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Old May 6th, 2005, 11:46 AM   #1
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Default Who will fare best in the cable upfront

From Media Life Magazine:

Who will fare best in the cable upfront

Growth matters. Signature shows will matter more

By Kevin Downey

The $18.8 billion upfront ad-selling season kicks off this month, and while most media buyers and sellers agree cable television as a whole will again take revenue away from the broadcast networks, it’s a bit more difficult to estimate how individual networks will fare.

But that guessing game is starting to get easier.

Media researchers are sifting through recently released ratings for the year through April. Forecasters are releasing initial projections, such as Jack Myers of the Jack Myers Report, who last week forecast that cable television would increase its share of upfront revenue from 36 percent in 2004 to 38 percent. He believes syndication’s share will hold at about 12 percent, while network’s share will dip from 51 percent to under 50 percent. And media buyers are having conversations with cable owners like Viacom, NBC Universal and Time Warner.

Ultimately, the cable networks that are expected to do well are those with ratings growth--no surprise--but also momentum with original hit programs, whether large networks, such as FX, or smaller ones like Hallmark Channel.

Networks like MTV that do well with hard-to-find demographic groups such as young adults are also likely to fetch big money from advertisers, though that niche is getting crowded.

With the cable networks this week finishing their upfront presentations to media buyers, and keeping in mind that buyers often negotiate for ad time with media companies that own multiple networks, the Media Life Upfront Report this week takes a look at the strengths and weaknesses of each of the major cable owners.

This report is the second in a series that will be published through this upfront season. These reports will appear weekly over the next two months and more frequently as we get closer to when the broadcast upfront breaks later this month. The series is being sponsored by TV Land and Nick at Nite. Click here to read the first issue: "Upfront puzzler: Whither broadcast? This will be the second year that cable scores big."

Disney: Expect a strong showing from the ESPN franchise

Like many of the other big media companies that own multiple cable networks, Disney’s strength in the upcoming upfront partly comes from having a combination of growing ratings and networks that reach distinct demographic groups.

Key to Disney’s take this upfront is male-skewing sports networks ESPN and ESPN2. Disney owns 80 percent of the networks while Hearst owns the remaining 20 percent.

While some media analysts say the networks are mature, and as a result advertising growth will be modest, most media buyers give a thumbs-up to the networks’ plans to roll out more original programs, like ESPN2’s year-old talk show “Cold Pizza.” Buyers note that originals tend to bring in viewers on a regular basis and reduce the ups-and-downs associated with sporting events.

Morgan Stanley analyst Richard Bilotti earlier this year estimated that revenue for Disney-owned cable networks would grow about 7.8 percent in 2005, not limited to the upfront, which compares to an average 9.2 percent for the 35 highest-rated networks.

But significant audience growth in first quarter for both ESPN and ESPN2, up 14 percent and 4 percent in primetime, respectively, suggests Disney may do a bit better in the upfront.

Disney also gets involved in the smaller kids upfront with networks like ABC Family and Toon Disney. Both are growing. And its female-skewing network SoapNet is growing in key demographics, though it remains relatively small compared to giants like Lifetime.

Discovery Networks: Suffering for sure but hardly KO'd

There was a time when each year in the weeks leading up to the upfront Discovery could be counted on for boasting how well it would lure advertisers to its flagship and other networks, notably the until-recently hot TLC.

Times have changed. This year there is little in the way of proclamations, and with good reason. Discovery’s primetime audience in first quarter was down 26 percent from a year earlier, while TLC was down 34 percent. Moreover, Animal Planet has also been losing viewers.

That will hurt Discovery this year. Bilotti is forecasting a modest 4.5 percent increase in ad revenue this year.

But media buyers aren’t quite as ready to dismiss Discovery. Both the flagship network and TLC have new programmers in place, while Discovery is pulling back a bit from being a general-interest network to be truer to its origins as a science and nature network. Most buyers are impressed that the network is rolling out high-profile specials like next month’s “Greatest American.”

In the case of TLC, which is suffering from the decline of “Trading Spaces,” buyers say it will take a year or two for the network to recover. But they see the network's new management team heading in the right direction with the retooling of the home improvement show, including the ouster of its longtime host, and a scaling back on the slew of repeats.

Hearst: Strength across A&E, History and Lifetime

While HBO’s “The Sopranos” won’t premiere on A&E until fall 2006, the program signals a clearer direction for the network that media buyers say will almost certainly propel it from a growing top 15 network to a top-rated network.

A&E has also added the high-rated off-network run of CBS’s “CSI: Miami” and this fall will launch Fox’s “24.” The programs and unscripted shows like “Dog the Bounty Hunter” move A&E far away from its arts roots and closer in tone to the higher-rated and infinitely more buzz-worthy FX.

Moreover, the History Channel has quietly grown into a top 15 network among the 18-49 and 25-54 demographics advertisers favor.

Meanwhile, Lifetime continues to churn out high-rated movies. And media buyers say it remains the go-to network for female-targeted advertisers. Based on first-quarter audience figures, the top 10 network is growing in all key demographics.

NBC Universal: Mixed ratings bag in USA, Sci Fi and Bravo

NBC Universal owns top-tier networks like USA and Sci Fi and mid-tier Bravo, but sluggish ratings for all but Sci Fi might prove a drag in the upfront. Morgan Stanley’s Bilotti is forecasting annual ad revenue will increase 5.8 percent, well below the 9.2 percent average for the top 35 cable networks.

USA will score points with media buyers for again landing a deal with WWE and posting growth in the 18-34 demographic, up 10 percent in first quarter. But overall viewing is flat while original shows like “Monk” have been losing steam.

Sci Fi has a stronger story to tell. A few years back it jumped into originals with Steven Spielberg’s “Taken,” and ratings have been rising ever since in most demographics with shows like “Battlestar Galactica.”

But Bravo’s audience has been slumping in all but the youngest demographics. The network has a relatively new leader in Lauren Zalaznick and the network is continuing to roll out unscripted shows. But some of the buzz from “Queer Eye for the Straight Guy” that lifted the tiny arts network into a mid-tier network has faded.

News Corp.: A bigger share to take with the success of FX

Though relatively small in terms of annual cable ad revenue, News Corp. may post the biggest percentage increase in this year’s upfront.

Key to its success is FX, which reinvented itself earlier this decade with the gritty drama “The Shield” and then went on to roll out other original programs like “Nip/Tuck,” keeping it from being a one-hit network.

Yet media buyers do have a couple of concerns, and one is the recent management change that shifted Peter Liguori over to head Fox. Without Liguori might FX stumble? Another is the network’s plans to venture into original sitcoms, in a move away from the dramas that have worked so well for FX.

News Corp. also has Fox News, long ago having dethroned CNN.

And while still a third-tier network, National Geographic Channel, in which News Corp. has an ownership interest, is a bright spot. Following its launch four years ago, the network quietly grew its distribution and is now posting sizeable audience gains--up 67 percent in primetime--with ex-Discovery Networks veteran John Ford running programming.

Scripps: Age and ratings worries in how-to land

Challenges loom for Scripps in this year’s upfront. While HGTV and Food Network and its smaller DIY and Fine Living are highly targeted at women, ratings have been soft for its highest-rated network, HGTV.

Both HGTV and Food Network are also struggling to bring down the median age of their viewers, 53 years for HGTV and 49 for Food Network. HGTV has been launching programs like “Designer Finals” to fix the problem, but overall viewing has been dipping.

HGTV’s audience in the 25-54 demographic, for example, was down 8 percent in first quarter. Food Network did better, with its audience up in all key demographics, while the median age of its audience is coming down.
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Old May 6th, 2005, 11:47 AM   #2
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Time Warner: TNT and TBS and ratings on the climb

Time Warner has a story to tell buyers this upfront, and it’s one most will pay attention to: Ratings are up.

Having the two most-watched networks among 18-49s and 18-34s with TNT, which focuses on dramas, and TBS, which focuses on comedies, will help Time Warner in the upfront.

But media buyers say what is even more impressive than being top rated is that both TNT and TBS are growing, with audiences up in virtually all key demographic groups.

Moreover, while the two networks are expected to do well in the upfront, Time Warner’s Cartoon Network and competitor Nickelodeon dominate the kids’ market. Cartoon Network’s audience among kids 2-11 and 6-11 was up in double digits in first quarter, while the recently spun off Adult Swim is also posting dramatic growth among young adults.

Viacom: Slew of young viewers, and perhaps too many

Viacom has a slew of bright spots going into the upfront, with MTV, VH1 and Nickelodeon all highly rated among young people. But the concentration on young viewers of those networks, along with Comedy Central, may be too much, according to Morgan Stanley’s Bilotti.

While advertisers struggle to find young people on network TV and to a lesser degree on cable TV, the big money is still in adults 18-49. Meaning the total dollars chasing after Viacom’s core viewers is limited. That may partly explain why Spike is moving away from its short-lived focus on young men and is now posting its strongest growth in the 25-54 demographic.

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