Updated: Cable Upfront to Stretch to September?

As much as all parties involved can’t wait to watch the 2009-10 upfront recede in the rearview mirror, the cable marketplace still has quite a stretch of road ahead of it before buyers and sellers reach the finish line.

While some of the major network conglomerates (Turner, NBC Universal, Viacom) have finalized their upfront negotiations, a significant chunk of business remains to be written at Discovery Communications and Scripps Networks. Fox Cable Networks is believed to be all but wrapped up, while A&E Networks has completed around 80 percent of its deals.

Mid- and third-tier cable nets have done very little deal making, and at this juncture, many executives don’t anticipate crossing the line before Labor Day. As it stands, this year’s bazaar will go in the books as the most drawn-out upfront in TV history, and while compromise was a two-way street, few will look back on the last three months with a sense of satisfaction.

“Nobody is exactly thrilled with how things played out,” said one media buyer, who like nearly everyone else who chimed in this summer, spoke on condition of anonymity. “On the one hand, guys on our side came to the realization that there was a limit to what kind of rollbacks the sellers were willing to accept. And the networks saw that we weren’t going to go along with the CPM increases they were looking for early on, or even flat pricing.”
 
Irresistible force, meet immovable object.
 
When the dust settles, cable will see CPMs retreat between 5 percent and 8 percent from last year’s upfront levels, although if you plot the results on a number line, the variation between the haves and have-nots looks like a column of marching ants. Closest to the zero are NBC Universal’s USA Network, which secured superficial (2 percent) CPM rollbacks, thanks to its status as cable’s ratings king and an historically low price point. Turner’s TNT and TBS also absorbed relatively minor pricing decreases, finishing up with reductions of 4 percent.
 
While Discovery has yet to finish its deals with agency heavies OMD and GroupM, thus far the network group has written better-than-average decreases (negative-3 to negative-4 percent).

During the company’s August 4 Q2 earnings call, Discovery president and CEO David Zaslav said the ad sales team “plans on selling less [upfront] inventory than in years past,” largely because of tightened marketing budgets and a scatter market that is pricing at a premium to last year’s upfront levels.
 
“We’re still in middle of our sales process, but we anticipate lower absolute levels of commitment,” Zaslav said. “We think holding back additional inventory is prudent.” Last year, Discovery sold a little more than 50 percent of its avails in the upfront.
 
With less than 50 percent of its upfront squared away, Scripps Networks is also outperforming the mean, with pricing down in the Discovery range. Viacom hovered slightly above that span, with rollbacks of –4 percent to –5 percent, although the MTV Networks are thought to have taken more of a hit on volume. Sources said MTVN closed its upfront down as much as 15 percent in total dollars.
 
“There was certainly some pressure on volume, as advertisers looked to maintain flexibility in how they plan their advertising budgets,” said Viacom president and CEO Philippe Dauman during the tail end of the media conglomerate’s July 28 earnings call. Dauman did not quantify the volume decrease, saying only that the company was “pleased” with the results.
 
Buyers suggest that cable volume will fall between 10 percent and 15 percent, adding up to $6.5 billion to $6.88 billion, down from $7.65 billion a year ago.
 

While the smaller properties continue to grind it out, those who have closed the door on this year’s upfront said that they’re happy to jump back into writing their third-quarter scatter business. “We’ve been pricing at above last year’s upfront levels, and that’s starting to go up a little more every week,” said one ad sales chief. “The economy’s picking up and I think we hit the worst patch back in the second quarter. Has the year been great? No. Was the upfront what we were hoping for? Not really. But we’re looking forward to next year, when the demand has to be higher.”
 
That sentient was echoed all the way down the chain. “We just came through the worst economic disruption since the Great Depression, and it looks like the worst of it is behind us,” said one ad sales boss. “You have to believe that demand will be up 3 to 5 percent in 2010 … and supply will be up a bit as well.”
 
While many marketers reduced their upfront commitments or sat it out altogether, sellers believe that their partners will be back in a significant way in scatter. “We’re seeing automotive start to pick up. We’ve already had one of the Big Three come back from the brink of extinction, and they’re going to spend. CPG and fast food will be up,” said one ad sales exec. “If the clients who’ve told us they’re waiting for a better sense of how things will play out come back in a meaningful way, then whatever lumps we took in the upfront won’t be coming back to haunt us.”
 
That said, some of those seated at the other side of the table are skeptical that there will be an accelerated recovery.
 
“We’ll see how scatter plays out,” said one national TV buyer. “The demand just wasn’t there in the upfront, and the line about the networks wanting to hold back for scatter is a little overstated. The clients just don’t have it in them, and we don’t know if they will anytime soon. So there’s no way of knowing exactly how much money is going to be out there.”