Cable television is about to suffer a humiliation it’s never experienced before.
Ad spending in the ongoing upfront will likely be down from 2005 when negotiations wrap up in about two weeks.
That will be the first year-to-year decline since cable networks began actively selling ad time in advance of upcoming seasons way back in 1988, not including 2001, when cable TV and virtually all other media types suffered steep losses following the 9/11 terrorist attacks.
Negotiations have been dragging on for weeks and buyers are increasingly holding out for price cuts or prices that are flat to 2005.
Only a handful of the most sought after networks are posting modest increases from last year, typically in the low-single-digit percentages.
“It has been grueling and slow going and we haven’t done any deals at a cost-per-thousand increase greater than flat,” says a buyer in the Midwest, who expects spending to be down or, at best, flat to 2005.
Merrill Lynch analyst Jessica Reif Cohen estimates that advertisers spent $7.1 billion in last year’s upfront. David Joyce, an analyst with Miller Tabak, estimates $6.8 billion and Jack Myers of the Media Business Report estimates $6.6 billion, up 4.8 percent over 2004.
MTV Networks is slowing down negotiations because it’s resisting price cuts, according to buyers.
But many networks are agreeing to lower prices because most simply want to book as much revenue as possible in an upfront market notable for slim budgets, weak advertiser demand, and some shifting of dollars from television to interactive media.
This year media buyers have a few advantages over sellers in upfront negotiations.
Most significant, the network TV upfront ended earlier this month with volume down an estimated 2 percent on prices that were barely up from 2005.
Advertisers have also been trimming budgets as many wait for prices to come down in the scatter market later this year, while some are shifting money to new media.
But buyers were also given added ammunition this month when second quarter ratings were issued.
The primetime cable audience was flat or down on a year-to-year basis for 20 of the 58 networks measured in both time periods by Nielsen Media Research, including seven of the 10 most-watched networks.
Cable TV also has an oversupply of inventory, a situation affecting the broadcast networks to a lesser degree.
That gives buyers leverage in negotiations because they can simply pick and choose between dozens of networks. When ad budgets are down, as they are this year, the supply-demand equation moves further in favor of buyers.
And media buyers are now saying budgets aren’t likely to pick up much in scatter, when inventory not sold in the upfront is put on the market. When the media economy is healthier, scatter prices are sometimes 15 percent higher than upfront prices.
The outlook for the cable upfront has been growing dimmer ever since forecasters began making projections a few months ago.
Jack Myers, for instance, initially projected a 7 percent bump for cable networks. But he cautioned at that time that cable could be facing the worst upfront since 1991, when ad spending was up only 1.4 percent.
In May he lowered that to 2 percent to 3 percent. And last week, Myers reported that some cable networks expect overall volume to be down.
“It’s a soft market out there,” says the Midwest buyer. “And we’re also looking at what happened with the broadcast market. It seems in most cases there was less inventory sold in the upfront and we saw a slight decrease in dollar volume. So, unless people were holding back a lot of money, we don’t anticipate an aggressive scatter market.”
