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Cable Closes the Books on a Solid Season

Networks prepare to wrap their upfronts with hefty commitments from tech and luxury automakers

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As the cable upfront market winds down, networks and advertisers have just one little thing to worry about: the future.

With brands preparing to roll out a whole range of new products as the third quarter begins and the fourth quarter fast approaches, they are aggressively investing marketing dollars against all those new gadgets, cars and movies.

Coming out of the upfront, TV networks are sitting pretty, with Morgan Stanley analyst Benjamin Swinburne putting cable’s haul at $9.69 billion, up 4.3 percent versus last year, and broadcast at $9.16 billion, a 1 percent uptick.

Among the categories stoking business is technology, as competition among Web browsers heats up and Microsoft readies Windows 8 and its new tablet computer, the Surface, a rival to Apple’s iPad.

Luxury automakers are also putting money into the market. “You’ll definitely see more from the Audis and the BMW’s—the 1 percenters,” said one buyer. The jury is still out on makers of less expensive cars, including the single most controversial player in this year’s upfront.

But General Motors’ avowal to sit out network negotiations could serve it well, suggested Pivotal Research senior analyst Brian Wieser.

“If they’re truly indifferent about the context around which their creative messages appear, I think they’ll be doing well for themselves,” he said.

Others are more skeptical. Not only is it difficult to imagine GM promoting its two new truck models absent spots during sports programming, but the automaker also has debts to pay, as one ad insider pointed out. Meanwhile, CMO Joel Ewanick appears eager to shake things up.

Some advertisers are getting bumped into the scatter market simply because of the way their businesses work. For example, tech—especially telecommunications—is likely to rise even more as the scatter market begins, as brands depend on both novelty and secrecy to drive sales.

Some categories are not likely to have as smashing a year in 2013 as they did in 2012.

This summer movie season already is one for the record books. Disney/Marvel’s heavily marketed The Avengers has sailed past the $1 billion mark globally. Major campaigns also backed releases like Men in Black 3, Prometheus and Rock of Ages—this, as prospective blockbusters like Christopher Nolan’s final Batman film have yet to be released. Next year, the Superman flick Man of Steel, as well as the latest Star Trek and the Despicable Me sequel, seem promising, but probably on a smaller scale, which hurts networks selling young GRPs.

Looking ahead, producers of consumer packaged goods are biting their nails over daily dispatches from the troubled economies of Europe, as well as our own, still-shaky recovery and banking industry. If the U.S. economy starts going in reverse again, the first thing consumers will do is lay off the name-brand potato chips—and that, as always, has marketers sweating.

Yet by and large, negotiations are on track this cycle, and Wieser predicted an uptick in pricing of 5 percent in scatter and another 5 percent in each consecutive quarter.

For its part, the $2.5 billion syndication market was lackluster, with continued declines for prime-time strips—though there was some interest in daytime programming, particularly Katie Couric’s new talker Katie.

Wieser called the upfront process “creative destruction,” explaining that as established categories suffer growing pains—and in some cases even bite the dust—new ones emerge. As for 2013, advertising’s bounty could hinge on a looming Supreme Court decision, according to Wieser. “Health insurance is a big one next year,” he said. “If Affordable Care is held up by the Court, that’s a new, multibillion-dollar category."


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