Cable Networks Begin Upfront Talks as Broadcast Remains Quiet

Modern Family Bad Hair Day Stonestreet Ferguson - H 2013

Modern Family Bad Hair Day Stonestreet Ferguson - H 2013

Viacom has worked its way through a handful of agencies, while NBCUniversal is pushing USA's acquisition "Modern Family," asking as much as 25 percent over previous time slot occupant "Law & Order: SVU."

And they're off! Sort of.

Though there's not been any substantial movement in the broadcast market yet, a few of the cable players are already deep in negotiations. Viacom has worked its way through a handful of agencies, and sources confirmed that NBCUniversal is pushing USA Network’s off-net pickup Modern Family, asking as much as 25 percent over the previous time slot occupant, Law & Order: Special Victims Unit.

While early chatter has Viacom finished with 60 percent of its deals, rival sales execs claim that the conglomerate has only wrapped business with three major agencies. Given that Nickelodeon controls roughly 75 percent of all kids GRPs, and MTV is a must-buy for movie, video game and tech marketers looking to tap into the 18-24 set, the prospect of favorable rates in exchange for early business is sound -- provided that Viacom secures the commensurate dollar-volume increases for which it is surely looking.

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For USA, Modern Family clearly represents an opportunity to get itself on equal footing with the likes of TBS, which charges princely sums for off-net episodes of CBS' The Big Bang Theory. It’s probably not a coincidence, either, that Turner’s former head of ad sales, Linda Yaccarino, is now running the show over at NBCU and is driving a hard bargain around similar content.

There's also a lot of chatter about NBCU’s full-portfolio network strategy. Even broadcast inventory is potentially in play as the company begins to package its panoply of assets -- cable, broadcast and digital -- to best suit clients.

The Modern Family ask might be a sticking point, however, and folks are finding workarounds. Twentieth Television, for example, is selling time in the show's syndicated run on Fox Television Stations, and it also controls inventory for an hour per week on USA. As such, some buyers are trying to backdoor their way onto the cable network via a syndie buy.

There's also some concern that Modern Family has already peaked on ABC. Per Nielsen live-plus-same-day ratings data, Season 4 averaged 11.1 million viewers and a 4.2 among adults 18-49, down a steep 16 percent from the 5.0 in the dollar demo the show chalked up the previous year. By comparison, CBS’ The Big Bang Theory, the No. 1 scripted series on TV, averaged 16.8 million viewers and a 5.3 rating.

Big Bang Theory is one of a handful of broadcast shows to actually improve its deliveries during the 2012-13 campaign, growing 11 percent in the 18-49 demo. This, in turn, has helped TBS put up big numbers with its Big Bang Theory repeats -- recent episodes have delivered as many as 3.01 million viewers and a 1.4 in the demo.

Yaccarino controls an estimated $9.5 billion in upfront ad inventory across the NBCU portfolio, which includes the third-place broadcast net NBC, top-tier nets USA and Bravo, and niche offerings like E! and Oxygen.

As of late Tuesday afternoon, Yaccarino was believed to have inked some preliminary deals, but for the most part, client budgets have not been registered. (So quiet was the TV marketplace last week that Route 27 on Friday morning was already clogged with sales execs and buyers making an early run to the Hamptons in the annual Memorial Day Weekend exodus.)

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Last year, Fox got the market started on May 31, the Thursday after the holiday break. Automotive, movie and retail dollars poured in mere hours after the budgets finally began arriving.

While it's too early to get a read on how the overall upfront will shake out, many players are struck by the similarities between this year’s bazaar and the flat 2012-13 market. In a recent note to investors, Janney Capital Markets analyst Tony Wible said he expects the Big Four’s dollar volume will be flat to up 3 percentage points versus last year’s $9.25 billion haul, while cable is on track to grow between 5 percent and 8 percent versus a record take of $9.8 billion.

UBS analyst John Janedis said he expects network dollars to slide 5 percent, as ratings declines and the ascension of big-tent cable programming is likely to precipitate a major shift from broadcast to national cable.

Wible also said he believes that pent-up consumer demand for new cars (the age of the average car on the road today is a creaky 11 years old) could prove to be a boon for the TV market. Unfortunately, most of the high-volume contracts with broadcasters do not expire until next year, which means it is unlikely that we'll see a sudden influx in car dollars.

For all the early noise about a switch to a more comprehensive C7 ratings currency, don't bet the farm on an upfront sea change. 

"I think with this upfront that's going on as we speak, I’m not sure that [a currency shift will happen]," said Joseph Ianniello, executive vice president and chief financial officer at CBS Corp., at a May 22 investors’ conference. "But I’d say 12 months from now … I’m pretty confident that C7 will be the metric for the marketplace." 

Some buyers remain unconvinced that C7 is the answer. "When we went from program ratings to C3, the sellers got the benefit of three additional days of viewership off the DVRs, and the advertisers got the benefit of commercial ratings," said John Muszynski, chief investment officer at Spark SMG. "We go from C3 to C7, I see what the programming guys get for four days. But I'm still waiting for someone to explain to me what the advertiser gets. When that happens, we can have a conversation."

When the broadcast marketplace finally kicks into high gear -- the wheels should begin moving before the end of this week -- Ianniello expects that CBS will remain TV's top banana. (Last year, the top-rated broadcaster raked in a record-tying $2.65 billion in advance commitments.) 

"We're not really focused on who breaks the market," Ianniello said. "We want what we want, and we’re going to get it whether we go first or last. We’re best in class, and we expect to be compensated for that."