Cable Tv

IF THE CLOSE of the 2006 cable upfront brought a measure of discomfiture to anyone not on the buying end of the ad sales food chain, it may be because so many network executives expected a far more robust marketplace. Earlier this spring, the Cabletelevision Advertising Bureau projected that the overall cable take would grow between $500 million to $750 million over last year’s $6.5 billion haul, a dollar hike of between 7.7 percent and 11.5 percent. Now, with a small amount of business yet to wrap, best estimates peg overall dollars coming in flat to down 2 percent.

That said, the scatter market is expected to be strong enough to neutralize any lingering dampening effects from the upfront. Analysts remain bullish on cable, citing its relentless assault on broadcast’s audience share, its continued investments in programming and technology, and favorable costs-per-thousand rates when compared to broadcast CPMs.

Spending on network cable is expected to grow 10.9 percent this year to $24.7 billion, according to the Veronis Suhler Stevenson Communications Industry Forecast for 2006-2010. Next year looks similarly robust, with cable network spending projected to reach in excess of $27.1 billion.

This suggests that cable will show strong growth in the near term as basic cable networks like Turner, USA Network and ESPN continue to steal ratings share from the broadcast nets. According to Nielsen Media Research, ad-supported cable ratings were up 2.1 percent to 33.5 in prime time during the 2005-06 television season, for a net gain of 0.7 HH rating points versus the previous season. Moreover, cable’s overall share of the prime-time audience hit a record 55.6 percent.

While cable’s ad share remains disproportionately small when measured against the number of eyeballs the networks deliver in the aggregate, the dollars are moving. According to PricewaterhouseCoopers’ Global Entertainment and Media Outlook for 2006-2010, last year marked the first time that cable networks generated more advertising revenue than the broadcasters, by a margin of just under $1 billion.

Cable hits like ESPN’s Monday Night Football and TNT’s The Closer may garner their fare share of buzz, but as the Veronis forecast notes, a key driver lies beyond the cathode ray tube. Advertising at cable network and operator Web sites is projected to grow a whopping 34.1 percent in 2006, to $594 million, which represents almost one-fifth of the sector’s overall growth.

As most major cable networks have begun to surpass the virtual saturation point of 90 million-plus subscriber households, the only room left in which to show growth is in the nonlinear space, says Jason Kanefsky, a senior broadcast buyer at MPG. “The business now is for the networks to make their domains more valuable to their entrenched viewers.”

According to PwC, however, the end of cable’s distribution spurt is likely to mark the end of its double-digit ad growth. While PwC anticipates that cable will continue to rake in more ad dollars than broadcast in the Olympiad years 2008 and 2010, the outlook notes that “the two network categories are approaching equilibrium with respect to viewership, which we expect will translate into smaller differences in advertising growth.” As such, the cable ad business is expected to grow by as little as 6.9 percent in 2010, versus a projected 6.1 percent increase on the broadcast side.

As for the technology that keeps advertisers up at night, PwC remains rather sanguine about the perceived threat of the digital video recorder, noting that the devices will find their way into a mere 9 million U.S. households this year. And while DVRs are projected to reach 35 million homes by 2010, history suggests that fears of DVRs wiping out the traditional commercial model are groundless, according to the report: “Even though VCRs penetrated nearly 90 percent of TV households, the threat of lost commercial viewing did not materialize.”

Rising oil prices may pose a greater danger, with stalwart categories like automotive and retail expected to take a significant hit. “There are a lot of nonpositive signs out there,” says Kanefsky. “If any major advertisers start stepping out [of the TV ad market], there’s no one to take their place.”

Anthony Crupi covers cable TV for Mediaweek.