Outlook 2008: Cable TV

NEW YORK Should the writers’ strike continue well into spring, an already untenable situation at the broadcast nets will only worsen. Season to date, ABC, CBS, NBC and Fox have seen their aggregate prime-time share among adult viewers 18-49 drop 8 percent, per Nielsen Media Research, and analysts believe a protracted standoff between writers and the studios will only cause faster erosion. “In one year, they’ve lost 10 percent of their commercial impressions,” says Jack Wakshlag, chief research officer at Turner Broadcasting, adding that broadcast was particularly stung by a weak fall lineup. “Last summer, cable proved that you don’t need to wait for the broadcast season to start up again if you want to see great programming.”

The first two quarters of 2008 may be even juicier than summer. “It’s supply and demand,” says one ad sales boss. “We have new shows that people are going to want to watch, and the broadcast guys are going out with [stuff] like American Gladiator.”

Obviously, those economics inform the ad sales business. Broadcast is so squeezed by the ratings shortfall and the C3 conversion that prime-time inventory is rare—a reality exacerbated by a similar sellout rate in early morning, news and late night. All four broadcast nets are doling out makegoods, and NBC and The CW are giving cash refunds.

“Money is going to continue to shift out of national broadcast, because it just can’t take any more,” says Steve Farella, president and CEO of TargetCast. “The cable nets have been in the catbird seat for a while, and like it or not, that’s not really going to change—especially when you’re dealing with a business that has lower ratings expectations than broadcast.”

As such, many observers have revised their earlier prognostications for 2008, a year that could see cable take upwards of $200 million from broadcast should the strike creep into the warmer months. Bob Coen, senior vp, director of forecasting at Universal McCann, predicts that cable will ring up $21.7 billion in ad sales in 2008, a 6.1 percent increase over this year’s $20.5 billion haul.

While some top-tier cable nets have been writing first-quarter scatter deals at a 50 percent premium over upfront pricing, buyers insist the market will stabilize. “People will evaluate scatter, and if they feel they’re paying too much for what they’re going to get, they’re going to reevaluate where and how they spend,” says Jackie Kulesza, vp, broadcast activation director at Starcom. The Internet is the first place marketers are likely to turn if cable is too rich for their blood.

Farella anticipates scatter prices will fall in second quarter, as inventory starts to open up and dollars shift to other media. “When pricing goes through the roof, we only have ourselves to blame,” he says. “You have to have a strong multimedia mix, so planners will have to play catch-up and move more money around…Next year, you’re going to need a catcher’s mitt if you’re a Yahoo or a Google.”