Media Shops Make Broadcast Nets Sweat

NEW YORK Hoping to generate extra leverage against rate hikes by the broadcast networks at the upfront, several media buying agencies put between $750 million and $1 billion into play with major cable networks over the past 10 days.

The goal, say buyers at those agencies (all of whom declined to speak for attribution), was not only to warn the broadcast ad-sales operations that there is an alternative if they take a hard line on cost-per-thousand rates, but also to lay a solid foundation of dollars since they already plan to spend more money in cable this upfront.

It didn’t hurt that some cable networks were calling buyers up looking to do deals at single-digit CPM increases.

“All the cable networks were picking up the phones, talking to the agencies, trying to do business,” said one major media buyer. “If we think [the] cable [marketplace] is going to be strong, and we do, and we think we can do a better deal by moving early, you do it.”

USA Networks, which includes Sci Fi Channel, was the first to kick off negotiations, followed in short order by MTV Networks, Discovery Networks and Turner Broadcasting. (Together they represent more than three of every four cable ad dollars). Execs from those networks signed or, more likely, shook hands on a number of deals with buyers from OMD, Starcom, MediaVest, MindShare and Mediaedge:cia. In total, they have done deals totaling 12-16 percent of the anticipated $6.1 billion cable upfront take.

The consensus among media buyers remains that the broadcast upfront will attract $9 billion, down 3 percent from last year.

“Agencies are trying to lay in a base so we don’t get caught up in the usual frenzy that occurs during the broadcast upfront, where we end up doing bad deals because we feel we have to get money down,” said a top executive at one of the active agencies.

Buyers are still bruised from last year’s upfront, when they overpaid for broadcast-net program schedules that underperformed. Season-to-date, every broadcast network save CBS has seen its delivery of adults 18-49 drop, according to Nielsen Media Research.

It isn’t unusual for cable networks to cut some deals before the broadcast nets’ unveil new programming, which occurred last week. Starcom is known to buy cable early, and several cable-network groups, including Turner, have quietly brokered deals in the past prior to May’s upfront negotiating craze. However, the amount of cable business done with agencies at this point is noticeably large this year.

“It’s safe to say that, as a group of networks, MTV Networks is much further along than it has ever been before at this point,” said Mark Rosenthal, COO and president of MTVN, which includes MTV, VH1, Comedy Central and Spike TV.

While no network or buyer would discuss pricing publicly, some said deals were done at CPM increases of 4-11 percent over scatter.

Also fueling early cable buying is that marketing budgets are up about 20 percent collectively over last year. Unlike years past, the lion’s share of the new money is not expected to go to broadcast. “I think a portion of it will go to cable, and another sizable portion might be held back for broadcast spending during the season,” said a major media buyer. “More product-placement opportunities might come up, and if you have already allocated the money, you can’t take advantage of these. The same is true for new mid-season programming that is not announced in the upfront.”

Of the four cable groups that did deals last week, USA is furthest along at 50 percent sellout. Since USA was talking with some agencies prior to the close of NBC’s purchase of its parent company, Vivendi Universal Entertainment, two weeks ago, it will not be sold in conjunction with NBC in the upfront this year. However, if an agency does play hardball with USA and try to drive down price, NBC will likely apply some pressure.

So far, however, it seems the cable marketplace is less contentious than it has been in recent years, with few executives brawling over price. “There is an unstated degree of cooperation,” said Lou LaTorre, president of ad sales for Fox Cable Networks Group. “It should all go down relatively soon without a whole lot of kicking and screaming.”

Big spenders so far include car makers, movie studios and pharmaceutical companies.

In general, the upfront is expected to continue at a normal pace, with broadcast doing the majority of its business this week. “A couple of cable deals are not going to move the market,” said one buyer. “It’s only $1 billion of $17 billion that gets spent across broadcast, syndication and cable.”