Scatter Market Thrives Following Tepid Upfront

To hear some cable ad sales executives rhapsodize about fourth-quarter scatter, the marketplace is nothing short of a roaring ’20s bacchanal, replete with Lindy Hopping flappers and a hopped-up orchestra blaring “Happy Days Are Here Again.” And while that exuberance is a bit overstated, most cable nets are doing brisk work heading into the Hard Eight, writing business slightly over upfront cost-per-thousand ad rates, and, in so doing, alleviating early concerns that an inventory glut would turn the last three months of the year into a pitiless grind.

Ad sales chiefs and media buyers generally concurred that average scatter volume is up anywhere from 10 to 12 percent, a nifty reversal of an upfront that saw volume fall 4 percent and CPMs ranging from plus-1 percent to down a peg or two. Though this is an encouraging sign, given the vicissitudes of the evolving scatter market, there’s no guarantee that this momentum will carry over into first-quarter 2007.

One thing that is readily apparent is that the nature of the scatter market itself has evolved with the changing needs of clients and their purchasing managers. “Scatter’s not what it used to be,” said Andy Donchin, director of national broadcast, Carat. “People are spending less and holding onto their dollars a little longer, putting in orders closer and closer to air date.” It’s a trend that seems to be here to stay; most cable nets report that the tendency for dollars to come in later has been a defining characteristic of the last six or seven quarters.

Meanwhile, some sales execs believe that the fundamental way in which the upfront informs the scatter market has swung back toward a much more conventional arrangement. “We’re seeing a return to a natural relationship between scatter and the upfront,” said Hank Close, president, U.S. advertising sales, MTV Networks. “When the upfront is tepid, like it was this year, scatter usually picks up. That wasn’t the case last year.”

Having sold its targeted chunk of inventory in the upfront, Close’s team entered the quarter as a bit of an anomaly. The vast majority of cable networks undersold in the upfront because the demand just wasn’t there, creating what some had feared would prove to be a market-clogging glut of inventory in scatter.

“Certainly, because there was a little lower sellout, there’s a bit more inventory available, but we’re not seeing the urgency you’d normally associate with the word ‘glut,'” explained Louis Rolofs, vp, director, video investment and activation, MediaVest USA.

Buyers and ad sales execs agree that the pace of the scatter market has been customarily steady, with clients showing little impetus to rush in to make deals. Much of that has to do with the time of year, said Scott Haugenes, senior vp, group director, national broadcast, Initiative. “Advertisers are holding money close to the vest for corporate reasons,” Haugenes said. If business is booming and a client isn’t worried about hitting its year-end goals, they’ll spend on advertising. Conversely, “if they need that money, they can put it back into the bottom line,” he added.

Both MTV Networks and Discovery Communications said that they could close the quarter with volume up as high as 20 percent over the upfront. If that’s the case, those numbers would define the high end of the marketplace, although buyers suggest the companies may be slinging a little Kool-Aid with their projections. “We haven’t seen anything like that at our shop,” one senior TV buyer said.

At least one ad sales chief has been a bit more restrained in his marketplace analysis. “It’s been going along at a nice, steady pace, but I wouldn’t say that it’s been gangbusters,” noted Bruce Lefkowitz, executive vp of ad sales for Fox Cable Entertainment. “It’s a week-to-week phenomenon in that things were really moving for a few weeks and then right around Columbus Day they slowed right down. Now it’s picked right back up again.”

In macro, economic indicators are generally favorable, as gas prices fall and the Dow hovers above 12,000. Of course, there’s no telling how either factor will affect cable sales. “The thing about economic indicators is it usually takes about six months before they hit your budgets,” Rolofs said. “Oil had been up for about a year and we still haven’t seen any indication that that has had a major impact on sales.”

In any case, buyers believe that it’s still too early to definitively get a handle on how the rest of the year will shake out. “Up until now the fourth quarter seems healthy. The only question is how healthy it will be in the latter part of the quarter,” Donchin said.

One network that will be slightly less active in the quarter is Lifetime, which had such a good run with retail that it oversold the fourth quarter. “They have a history of doing that and then trying to make good in the cheaper quarters,” said a senior buyer who spoke on the condition of anonymity. Lifetime confirmed that it is holding out some inventory for make-goods, but said it was not out of sale.

Even though cable’s not exactly in the midst of a Jazz Age, buyers and sellers remain encouraged in the medium. “I’m a big believer in TV and the 30-second spot,” Donchin said. “It’s encouraging that advertisers are still buying them.”

Still, more than a few fingers are crossed that a Black Tuesday won’t hit in early ’07.