Forecast 2009: Cable TV

For ad-supported TV, 2009 is shaping up to be a bit like what typically happens after a high school kid throws a house party when his parents go out of town on a trip.

If last year’s marketplace was marked by a disorienting plunge into chaos––Hummel figurines were shattered and parties unknown threw up into the umbrella stand––the next 12 months promises more of the same, but worse. Not only will the sofa be defenestrated, but it’ll come to rest at the bottom of the pool.

Oh, and at 3 a.m. when the house is in shambles, the telephone will ring from underneath all the broken stuff and it’ll be the kid’s dad calling to say that, surprise!, they’re on the way home from the airport.

That sense of creeping inevitability has media types casting back to the bad old days of 2001, when the destabilization of the grossly inflated tech-stock market engendered the most severe advertising recession since World War II. Thing is, this particular downturn is likely to be significantly more punishing than the 2001 recession, in terms of constricted media spend and duration. And while no one’s walking away from 2009 unscathed, many observers remain cautiously optimistic that the cable sector won’t absorb the sort of concussive trauma that’s in store for the rest of the traditional media space.

Chief among cable’s inherent strengths is the palliative dual-revenue stream, which serves as the trampoline at the bottom of the elevator shaft. While cable’s cumulative ad intake could land anywhere in a range between up 1 percent to down 3 percent in 2009, carriage fees should go a long way toward breaking the fall. Witness Discovery CEO David Zaslav, who has remained on-message during the downturn, reminding investors that half of the media giant’s overall revenue is tied to sub fees.

Then there’s the whole fragmentation issue, which by all rights should have broadcasters sitting quietly in a dark room somewhere with their heads down on their desks. Per Nielsen data, ad-supported cable is up 10 percent in prime season-to-date, while the Big Four nets have slipped another 7 percent. In the core 18-49 demo, nightly cable audiences are up 9 percent versus last year, while NBC, CBS, ABC and Fox combined for an 11 percent drop.

Ratings and the inherent efficiencies bundled in with a cable buy––the average CPM commanded by a TNT or USA Network is still only about a third of broadcast’s asking price––will keep the ad-supported channels relatively stable, although the groups that will be best positioned in ’09 are those that can bob and weave around the most unstable categories.

“We’re broad in terms of portfolio, and no [ad] category represents more than 15 points of our overall mix,” said Jon Steinlauf, senior vp, advertising sales, Scripps Networks. “At about 7-9 percent of our base, neither financial services nor automotive is particularly disproportionate in terms of representation.”

If the Discoveries, Turners and Scripps are expected to outperform in what is otherwise promising to be a miserable year, they’ll still have to wade through the tidal murk of mid-January, when second-quarter upfront options come due. “In 2001, we saw pullbacks at a rate of around 25 percent,” said one media buyer. “Second-quarter cutbacks could be as bad as that, or maybe even a little worse.”

As much as cable’s slate of originals looks just as strong as ever, all the buzz in the world won’t translate into revenue when viewers are stuffing their paychecks under the mattress.
“The ad market will only improve when consumer confidence improves,” said Jon Swallen, senior vp, research, TNS Media Intelligence. Swallen added while local media will continue to bear the brunt of a retrograde economy, no one benefits when auto and retail dollars contract.

“Auto sales peaked back in 2004 and have been heading south ever since,” Swallen said. “Now there’s no credit, which will further restrict car sales. My sense that this all may get worse before it gets better.”