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as upfront drags on
Total spending is expected to be off 16 percent
By Kevin Downey
The cable upfront still has several weeks to go, but forecasters are already marking down earlier predictions for the cable networks' total dollar intake this ad-selling season.
Cable ad spending is now projected to decline 16 percent, compared to a 14 percent drop for the broadcast networks.
Just a couple of weeks ago, forecaster Jack Myers of The Myers Report had predicted that spending would hit between $4.0 and $4.1 billion, well off from last year's $4.8 billion.
But Myers now expects sales to fall below $4.0 billion.
This year’s upfront will be the first time ever that cable upfront dollars have fallen.
The reason behind the lower estimates: an increasing cautiousness on the part of advertisers in response to the ongoing economic downturn and the outlook for a slow recovery.
"A significant number of advertisers are curtailing media investments," says John Rash, senior vice president and director of broadcast negotiations at Campbell Mithun.
"Very few advertisers have chosen to opt out of the cable marketplace but many have reduced spending."
Buyers say that since demand from advertisers is so weak and because cable inventory is so plentiful, with over 40 networks selling ad time, no single network has enough leverage to demand prices comparable to last year's.
Overall, media buyers say CPMs, or the cost to reach 1,000 viewers, are down at least 15 to 20 percent.
"It’s probably a little bit deeper," says one media buyer. "There’s a range but it goes deeper than that, probably down to the mid-20s."
While the biggest cable networks are said to have an advantage over the smaller niche networks, the price cuts are widespread.
"There are decreases across the board," says Bill Cella, chairman of Magna Global USA.
"Some networks are cutting deeper than the others, but they are all scrambling for the volume because there isn’t enough out there. They are finally getting realistic about writing business and are trying to make sure they don’t lose out to someone else."
The networks least impacted by the price cuts are those that target difficult-to-reach audiences, like younger men.
While media buyers say the sluggish economy is to blame for the weak upfront, the cable networks are also being hurt, to a small degree, by ad dollars being diverted to the 2002 Winter Olympics.
MSNBC and CNBC together will air 200-plus hours of the games, and NBC has been busy selling ad time.
"It can have an impact," says one buyer. "There are some clients who specifically allocate more media investment dollars for the Olympics. But increasingly it’s coming out of general media budgets."
Compounding the cable network’s problems is the fact that advertisers, even those that have not slashed budgets, do not need to spend as much as last year.
"There are so many cable companies out there, if the cuts go deep enough, the clients will buy to point levels," says one media buyer.
"If they get the rating points cheaper, it cuts back their overall dollars and they take some of their money back. We haven’t experienced that but I’m sure it’s happening."
The best hope for the cable networks to recoup the losses incurred in the upfront is the scatter market, when ad time is sold throughout the year.
The cable networks sell less than half of the available ad time in the upfront, compared to the broadcast networks, which in recent years have sold 80 percent or more of the coming year’s ad time.
The outlook for the scatter market is grim, though.
Most industry forecasters are projecting an overall decline in ad spending this year, with a recovery put off until the second half of 2002, if not as far back as 2003.
CMR, in fact, just last week revised its forecast for total ad spending in 2001 to fall by 2.0 percent.
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UPFRONT CABLE
ADVERTISING SALES |
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|
Season |
Cable
Networks |
% Change |
|
2000/01 |
4.75 |
28.4 |
|
1999/00 |
3.70 |
34.5 |
|
1998/99 |
2.75 |
20.1 |
|
1997/98 |
2.29 |
16.2 |
|
1996/97 |
1.97 |
18.0 |
|
1995/96 |
1.67 |
50.5 |
|
1994/95 |
1.11 |
23.3 |
|
1993/94 |
0.90 |
11.1 |
|
1992/93 |
0.81 |
8.0 |
|
1991/92 |
0.75 |
1.4 |
|
1990/91 |
0.74 |
45.1 |
|
1989/90 |
0.51 |
155.0 |
|
1988/89 |
0.20 |
- |
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Source: Paul Kagan Associates |
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August 3, 2001
© 2001 Media Life
-Kevin Downey is a staff writer for Media Life.
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