the entire first break on "The Real World" this August. USA Today reports that another series is on tap for December and more will follow in 2008.

MTVN also has a new deal with technology company Visible World, which gives advertisers the chance to alter creative in real-time to make ads more appealing and relevant. This could also help raise viewer retention.

In addition, postponing commercial ratings to January gives MTVN time to continue to monitor the recently released data and gain further insight into how it might affect network ratings and revenues in the following three quarters.

But for buyers, the deals represent another leading cable group acceding to their call for commercial ratings. Cable programmers from Lifetime to Turner to NBC Universal have all followed the broadcast networks in using the so-called "C3" currency (which use commercial ratings and cover three days of DVR viewing.) That ratcheted up the pressure on MTVN. As one source said: "The ship has sailed." Some cable programmers had expressed concerns with using the data this year while questioning its accuracy. (Nielsen denies an issue.) But some viewed this as a smokescreen to avoid negotiating on the lower commercial ratings.

One question is what shape a deal between MTVN and Group M would take, since the massive buying entity has made it clear to networks it has no intention of engaging in negotiations on any currency but "C3," a source said.

DVR viewing is not considered a major issue in the cable arena, since viewers are believed to record shows at a much lower rate than broadcast, perhaps because cable shows are repeated so often. As a result, it appears that MTVN deals would mostly use "C3," since agencies are not eager to use different metrics for different networks in order to avoid back-office complications, among other issues. Still, some "C1" or even "live plus same day" (incorporating commercial ratings covering DVR use on the same day) could be employed, since the metrics may be attractive to MTVN's significant number of movie advertisers who want to plug a film heavily just before it opens.

While MTV Networks has had to grapple with competition for its young audience with the Internet, it's still considered a must-buy among advertisers eager to reach its lucrative demos.

In 2006, just four of its networks--MTV, VH1, Comedy Central and Spike--brought in $2.4 billion in revenues, which includes more than the upfront, per TNS Media Intelligence. Merrill Lynch estimates this year's cable upfront will come in overall at $7.5 billion.