Upfront Market Special Report: Let the upfront begin

While the dynamics of the upfront children's television market may be changing dramatically, with cable services taking away more of the networks' audience share, and with some suggestions that children's overall numbers are down, one fact remains unchallenged-television is still the...
January 1, 1998

While the dynamics of the upfront children’s television market may be changing dramatically, with cable services taking away more of the networks’ audience share, and with some suggestions that children’s overall numbers are down, one fact remains unchallenged-television is still the best way to reach the largest number of kids

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The changing of the guard continued in the prelude to the 1998 kids upfront ad market, as cable solidified its gains as the delivery platform for kids TV. With two major exceptions, television networks are struggling in the battle to keep young eyes glued to their programs.

As for exactly how the upfront market will play out this year, most media buyers believe it will tilt in favor of advertisers, since the belief is that there will be significantly more inventory available to a relatively fixed number of advertisers. Numerous fourth-quarter relief requests and a soft scatter market should also serve to dampen any upward pressure on ad rates.

Conversely, vendors, or at least the ones who have come off good ratings performances in 1997, are predicting overall revenue growth of anywhere from five to 10 percent, due in no small measure to increased ad spending by existing advertisers and the arrival in the market of such non-traditional advertising categories as personal care products and kids fashion retail.

As an interesting sideshow in the prelude to this year’s kids upfront ad market, some industry players appeared less focused on network and cable ratings performances and possible CPM fluctuations, and more concerned about whether the market would be thrust into action even earlier than it has in recent years.

Much of the anxiety stemmed from reports that Fox Kids Worldwide would be presenting a 12-hour daily schedule of kids programming for its recently purchased and newly named Fox Family Channel to potential advertisers as early as mid-December, in the process precipitating the earliest kids upfront market yet.

Several media buyers expressed exasperation with the idea that the upfront might be set in motion before most of the networks had even announced their fall kids lineups or before most advertisers had had an opportunity to evaluate their Christmas sales to determine which of their products should receive advertising support later in the year.

One buyer said an early upfront market would amount to a major waste of time because advertisers would be making advertising commitments simply to ensure that they had spots locked up for the fall and this would result in many orders being cancelled later on.

However, some observers familiar with the situation at Fox insist that the programmer was simply attempting to give advertisers and buyers a preview of some of the kids programming it plans to begin airing on the Fox Family Channel in August 1998.

Jon Mandel of Grey Advertising, for instance, doesn’t believe Fox was trying to panic the market into action. ‘They’re not trying to move the market,’ says Mandel. ‘It’s more a question of softening up the beaches before they land.’

Fox Kids representatives refused to comment, stating that they wanted to wait until they had made their official schedule presentation to the industry on January 13, the date some media specialists expect the upfront to start.

Meanwhile, the vendors expected to do well in this year’s upfront are those that performed at or above expectations over the past year, including Viacom-owned Nickelodeon, which continues to attract the largest number of kid viewers, with a 56 percent share of available kids rating points, though, at 11 percent, its rate of growth is beginning to slow.

Sam Moser, Nickelodeon’s senior vice president of advertising sales, says he’s not concerned about Nick’s decelerating pace of ratings expansion. ‘It’s only natural to expect some slowing of the growth,’ he says. ‘But, even if our ratings went down 10 or 20 percent, we’d still have the lion’s share of the GRPs.’

Moser says he thinks advertising buyers are probably delighted about the news that Fox plans to carry a heavy load of children’s programming on its Fox Family Channel, that Cartoon Network’s popularity continues to grow steadily, and that Disney is going to basic cable in April. ‘Frankly, though, I think all those guys have a lot of proving to do,’ he says. ‘It takes a long time to build a track record with kids.’

Nickelodeon, says Moser, has long been expecting its competition to get more aggressive, and so has resolved to ‘shore up’ its resources to prepare for the onslaught. He points to the company’s commitment to invest US$350 million in developing new products and its building of a new animation studio as being testament to Nick’s determination to stay ahead of its competition.

‘The real determining factor,’ he says, ‘is you’ve got to have ratings and you’ve got to have distribution. Now that we’re close to 75 percent penetration and, now that we’re delivering four of the five top day parts, we’re outdelivering all of our competitors on a head-to-head national ratings comparison.’

Far from being out of the picture, however, is Time Warner/Turner’s Cartoon Network, which boasts of stellar increases in its viewership. Karl Kuechenmeister, senior vice president at Turner Broadcasting Sales, says ratings growth at Cartoon Network has been ‘phenomenal’ over the past year and that its subscriber base expanded by 52 percent, moving its distribution from 30 million to 45 million homes in just 12 months.

‘We’re outpacing our kid two to 11 delivery this season over last year at a clip of 93 percent, and in some day parts, we’ve more than doubled our delivery,’ he says, largely crediting the popularity of the channel’s original animated characters and the extent of its cartoon library, which contains more than 8,500 titles.

Rob Sorcher, Cartoon Network’s executive vice president, credits the network’s newfound popularity mainly to the strength of the channel’s original programming.

‘Original programming is on a serious fast track at Cartoon Network,’ says the recently appointed Sorcher, who points to the success of Dexter’s Laboratory (the highest-rated original series on the channel) and Cow and Chicken and the fact that they are both going to strip in 1998, as proof positive that the five-year-old cable channel is on the right track.

In addition to bringing back such popular programs as Space Ghost Coast to Coast and Johnny Bravo, Cartoon Network has announced the acquisition of Batman: The Animated Series, Beetlejuice and Alvin and the Chipmunks. The channel also plans to roll out two new original animated series in 1998: The Powerpuff Girls, which centers on three preschool girls with super powers who frequently rush into action to save the world, and Ed, Edd `N’ Eddy, about three friends who not only share the same name, but who are also going through puberty at the same time.

‘I couldn’t be more confident going into upfront,’ says Sorcher, ‘because I just feel that we have an incredible package to present, top to bottom.’

Professing not to be concerned about the impending arrival of either the Fox Family Channel or Disney, Kuechenmeister says, ‘I’m not too worried about Cartoon Network’s growth rate. We’re going to continue to grow hugely, while I think the others that have been losing are in for still more. Our CPMs will grow as our viewership grows, as our distribution grows, as our programming gets better, and as our relative value in the marketplace increases.’

ABC, which is quickly gaining on Fox with its block of Saturday morning Disney shows, and Kids’ WB!, which also picked up a head of steam with its Saturday morning lineup, are also expected to attract some additional ad dollars this year.

Marv Goldsmith, president of sales and marketing for ABC Television Network, attributes the network’s improved performance exclusively to the introduction of its Disney One block on Saturday mornings. ‘Face it,’ he says, ‘nobody understands children’s programming better than Disney.’

Goldsmith says ABC’s ratings increase of 45 percent among kids has come largely at the expense of the Fox Kids Network and syndicated children’s television shows. He points out, too, that ABC, the last of the original networks to still be considered a player in kids TV, has much greater market penetration than any of its cable competitors.

‘Right now, it looks like it’s going to be a very healthy [upfront] marketplace,’ says Goldsmith. ‘We’re in a wonderful position at ABC because our numbers are up and the reaction to our programming has been terrific.’

Although he predicts the network’s CPMs may rise as much as five percent this year, Goldsmith says there will be few, if any, changes to ABC’s kids lineup. ‘When you’re up 45 percent from the previous year, I don’t think there’s any reason to make wholesale changes. Kids like what they see, and they come back and they watch us.’

The general consensus among buyers is that Fox Kids Network, while showing some modest signs of improvement in the November sweeps, will continue to lose ground in the kids TV ratings race, particularly to Nickelodeon and Cartoon Network.

Perhaps the biggest news leading into the upfront was the announcement that Fox Kids Network and The Family Channel would be combining their efforts in basic cable, thus significantly boosting the amount of kid-targeted inventory available to the market. The big question surrounding Fox Family Channel, however, is whether it will attract new GRPs for the kids market or whether it will simply cannibalize existing audiences and force up CPMs across the board.

Gary Carr, senior vice president and group director of national broadcast and programming at Ammirati & Puris/Lintas, says he isn’t convinced that Fox is capable of turning the reprogrammed Family Channel into a highly successful venture. ‘Fox is not even number one on Saturday mornings anymore. Now, they have the weight of the Family Channel on their shoulders and they have 12 hours a day of kid time to sell. That’s a lot of kid time.’

Carr adds that he has seen ‘snippets’ of the kids shows slated to air on the Fox Family Channel and they ‘didn’t knock my socks off.’

Expected to be positioned further down the ladder are CBS, which is not giving up on its kid viewers, even though it has experienced a 40 percent ratings drop for that demo in the past couple of years, and UPN, which, despite a popular one-hour kids block featuring Jumanji and The Incredible Hulk, is still considered a relatively minor player in the kids upfront market.

According to Carr, Nickelodeon should attract between 45 and 50 percent of the upfront dollars spent this year. Last year, he says, Nick wrote US$280 million in business, or about 37 percent of the available spending, out of a US$750-million marketplace.

Carr notes the fact that Nickelodeon already has most of its advertisers committed from last year on two-year contracts, meaning, he says, that it will automatically be earning 15 to 20 percent more revenue this year. ‘The result is that there’s going to be fewer dollars to spread out among the remaining guys,’ he says. ‘So, CPMs should work out pretty well for advertisers this year.’

The prognostications regarding Nickelodeon are not unanimously positive, however. For instance, Mandel, of Grey Advertising, says he has some ‘serious concerns’ that the number one cable channel may be losing some of the ‘cool kids’ in its audience who are seeking out new television shows to discover and persuade their friends to watch.

‘We think it’s possible that, at times when other kids programming is on, Nickelodeon has peaked,’ says Mandel.

He adds, ‘I think advertisers are more and more coming to realize that while Nickelodeon and Cartoon Network may have the GRPs, they’re missing out on a lot of big markets by not spreading their money around.’

Shelly Hirsch, CEO of Summit Media, says the 1998 kids upfront market will be marked by deflation in CPMs, thanks to the increased inventory put out by Fox Family Channel, an extra half-hour of prime-time programming on Nickelodeon and possibly even the new Toon Disney channel, and judging from the fact that there was a significant amount of unsold inventory throughout 1997.

‘I don’t see the demand for kid inventory being that much greater in `98,’ he says, adding that he doesn’t believe there will be any new advertising categories joining the upfront fray this year. Other buyers have speculated that there may indeed be some new categories shopping around this year, such as personal care products and kids fashion.

‘There’s always some new money, but then there’s also always a pullback,’ says Hirsch, pointing to last year’s merger of Tyco and Mattel as being a prime example of a business move that could lead to a lightening of overall spending in the kids TV market this year. ‘The effects of that merger were already being felt (in 1997) when Tyco spent no money in spot,’ says Hirsch.

Matt Maginley, vice president, assistant media director, national TV with Towne Silverstein & Rotter in New York, thinks this year’s upfront market is going to be soft because there were a significant number of relief requests put in by advertisers in the recent fourth quarter.

‘The trick,’ he says, ‘is not to panic and let the sellers push the market. The market won’t start until the networks set their pricing, and that doesn’t happen until they have a good idea of what the budgets are in the marketplace.’

Debbie Solomon, a senior media analyst with J. Walter Thompson in Chicago, says that while more and more advertisers are coming to recognize and appreciate the substantial influence children can have in persuading their parents to buy certain goods, she isn’t expecting to see a flood of new advertisers in this year’s kids upfront.

‘I constantly expect to see new advertisers who have never advertised to kids before, but I don’t think many of them will be part of the upfront,’ says Solomon, explaining that most new advertisers buy their ad time in the scatter market so as not to take on too much risk in the early going.

Solomon, who has prepared several reports on the state of children’s television, says that even though children’s ratings have been declining steadily over the past 10 years, the market is still big enough to attract the attention of a lot of potential new advertisers.

‘There’s more creativity needed to buy TV today, because you’re buying more shows in more places to get your ratings points, but the kids are there,’ she says, stressing that no other medium, including the Internet, can come close to delivering such large audiences of youngsters.

One of the surprising aspects of there being a greater number of children’s television venues available to the viewing public is that it doesn’t necessarily create more demand for programming from independent content producers. Sander Schwartz, Columbia TriStar Television’s executive vice president and general manager of children’s programming and animation, says that despite the apparent growth in kids TV choices, ‘there’s a dearth of spots available for independent programs.’

Schwartz says the lack of widespread support for independent children’s television programs underscores the need to produce strong properties that employ top-class talent, writers, producers and artists, in order that they can ‘find a home’ in a crowded marketplace.

And although he admits it hasn’t been a primary focus of two-year-old children’s division of Columbia TriStar Television thus far, Schwartz says the company will begin to develop some direct ties with advertisers and sponsors for some of the approximately 25 new programs it has in development, perhaps including such highly anticipated shows as Godzilla and a new I Dream of Jeannie.

‘I think you’ll see in the next year or two,’ says Schwartz, ‘that we’ll be spending more time with advertisers who would like to support our shows by bringing forward sponsor and media dollars, and helping to promote the shows in the marketplace.

‘I think that with the diverse choices that are out there for programming, that rather than buying into a full network schedule, it can be more attractive for an advertiser to get involved with a show that they believe in creatively and are willing to support.’

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