Upfront Post-Mortem Questions Cable/Broadcast Budget Shift

Cable TV might have gotten its billion-dollar increase in the upfront. But what isn't clear is where it came from--the broadcast networks or new money.

When the smoke clears from all the wheeling and dealing of the past month, cable seems poised to emerge a clear winner. If the industry still has a long way to catch up to the $9.3 billion the seven broadcast networks took in, it's not likely to complain too much about it: Cable is expected to bring in up to $6.6 billion in the upfront. That's up 15 percent to 20 percent, an increase of about $1.1 billion over last year's haul.

Driven by ratings gains, a higher profile, and a general advertiser unwillingness to pay too much for broadcast, the top tier of cable like MTV Networks, NBC Universal, and Turner Broadcasting pulled down high single-digit and low double-digit CPM gains. Higher amounts of inventory also were up for sale, bringing dollar-volume gains in the double digits as well. Beyond the big network groups, it was a mixed bag for the other cable channels. Buyers and sellers who asked not to be identified said that it was a rough road for some of the networks, who brought in either flat CPMs or slightly up.

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Yet no one on either side of the table is willing to say for sure where all that money came from: Whether it was new money in the market or money moving from broadcast to cable.

"That we've had a hard time actually quantifying," said one cable TV executive, who spoke on condition of anonymity.

Coming into the upfront, there was plenty of speculation that cable would reach that million-dollar-mark and take most of it from the broadcast networks, which would be perceived as vulnerable after two years of double-digit CPM gains. And while it's true that the broadcast networks came out nearly the same as they did last year--the broadcasters are quick to point out that it's still pretty good, since it was a record year and because there was less inventory sold--they still got their measure of CPM increases.

"How much money went to cable--you really don't know," acknowledged one cable network executive. "It could have been it was planned for cable, so that's kind of like a shift. You don't know. It could have been new money."

Another cable executive theorized that at least 7 percent to 8 percent might be new money, but that it defied belief that it could represent all of the increase.

"For it [the cable TV ad spend] to grow 20 percent on totally new money--that just wouldn't make sense," the executive said.

Buyers said it was a combination of new money flowing into cable and replanned money. "There was a share shift of dollars," said Tim Spengler, executive vice president and director of national broadcast at Initiative Media. "Not a great share shift, but one that I think will continue."

Andy Donchin, director of national broadcast at Carat USA, says it's true that cable realized a lot more volume and low to moderate CPM increases. But he's less convinced that the majority of the additional money in cable came from broadcast. Some might have come out of money that would have gone to broadcast, but not a lot--and certainly not a billion dollars, he said.

"That great shift that was supposed to have happened never happened," Donchin said. "Cable's gains were not at the great expense of the broadcast networks."

The upfront comes at a time when cable keeps ringing up gains against broadcast. In a report released late last week, Turner Broadcasting said cable was on track to win the second quarter in prime-time household viewing with a 52.8 aggregate share compared to the 42.4 share rung up by the seven broadcast networks. That's up from a 51.2 share for cable and a 43.4 share in the second quarter of 2003.

But, as Turner research chief Jack Wakshlag points out, that hasn't tipped the balance in favor of the cable networks in their fight against broadcast for ad dollars. To date, ad-supported cable has only captured about 27 percent of prime-time ad dollars compared to 73 percent for the broadcast networks. In an interview, Wakshlag told the MediaDailyNews that it seems that with this year, cable television is beginning to turn the tide.

"Clearly we have done well," Wakshlag said of cable in general and Turner Broadcasting's upfront performance in particular. He also said that it's not clear yet how much of cable's upfront increase is new money.

"But it's a huge change in the marketplace," he said.

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