Upfront and Center

Discovery ad chief Joe Abruzzese prepares to go to the mat, and takes Adweek along for an insider's view

Two well-dressed men enter a room, each carrying a sheaf of documents tucked under one arm. They take a seat across from each other at a small round table. Spring light creeps in through the venetian blinds. Over the sounds of the Third Avenue traffic, they speak the language of money.

It’s April 2, three days before Discovery Communications will host its New York upfront presentation, and Joe Abruzzese is trying to get a bead on what he wants out of the marketplace and how he’ll go about getting it. Resplendent in a midnight-blue suit, a pink polka-dot tie knotted at his throat, the 63-year-old ad sales president is carefully attending to the first step in a monthlong process, hammering out what he calls “the game plan” for 2012-13.

On the other side of the table, Abruzzese’s lieutenant Bobby Voltaggio is eyeing a spreadsheet that serves as a master key to decrypting Discovery’s upfront strategy. Beginning with the flagship Discovery Channel, the two men trade assessments of the company’s domestic networks, deciding which property will place an emphasis on locking in higher CPMs and which will focus on moving weight.

While Abruzzese works out where he’ll push pricing and where he’ll go for bulk, he also tinkers with the idea of restricting availability on one or two networks. Naturally, this should spike demand, allowing him to command a higher CPM. (Adweek has agreed to not disclose financial figures floating about the room.)

The conversation is conducted at peak efficiency, designed to convey the maximum amount of information in the fewest possible words. Numbers susurrate from one side of the table to the other in a sort of call-and-response cadence. After 20 minutes of quietly comparing notes, the men stand and nod at one another, secure that their plans for raking in $1 billion are theoretically sound.

“The easy part is laying it out,” Abruzzese says, rapping the table three times. “The hard part is actually modeling it and seeing what the whole thing looks like.”

The battle plan offers a perfect-world assessment of how each network will perform in the upfront. After Voltaggio layers in pricing targets for each individual client, Abruzzese will gather the heads of Discovery’s portals, a clutch of senior sales executives that includes svps John Barry, Sharon O’Sullivan, Scott Felenstein and Harold Morgenstern. Over the course of two days in the first week of May, the sales team’s marching orders for the spring bazaar will be finalized.

“Strategically, we’re also looking beyond the upfront because if we lay out what we want, we’ll have a great jumping off point to grow money in scatter,” Abruzzese says. “And that’s the big difference between broadcast and cable. As a broadcaster, when you move into scatter from the upfront, you’re jumping into a pool of 15 percent, whereas with cable, we’re jumping into a pool of 45 percent. And that’s where we make a lot of money.”

In a sense, all of this advance work seems to belie the notion that the upfront is a pitiless grind, a skull-thwacking collision between irresistible force and immovable object. “So much of our business is preparation that the negotiation is actually kind of easy,” Abruz-zese says. “Every time we write a deal, we make an adjustment in advance of the next deal. You keep adjusting until you finish. So basically, when we’ve laid out this whole thing, we’ve won. We haven’t sold one unit, but we’ve won because we’ve laid it all out.”

Discovery’s U.S. networks in 2011 took in $1.34 billion in ad revenue, up 9 percent versus the previous year and an improvement of 25 percent versus 2009. Rolling up sales at the company’s international channels, Discovery’s total ad haul is north of $1.85 billion.

As reassuring as those numbers are to investors, David Zaslav seems more impressed by what went down when the fur was flying. “One of his greatest accomplishments was during the recession,” Zaslav, president and CEO of Discovery Communications, says of Abruzzese. “Joe said, ‘We’re going to fight like hell and stay positive.’ He set a month-to-month goal to increase pricing. No other media company did it. He could have given the team a pass that year, he could have blamed the recession—but he didn’t.”

A cheery but implacable exponent of the work hard/play hard school, Abruzzese’s leadership in the midst of economic catastrophe had the desired effect. In 2008, while rival conglomerates were taking on water, Discovery booked $1.06 billion in advertising business, for a net gain of 4 percent.

“No other media company in the U.S. had ad revenue growth in ’08 except for Discovery,” Zaslav points out. “The plan changed a little bit because the world has changed, but Joe has always beaten the competition.”

Abruzzese’s virtuosity is such that at least one analyst has ascribed Discovery’s success to the dark arts. During the company’s fourth-quarter earnings call in February, Barclays Capital analyst Anthony DiClemente asked Zaslav what “magic” Abruzzese brought, noting, “There’s really a multiquarter outperformance story here.” Zaslav responded at length before capping off his answer thus: “Joe Abruzzese is the master of managing inventory and at motivating a great sales team.”

 

More recently, Abruzzese’s personal touch extended to one of the most visible members of the Discovery family. Just days before she was to appear at the New York upfront presentation, Abruzzese told OWN impresario Oprah Winfrey she needed only reassure clients that she was in it for the long haul.

Standing on the stage at the Jazz at Lincoln Center venue, Winfrey made a good impression on the throng of media buyers, humbly characterizing her stewardship of the fledgling network as an ascent up Kilimanjaro before striking a decidedly positive note. “With our restructuring and right-sizing and getting into the sauce of what needs to happen every day, I feel like I can at least now see the summit,” Winfrey told the crowd.

Immediately following the presentation, Winfrey hosted a dinner next door at the restaurant Asiate for eight prospective clients. Abruzzese joined the group after a few circuits of the Discovery meet and greet. “They did a good job. [OWN evp, ad sales] Kathy Kayse laid out the list of clients who should be there, drawing from the top 10 accounts that buy TLC but aren’t on OWN yet,” he says. “So at least they got a chance to meet Oprah and hear more about her vision for the channel. That’s all you can do—just set the table.”

Back to the upfront preparations, Ian Parmiter is convinced he can keep Discovery’s pitch under the 105-minute mark. Infamous for being the most time-consuming presentation on the spring calendar, the annual Discovery expo often seems to drag on longer than a screening of The Hunger Games.

Parmiter, svp of marketing for Discovery ad sales and the newly appointed head of integrated marketing for OWN, also helps choreograph the company’s song and dance for the ad community. “Joe, we’ve shaved 15 minutes off the Chicago show,” he tells his boss. “I’m sure we can get it down to an hour forty-five.”

At the upfront run-through in New York, Parmiter is trying to condense the 13-network showcase. Abruz-zese flips through the script, scans the names of the 45 guests slated to make walk-ons and tells Parmiter he has no shot at bringing the show in under two hours. “You’re going to have Henry [Schleiff] on a stage in New York,” says Abruzzese, referring to the garrulous president and general manager of Investigation Discovery and Military Channel. “He’s going to speak longer than he did in Chicago.” When Parmiter demurs, Abruzzese proposes a wager: “One of my good [ties] versus one of yours.” Parmiter will end up minus one necktie, as the curtain falls on the show a few ticks past two hours.

Having already engineered a full upfront presentation the previous week, this final cram session lacks a certain kind of urgency. Still, Parmiter is concerned about some of the talent—plus a somewhat balky droid that will introduce James Cameron’s new Discovery Channel project Robogeddon. “It’s never a matter of getting just one thing right,” Abruzzese says. “It’s true with sales, it’s true with sports, it’s true with everything. You have to do a hundred things right if you want to win.”

While deal making in the crush after an upfront is largely extinct, there is much riding on the New York show. Not only does it serve as a formal introduction to the next 18 months of programming, it also provides a sort of unity of impression. Clients are human, and are just as likely to be wowed by pyrotechnics and slick presentations as anyone.

In the grand scheme of things, Discovery represents roughly one-twentieth of the total upfront market, a vast landscape of broadcast networks and 98 ad-supported cable outlets.

Over the course of last year’s robust market, TV snapped up $18.5 billion in advanced commitments, a sum that was more or less evenly split between the networks and cable. When Spanish-language media and an estimated $2.4 billion in syndication are taken into account, the total take for the 2011-12 season added up to $23.2 billion.

Media buyers say Discovery commanded some of the highest CPM increases in last year’s upfront, though Abruzzese undermines the score-keeping culture. “You’re always going to have those guys who say, ‘I won’t go lower than [a] 10 percent [CPM increase],’ ” he says. “If the market says you can get 8 percent and you push back for 10, you might say that’s a great victory. But over the course of the year, two percentage points on a billion dollars is $20 million. That’s $5 million per quarter.” He shrugs to punctuate the point.

Of course, the chest-beating about who’s going to do what to whom has already begun in earnest. CBS Corp. fired the first shot in the upfront wars back in February, when president and CEO Les Moonves told investors his sales team would secure premiums of 10 percent or more. “The [media buyers] always lowball you,” Moonves said at Deutsche Bank’s annual media conference. “We’re going to get double-digit increases in the upfront. There you have it—let the games begin.”

While cable execs tend to utter their predictions sotto voce, last month Lou LaTorre gave his read through a microphone. Speaking to revelers at FX’s annual upfront party, the Fox Cable ad sales president predicted the high end of the cable market would secure CPM hikes of 11 to 12 percent.

On the other side of the table, buyers are saying last year’s market was demonstrably overpriced. Initiative evp Kris Magel says the TV market hasn’t held up as strongly as buyers had anticipated, as scatter has failed to “back up those higher upfront prices.”

If Q2 scatter rates are trending anywhere between 10 to 15 percent higher than upfront pricing, that goes a long way toward justifying inflated rates in the spring sell-off. But when scatter is up in the 5 to 10 percent range, as it is now, a correction may be in the offing.

“Look, the buyers are saying, ‘Oh, we’re not so sure about the economic outlook—it’s not as healthy a scatter market as it should be, we overpaid last year,’ etcetera,” Abruzzese says. “I almost want to say to them, ‘OK then, we’re going to limit how much money we take upfront and let’s see how high the prices go.’ ”

Flash back to June 25, 2009, one of those rare early-summer days in New York where the temperature and humidity aren’t in league to destroy your will to live. The upfront market has stalled, and while no one can know it at the time, negotiations will drag on through September, with some $2.9 billion in TV dollars left on the table. So, on this Thursday afternoon, in the thick of what should be a heavy trading day, Abruzzese is holed up in the bar at the Four Seasons. “I’ve been staring at the walls all week,” he said at the time. “I’d rather stare at the walls in here.”

Another thing no one could know that day until the news hurtles east is that Michael Jackson is dead. Three thousand miles from this temple of Kobe beef sliders and silvery martinis, Los Angeles is already scrambling for votive candles.

One of the bar’s younger patrons gets the word via her BlackBerry, and a game of 21st century telephone begins. When Abruzzese catches wind of the news, he is the picture of impassivity—only to perk up a beat after noticing former St. John’s standout Chris Mullin on the other side of the room. With the world aswoon over a doomed pop star, Abruzzese reminisces about St. John’s loss to Georgetown in the 1985 Final Four.

Simply put, there are things that do not pass muster in the Abruzzese universe, and his way of dealing with them is to offer a short little moue, shrug, then return to more crucial matters. Take those who visit his office wearing jeans, who become the object of brief but intense scrutiny. The sight of a man pulling a wheelie bag elicits an equally bemused response. All of which is to say that Abruzzese lives by a strict personal code, one he would very much like everyone he does business with to adhere to. You will never see one of his salesmen out of uniform. At times, Zaslav will exercise executive privilege, appearing at Abruzzese’s door in jeans and a polo shirt—a violation Abruzzese acknowledges with that characteristic quicksilver frown and shrug.

It’s not that Abruzzese has a Pavlovian aversion to denim. One senior Discovery staffer even claims to have once spotted the dapper sales chief in a pair of Levi’s. (Pictures, or it never happened.) Rather, Abruzzese’s attention to wardrobe reflects the esteem in which he holds this business.

“We take the stance that every client is so important, and that’s why we wear jackets and ties, to show respect for the client,” he says. “And I want my guys to think that way, to think that this is a professional business, a business where your word is your bond. When you stand there, with respect for the clients, with a jacket and tie, you’re telling them that it’s OK to buy futures from us, because I will take care of you as I take care of myself. It goes a long way.”

As expansive as he is, Abruzzese won’t speculate about when he might shoulder his bag of new TaylorMade RocketBallz golf clubs and walk out the door for the last time. His office is a shrine to the good life, but almost every artifact therein testifies to a balance between work and leisure.

It’s been that way since early on. After serving in the Air Force, a young Abruz-zese happened to meet an NBC executive in a New York bar. On the strength of his moxie, the suit offered him a job managing overhead budgets. From there, he worked his way up to sports sales. After jumping to CBS in 1980, he advanced to president of ad sales operations. Abruzzese remained at the helm of CBS network sales until 2002, when he made the daring leap to cable and Discovery.

“Joe is very passionate about his work, but he has done a full merge of his professional life and personal life,” Zaslav explains. “Those are the people he wants to be around. He has a great life because he’s found a great career and great friendships and they feed off of each other.”

Zaslav won’t entertain the idea of a Discovery without his sales capo. “I told Joey there’s one word you can’t say around me, and that’s the ‘R’ word,” he says. “I told Joe, ‘We leave together.’ He’s going to be here for a long time.”

There are many reasons why the prospect of going it without Abruzzese would keep Zaslav up at night. In 1992, when he was running ad sales for CBS Sports, Abruz-zese found himself in the enviable position of overseeing the network’s Super Bowl XXVI inventory. Early in the game, while sitting with Anheuser-Busch’s longtime sports and media czar, Tony Ponturo, word comes that Budweiser’s first ad in the game has misfired.

Midway through the 30-second spot, the feed broke off, and now August Busch III is on the phone from Florida—and to say that the beer scion was unhappy would be to traffic in grave understatement. Understandably vexed himself, Ponturo tells Abruzzese he can have the Nicole Miller tie he’s wearing if he can get him out of this jam.

Abruzzese starts working the phones, and his reps in L.A., Chicago and Detroit all report the same thing: The ad looked fine from here. A call to CBS’ New York studio confirms that the spot was transmitted cleanly.

But rather than confirm everything had checked out, Abruzzese heads to the truck and asks that they run the ad one more time, preferably during a timeout—no yelling, no threats, no wheedling. Abruzzese simply asked politely, and he and the Anheuser-Busch marketing team were rewarded with what would prove to be the first isolated 30-second commercial in Super Bowl history.

“The next day we get the report back and it says the feed to the bottom third of the country broke up, so we were right to do it,” Abruz-zese recalls. “We didn’t know it at the time, but sometimes you just have to take a flier. But Tony was so pleased by how we took care of him, the next year we did a three-year deal on a napkin. Because of the trust.”

There are challenges, even for some of the brightest stars in the Discovery constellation. Take the Investigation Discovery network, which has become one of TV’s great success stories, rocketing from the murky backwater of cable’s lower third to the No. 4 spot among the target demo, women 25-54. In the first quarter of 2012, ID beat the entrenched female-targeted channels Oxygen, Lifetime Movie Network and WE in adults 18-49, and if it can maintain momentum among the 25-54 set, it will find itself among cable’s top 25.

The trouble is, ratings spikes don’t necessarily translate to a concomitant boom in CPMs. It’s difficult to move the needle on legacy pricing, especially when your established rate is in the single digits and your GRPs keep soaring. “We have our work cut out for us,” says the net’s chief Schleiff. “But we have nine new prime-time series and a daytime block that will fill the soap opera gap, so all thepieces are in place for even stronger growth. I just hope the market can keep up.”

At the upfront rehearsal in New York, Schleiff is waiting for his cue. A few feet away, Abruzzese is effortlessly hitting his marks. Behind him, a slide demonstrates how the reach of the Big Four broadcast networks has plummeted 45 percent since 2006. “Yeah, keep buying broadcast,” Abruzzese cracks.

Broadcast may, in fact, be the key to springing ID’s upfront CPMs. Schleiff’s demos align neatly with those drawn to CBS, particularly when compared to high-value dramas like The Good Wife. Such is the disparity between that show’s $27 CPM and ID’s price—around $8 in prime—that marketers who want to connect with that cohort of viewers can find particular value in buying bulk.

As Schleiff practices a stunt with a Susan Lucci stand-in (Erica Kane will punctuate her ID pitch with a meticulously timed “slap” of the programmer’s face), Abruzzese slips backstage. A warren of sharp turns clogged with electrical cables, the area just behind the curtain gives way to a cinder block room.

Abruzzese can’t stick around for the remainder of the rehearsal, as he has an informal meeting at one of the bigger agencies. “We’re just going to compare notes,” he says, sidestepping James Cameron’s lethal robot, which, in repose, looks like a harmless piece of theater scaffolding. “We’ll see the budgets in mid-May, after the broadcasters get theirs.”

Pausing at the stage door, Abruzzese says he’s not about to make any predictions about the health of the upfront market until he’s had a chance to count the house. “When they get 80 percent of the money registered, we’ll make the call,” he says. “Without that, it’s a blind call.

“Remember, you don’t want to reduce this to just the numbers. This job is all about relationships. It’s about taking care of the client and living up to your word. And if the client uses more money to improve their business, using our airwaves? Everyone wins.”

He grins, pushes his shoulder into the door. And with that, Joe Abruzzese steps into the light.