Are the nets hurting? Not yet.

by Dave Lindorff

      Cable television is taking a record bite into the advertising dollars of network and local television this year, but advertisers aren't likely to see that reflected in any easing of network pricing, particularly for primetime programs, where demand continues to outstrip available inventory.
      Cable advertising revenues will climb to $8.6 billion this year, for a record jump of 29 percent over 1998, predicts the Cabletelevision Advertising Bureau. The bureau says that if the trend set in the first three months of 1999 continues, cable ad revenues could top $10 billion in 2000. ``The accelerating shift in ad dollars to cable mirrors the steadily increasing value of this medium to both viewers and marketers,'' crows CAB President and CEO Joe Ostrow.
      The Television Bureau of Advertising, representing broadcasters, has a significantly lower forecast for cable ad revenue growth--13.5 percent for 1999--but even its figures support the rise of cable at the expense of broadcast TV. According to the TVB, ad revenues for network television should rise an anemic 3.4 percent in 1999, while ad revenues for local television will be up only about 5 percent.
      In theory such a shift in advertising dollars should strengthen the bargaining power of advertisers, but advertisers say it's not happening. ``Network pricing keeps going up,'' says a spokeswoman at McCann-Erickson. "They're not selling as much as before but they're still able to charge a premium for shows that are delivering audience. The reality is, for mass audience advertisers, you still need the networks.''
      TVB spokesman Gary Belis makes the same argument for both the local and network TV, saying, ``If you want to reach everyone broadcast TV is the only way to do it.''
      Ad industry spending projections are close to those of the TVB. McCann-Erickson, for example, is predicting an increase in network ad expenditures of 5.5 percent and an increase in local ad expenditures of about 6.5 percent, compared to a 13 percent rise in cable ad expenditures. (Ad expenditure figures tracked by the ad industry are higher than the ad revenue figures reported by the broadcast and cable industries because advertisers include their own production and distribution costs.)
      The reason for the networks' continued pricing power is sheer size. While cable continues to gain ad revenue at a faster rate, the networks' combined revenue numbers remain that much larger. Network advertising revenues in 1998 totalled $16.3 billion dollars, with local stations accounting for another $15.6 billion. Syndicated shows like Oprah took in another $2.7 billion.
      Cable in the same period saw ad revenues of just $6.7 billion--just over a fifth of the over-the-air figure.
      Does the broadcast industry find the continuing trend towards cable by advertisers worrying? Not yet, says TVB's Belis. ``Network and local television have less inventory than the people wanting to buy it, so ad rates continue to rise and advertisers continue to pay those higher rates.''
      CAB spokesman Steve Raddock, agrees that cable has not yet put any pressure on network and local ad pricing. ``Logic dictates that one day it will happen,'' he says, ''but we're not near that point yet. We're closing the gap in terms of ad revenues. Our next challenge will be to close the gap in terms of the rates.'' He adds, ''Meanwhile, for now cable offers advertisers a real bargain.''