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Upfront Preview: They're Mad as Hell—So Why Do They Keep Taking It?

Cable World, March 21, 2005

Advertisers hate buying 30-second commercials on broadcast networks, but do it anyway. How can cable networks change their (agencies') behavior?

By Shirley Brady

This time last year, advertisers were fed up with the upfronts--and they had the stats to show why. The Association of National Advertisers led the charge, announcing that they'd officially had it with the annual melee in which up to 85% of network (and up to 35% of cable) is pre-sold over three sleepless days each May. The balance is bought and sold in calendar-year deals and the pricier scatter market.

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At the ANA's annual meeting--which reconvenes this week in New York--a members' survey showed that 57% were somewhat or very dissatisfied with the free-for-all open market known as the yearly upfront. Their biggest beefs: the "unfair pricing system" and "speculative deliverables" of broadcast network programming that "changes drastically and under-delivers." Each year, they complained, prices rose and they got less in return.

ANA members were eager to address these issues. This led to a landmark meeting to discuss upfront reform--appropriately called NUDG, for Network Upfront Discussion Group. Attending the meeting in New York last April were advertisers, agencies, broadcast networks (only NBC declined to participate) and two cable programmers, Court TV and Turner.

Antitrust issues (and lawyers in the room) kept pricing issues off the table. And, despite the desires of doomsayers, the upfront wasn't scrapped and replaced with some radical new model for buying and selling TV time.

Perhaps as a result of the "NUDG-ing" at that meeting, a handful of top- rated cable programming groups, including Turner, wound up closing their upfront deals ahead of the networks in the 2004 market.

"In last year's upfront there was a shift of broadcast dollars to cable," says David Levy, president of Turner Entertainment ad sales, who attended the NUDG meeting. Levy says his networks' 2004 upfront revenue grew by "about 25%" over the year before, with double-digit growth in CPMs (the cost of advertising per thousand potential customers reached by a TV commercial).

"I believe that trend will continue," Levy says. "There has always been some shifting, but typically that was always new dollars coming into the market. This was actually a real shift of money. And nobody got hurt: We're delivering-- everybody's delivering, [while] on the broadcast side those numbers are decreasing."

Last year, Turner's secret sauce, besides having successful brands such as TNT, was its influential Millennium III research study, which showed advertisers that cable networks are an efficient substitute for broadcast. The study's "One Television World" slogan became Turner's 2004 upfront rallying cry. The presentation swayed media planners and buyers, as well as the Cabletelevision Advertising Bureau, which adopted the "One TV World" moniker and rebranded its own efforts.

With Millennium IV due this year, Levy & Co. have a new upfront tag line: "Beyond the :30." "It's not just about 30-second commercials," says Levy of his cross-platform (including VOD) and cross-networks pitch. "It's about service, it's about backroom operations, it's about sponsorships and promotions, it's about integration, it's about programming and, of course, it's also about ratings and the 30-second commercial. It's about liability and maintaining that you get what you pay for. All those things are important when an advertiser or an agency is looking at buying a network."

Dueling Upfronts

ANA CEO Bob Liodice's opening keynote at this week's meeting will outline why TV advertising needs to be more efficient and accountable. Other sessions will focus on what advertisers need from television: brand marketing, viewer- empowering and -targeting technology and cross-network promotions, all of which will (they hope) help them transcend linear ratings and combat ad-skipping.

Cable networks will try to demonstrate in this year's upfront that they can deliver all of the above to advertisers and, in so doing, continue to shift the market in their favor.

But it won't be easy. Cable networks aren't just competing against broadcast and syndication for upfront dollars--they're competing against each other. Upfront competition among cable nets has gotten so fierce that The Weather Channel whisked media buyers to Quebec's Ice Hotel earlier this month in an attempt to stand out from the pack.

Luckily for cable networks, the upfront is just a part of their overall strategies; upfront inventory for cable networks typically is in the 35% range.

"If [broadcast] networks lose 85% sellout in the upfront, history has shown they can't handle that much scatter each quarter," says Discovery Networks ad sales president Joe Abruzzese. "So they try to write as much business as possible. We, on the other hand, sell every day." Discovery's calendar-year upfront covers September to September, and brings in a third of its annual ad revenue.

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Upfront Preview: They're Mad as Hell—So Why Do They Keep Taking It?

Cable World, March 21, 2005

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