Good News/Bad News: Cable Notches Record Upfront Haul, but Market Is Slumping

Stagnant economy puts the freeze on scatter

After two consecutive years of record growth, the cable advertising market has cooled down considerably—and if the current scatter market is any indication, the networks could be in for a long, cold winter.

According to calculations made by the Cabletelevision Advertising Bureau, ad-supported cable networks this summer generated nearly $9.8 billion in upfront commitments, and while that represents a record haul, it’s also just $511 million more than the 2011-12 total.

That 5 percent year-over-year improvement pales in comparison to the 16 percent volume increase delivered in last year’s bazaar when cable nets took in $9.29 billion in advance sales, or $1.28 billion more than in the 2010-11 upfront.

Cable upfront sales have been on the rise for the last three years, soaring 45 percent since the “correction year” 2009-10 bazaar. But a stagnant economy threw cold water on what sales execs hoped would be yet another strong summer selloff, and there’s been little relief on the scatter front.

As was the case a year ago, fourth-quarter scatter pricing is trending flat or slightly higher than the rates established in the upfront. Political dollars could help spark a rally in late October, but for the time being, the market remains soft.

“The advertising market is mirroring the tepid, slow growth performance of the general economy,” said Jon Swallen, chief research officer at Kantar Media North America. “Third-quarter results will get a short-term boost from the Summer Olympics and political advertising, but sustained long-term improvement will probably be linked to the health of consumer spending on the goods and services that marketers provide.”

Naturally, $9.8 billion is nothing to sneeze at, and it’s worth noting that cable wrote more business than the Big Four broadcast nets. (ABC, CBS, NBC and Fox pieced together $9.15 billion in 2012-13 upfront sales, flat versus a year ago. Toss The CW’s $400 million into the mix, and you’re looking at around $9.55 billion.)

The competitive balance is being shaken up by the sheer amount of quality programming now available on cable as well as the inherent efficiencies of the business. On a CPM basis, prime-time inventory on a top 20 cable net costs about one-third as much as that on the broadcast nets.

Given that advertisers reserve the right to pull out of a percentage of their advance commitments, the upfront totals are perhaps best interpreted as directional markers rather than absolutes. That said, the TV market as a whole does seem shot through with stasis. According to PricewaterhouseCoopers projections, the networks in 2013 are on track to generate $19.1 billion in ad sales revenue, a figure that marks a 1 percent increase from this year’s $18.9 billion.

Media buyers are currently preoccupied with the business of converting those upfront holds into orders. Network sales execs said there has been little breakage thus far and expect cuts to fall within the usual range (between 2 percent and 3 percent). At the same time, clients do not appear to be adding to their earlier commitments.

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