After Cable Nabs Prime-Time Ad Dollars, Networks See Action

After watching advertisers clamor to buy commercial time on cable’s most popular channels, broadcast networks were breathing a sigh of relief Thursday as the cash registers finally started ringing.

Executives cautioned that they wouldn’t take in as much as they did last year, when a record $9.3 billion in prime-time commercial spots were sold by the six major networks in less than three days.

Still, as of late Thursday, CBS, NBC, ABC and Fox said they had sold hundreds of millions of dollars in prime-time advertising for next season. In some cases, they were fetching rate increases that slightly exceeded initial projections. Sales will continue over the weekend.

The networks had gotten off to a sluggish start, in part because of cable’s growing clout. Top-tier cable channels have dramatically improved their programming in recent years, and it shows: For the first time, cable TV viewers last year collectively surpassed broadcast viewership.

In the past, broadcasters typically led the ad-selling season, with leftovers going to cable. This year has been different. Cable channels such as USA, TNT, TBS, Discovery and MTV Networks sold the bulk of their inventory before some broadcasters had signed many deals.

“That was the most telling moment and incredibly significant,” said Mark Rosenthal, president and chief operating officer of MTV Networks, the largest family of cable channels. “For us, it was not only earlier, but at such an accelerated pace that it was breathless.”

The bulk of TV ad dollars are still destined for broadcast networks. But the gap is narrowing. Several analysts have predicted that cable channels this year would see a $1-billion boost in ad revenue over last year’s $5.4 billion, in part by siphoning off broadcastings’ advertising dollars.

“Every year there is posturing about advertisers moving away from network television,” said Ian Beavis, a senior vice president at Mitsubishi Motors North America. “But this year it’s real. We’re shifting more advertising dollars out of network television than ever before.”

Network executives confirmed as much, saying they’ve endured haranguing from ad buyers who have complained about the rising rates at a time when network viewership is slipping.

“If you want to change your image, it’s not cost-efficient to do that on broadcast television,” Beavis said. “They’ve priced themselves out of the market.”

The annual springtime sale of prime-time TV commercial spots -- the so-called upfront market -- is a closely watched barometer for the overall health of the advertising industry. The major networks typically sell more than three-quarters of their prime-time commercial spots for the next season in May and June.

General Electric Co.’s NBC network and News Corp.’s Fox Broadcasting Co. on Thursday were snagging rate increases of about 7%, according to network sources.

Surprising some, ABC was getting a bump of 3% to 6% despite coming off a bruising season. Ratings for the demographic group that advertisers covet most -- ages 18 to 49 -- plummeted 16% at the Walt Disney Co.-owned network in the season ended last month.

Sales were a little slower at Viacom Inc.’s CBS, sources said, primarily because network executives were holding out for rate increases of 10%. CBS is expected to make the most progress in revenue growth this spring, shrinking the gap with perennial market leader NBC.

“CBS enters the 2004 upfront from a position of strength,” Merrill Lynch media analyst Jessica Reif Cohen said in a report Thursday. She predicted that CBS would collect about $2.35 billion.

The WB network, owned by Time Warner Inc. and Tribune Co., on Thursday reported rate increases of about 7% even though it had a disappointing season, with viewership down among teens and young adults. The network is expected to finish with less than last year’s bounty of $700 million.

NBC isn’t expected to rake in the $3 billion that it collected last year, when it included in its upfront total more than $100 million worth of 2004 Summer Olympics advertising spots. The network has also seen its prime-time ratings decline.

Beavis wouldn’t quantify how much of the more than $275 million Mitsubishi spends on media buys in the U.S. would shift this year from broadcast to cable, but he said the amount was “very significant.”

He said cable was just one alternative to broadcast advertising for Mitsubishi. Online advertising is a growing part of the equation, he said.

“Over 80% of our customers go online to research the price of a car,” Beavis said.

As a result, he said, broadcasters “should be giving us strong reasons why network television is a must-have.”