A CYNOPSIS MESSAGE FROM WE tv

Cynopsis Media Presents: Cable Upfront: Special Report
04/03/13

by Roberta Caploe

It’s still Wednesday, April 3, and first things first: Don’t even call it a cable upfront – not these days, anyway. “Our viewers just like TV,” regardless of whether it’s on a cable or broadcast network, says Scott Collins, Executive Vice President, Advertising Sales, AMC & WE tv. And it’s true that the quality of cable television this year has been soaring: look at the raft of scripted programming that’s getting ratings worth paying attention to: The Bible on History Channel attracted 10.9 million viewers in its second episode, and Bates Motel on A+E checked in 3 million viewers at its debut. “There’s a dynamism in the cable area that’s palpable,” says David Lyle, National Geographic Channel’s CEO. “Think of the great original dramas we’re seeing, like Hatfields & McCoys on History Channel and Killing Lincoln, which Nat Geo did.”
 
Nothing less than a fundamental shift in perception about the cable TV world is what’s really got people talking, according to some experts. “It used to be that broadcast was the biggest game in town,” says Jon Steinlauf, Executive Vice President, Ad Sales & Marketing at Scripps Networks Interactive. “But that’s not the case anymore. On a typical night, you see eight or nine broadcast shows and six or seven cable shows in prime time; we have now parity on that side of the ledger. And cable offers so many more options.” Steinlauf, in fact, is feeling downright confident about this year’s opportunities. “Last year we moved past the $1 billion total for the first time. So we’ll start from there. We plan to generate more demand in this upfront market.” FX came out swinging this year, too, launching a new network, FXX, in addition to FX and FXM. “I think we’re going to do better than last year- and we were up 12% last year,” predicts Lou LaTorre, President of Ad Sales, Fox Cable Entertainment Group.
 
Indeed, viewers are loving all the new choices. But the question remains: will advertisers be willing to pay more for them this year? The cable execs Cynopsis spoke to say that all the right markers are there for a big payday. “The headwind has become a tailwind and people think it’s a good time to buy,” analyzes Steinlauf. “We were at the National Builders Show in January in Las Vegas; they were upbeat about housing starts and new home purchases. We also had a very successful first quarter scatter marketplace, trending toward a high-singles CPM growth rate.” 
 
Chimes in David Levy, President of Sales, Distribution, and Sports at Turner Broadcasting, “We saw high double-digit scatter pricing. And we had very few options exercised. We don’t control the marketplace, of course, but these are good indicators.”  Citing year over year ratings increases, A+E’s Ad Sales President Mel Berning says, “The economy is healthier, consumer spending numbers are solid, construction and auto are healthier. So we see signs of strength.” Don’t get your hopes up, though, warns Chris Geraci, OMD’s President, National Broadcast. According to his eighty clients, “Demand is flat going in. Things aren’t terrible, but we don’t have any categories that are going to grow tremendously. It’s not a big year for that.”

A CYNOPSIS MESSAGE FROM WE tv

Clients are saying they want a lot more – of pretty much everything. “Advertisers are looking for different opportunities in digital extensions and product integrations,” says Nat Geo’s Lyle. Scott Collins is hearing the same thing. “Our advertisers want a TV Everywhere platform, which we will be discussing in a bigger way this year,” he notes.
 
One senior media buyer comments that he and his clients like how AMC is marketing its shows, such as Mad Men, Breaking Bad, and The Walking Dead. “There’s a lot of interest and bounce around AMC,” he says. A+E, he adds, is also looking good this year when it comes to extending its shows, including Lifetime’s Dance Moms and Storage Wars on A+E.  “We’re looking for shows that deliver our core target and help us enhance our consumer’s experience,” says Blaise D’Sylva, Vice President of Media, Sports and Entertainment Marketing for Anheuser-Busch. “With the continued growth of digital TV platforms, we expect cable networks to continue developing assets and platform extensions that will allow them to succeed in this space.”

Naturally, digital is a huge play here. “We have a lot of content that’s perfect for the digital space,” says Bill Abbott, President & CEO of Crown Media Family Networks (the Hallmark Channels). “For example, we take the content on Home and Family and use it to extend client messages in pre-roll and product integration before the actual segment airs. Clients love it.” Yeah, but can you sell it? There’s the rub. “It’s not easy for the buyers to wrap their arms around digital,” says Steinlauf. “We need to make it easier to sell and buy digital screens.”
 
This, of course, leads us to the big kahuna that’s been rattling and reeling the whole media industry – the lack of consistent measurement.  “We need Nielsen to be able to monetize cross-platform, with better devices and measurement methods,” says Levy. “Then we’ll be able to stem the leakage of impressions that we don’t yet monetize. And more advertisers will jump in.”  People on both sides of the bargaining table are trying to address this question – but it won’t happen in time for this upfront season. “We’re creating a combination of survey data and server data – the actual count of video screens off our own servers,” says Mel Berning.  “The data doesn’t lie, and the ad community is accepting it. But we need to make it verifiable. We’re investing a huge amount of headcount and money to get this off the ground. It’s going to be a big priority, for the agencies to figure out how to access that viewership.”
 
OMD’s Geraci is already considering solutions. “For these platforms to be interchangeable, you need the metrics figured out,” he says. “The networks themselves admit that their accounts are wildly different from third party sources. I’ve heard a lot of heads of ad sales complaining that can’t figure out what their numbers really are. The next step is some sort of standard…we’re already working on it, but I can’t comment more.”  
 

A CYNOPSIS MESSAGE FROM WE tv

While that fire rages, the other big issue heading into the Upfront remains the inequity in CPM’s between cable and broadcast, especially in entertainment programming. “CPM’s for most top-rated cable networks are half of broadcast’s,” says Steinlauf.
 
“The gap should be shrinking, based on delivery, if you look at shows like Vikings and Duck Dynasty,” says A+E’s Berning. “But it’s increased because broadcasting is charging more, due to scarcity.” Geraci contends that generally, delivery is still an issue, however. “We want to see ratings stability, first and foremost. More viewership has shifted to cable but we’re seeing continued fragmentation,” he comments.
 
“Another reason for the disparity in entertainment CPM’s is because cable wasn’t producing original content (until recently)” says Levy. “In sports, kids, and news, there’s no difference. The same Kobe Bryant plays on TNT; it’s the same Conan on TBS. But the gap in entertainment is closing. Whether it’s Walking Dead or Dallas, it’s a question of quality of content.”  
 

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It’s also a question of a new paradigm. Some insiders are suggesting that the clear wave of the future is for the larger cable networks to take the lead in narrowing the CPM gap by selling all their prime time programming – regardless of whether it’s on broadcast or cable or a larger or smaller cable network – for the same price. “USA has more success than NBC does, let’s face it. So if NBC sold its programming as one entity blend rather than broadcasting versus cable, the other networks, like Turner, will have to follow suit,” says one senior level cable ad sales executive.
 
“That’s asking us to pay a lot more for cable and I am not sure advertisers would tolerate that,” responds OMD’s Geraci. “Broadcast ratings may be down, but there’s still a big differential.”   
 
Nonetheless, business will be conducted and chased in the next few weeks, and plenty of it. Scripps’ Steinlauf says that he’s targeting returning categories such as home improvement – Lowes, Home Depot, Pier One, Home Goods  – as well as retail, finance and mortgage companies, like Wells Fargo, Quicken, and Bank of America. Hallmark’s Abbott is bullish on packaged goods and pharmaceuticals. Plus, he says, “For our audience, travel has gotten stronger, and so has electronics.”
 
When it comes down to it, “Advertisers are going to have to accept that it’s a TV universe,” says Turner’s Levy. “Strong brands will win and smart execution of vision will win. It’s that simple.”
 
Agrees Steinlauf, “In a year like this one, the clients are going to wonder, ‘Should we re-balance our spending in cable, where there’s more opportunity to grow our share and not necessarily support the prime time CPM?’ It’s a mindset at the client level. The value and audience is in cable. TV is still the dominant medium.”

Keep Watching & Reading,
Roberta Caploe
Editor
04.03.13

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