Cable Upfront '12

$10 billion. That is the milestone number the cable television industry very well may reach by the time the upfront sales season concludes in a few months. As networks began presenting their 2012–13 season plans to advertisers and media agencies in mid-March, conventional wisdom said $10 billion in upfront sales would be a stretch. It seemed impossible for cable's upfront to grow that much on the heels of two huge years.

Last year's upfront negotiations led to $9.3 billion in deals, up 16 percent from the previous year—after a 19 percent increase in 2010, according to the Cabletelevision Advertising Bureau. Cable CPMs were up about 10 percent overall as well. Last year's numbers represent "a 1-in-10 kind of upfront," says Mel Berning, exec VP-ad sales for A&E Television Networks. In addition, the past two years were regarded partly as corrections after the 2009 upfront, when sales actually declined.

But now, after a host of cable network presentations to advertisers and agencies, more prognosticators are becoming convinced that the $10 billion mark is in sight. "We feel very strong," CAB President-CEO Sean Cunningham says. "All of our health indicators are terrific, and demand continues to be strong. So we are looking at eclipsing $10 billion in the upfront."

Steve Gigliotti, president, ad sales & marketing, Scripps Networks Interactive, says the overall cable upfront should be up, percentagewise, in the mid-to-high-single digits—again, placing it in the $10 billion range. "Cable has never been stronger," he says. "We will continue to enjoy the benefits of shifting mixes, where ad dollars move from broadcast to cable."

Ed Carroll, chief operating officer for AMC Networks, says the macroeconomic indicators he consults "look just as solid or more solid than last year, and it's a presidential election year, when the economy tends to stabilize."

Executives tick off the positives: Corporate profits are high. Interest rates remain low. The U.S. auto industry rebound has benefited media sellers. Consumers are cautiously optimistic. And companies are hiring again, even if not at a robust rate.

David Levy, president of sales, distribution and sports for Turner Broadcasting System, says one of his marketplace indicators is cancellation options. "Despite a robust upfront market last year, options were very limited; very few were taken," he says. "That is an omen for the coming upfront."

If the cable upfront hits that magic $10 billion mark, it will have doubled in the past decade. Although the actual negotiations seem to begin later and later—"the money doesn't start flowing until June," Mr. Berning says—upfront deals continue to sew up roughly 60 percent of cable's national ad time.

"The upfront is still a critical choice for advertisers to get discounted pricing, to lay in their [gross rating points] for the weeks they will really need them—for new product or campaign launches—and for programming they really want to be attached to," Mr. Levy says.

At AMC's portfolio of networks, led by AMC, WE tv and IFC, "we are looking to an upfront similar to last year, which was great," Mr. Carroll says. "We are in the unique position where we are turning away advertisers on some of our most sought-after programming, like 'The Walking Dead' and 'Mad Men,' because we are sold out."

Similarly, at A&E, Mr. Berning says simply, "Don't wake us up." His company continues to ride the ascent of A&E and History as Top 5 cable networks and is seeing growth at Lifetime as well.

Mr. Cunningham says one of the ways he gauges the strength of the market is in the types of data requests he receives. Agencies are asking for a lot of data about the amount of original programming on cable, he says. What he tells them is that 74 percent of the programming on ad-supported cable networks today is original.

"Advertisers are looking to see investment in shows," Mr. Carroll says. "Today, placing your brand in a quality environment matters more than ever, and advertisers are looking for investment originals." That is why, he says, a portfolio of original scripted series such as AMC's "Mad Men," "Breaking Bad," "The Killing" and "The Walking Dead" is so important.

Cable networks are producing more original content than ever, and more networks have jumped into the programming game. The big entertainment networks these days are expected to be anchored by original programming. But virtually every other network is focusing on original programming as well.

Scripps' Cooking Channel, which launched less than two years ago, will premiere seven new series between now and October. The Weather Channel's big push is to make prime time a showcase for original series rather than weather news. E! hired its first head of scripted programming last fall. After running programming imported from the U.K., BBC America this year is introducing a number of series produced specifically for U.S. audiences.

"More people watch cable TV than any other source of programming," Mr. Berning says. "The big cable brands are very distinctive and serve consumers' viewing preferences very well. They fill viewers' needs in a way that broadcast hasn't. But while there is a lot of growth among the Top 20 cable networks—like History, Lifetime, Food Network, HGTV—there is a surprising lot of growth among smaller networks as well." He says there are opportunities even in the mature cable business for a smaller network to succeed by creating a really defined target audience.

Original programming can put a network on the map with those target groups. IFC, which moved to an ad-supported model last year and just hosted its first upfront presentation, has attracted critical and viewer attention with its Friday night original programming block. The anchor series is "Portlandia," a quirky comedy that appeals to the IFC target: younger men.

"We had identified a very specific audience, and it wasn't abundantly well-served," Mr. Carroll says. "They were men 18-to-34-years old, early adopters and very 'trend aware,' psychographically. We saw an opportunity to provide original programming to superserve that audience. We called it 'Alt Comedy.' " The tagline: "Always on. Slightly off."

In addition to the third season of "Portlandia," the network's most-watched series ever, IFC this year will debut two new scripted shows plus a hybrid talk show/comedy sketch show called "Comedy Bang! Bang!" and a comedy game show called "Bunk."

Similarly, NBCUniversal's Syfy has seen great success in targeting programming toward what it has defined as the "igniters": highly imaginative, creative, tech-savvy innovators and leaders. "These consumers are the go-to people in terms of finding the next hot thing," says Syfy President Dave Howe. "We have always set out to superserve this segment of the population—those viewers who think beyond the here and now."

Syfy announced at its April upfront event that it has 28 scripted and reality projects in development, the network's biggest commitment to original programming ever. "We think we have defined a valuable slice of the audience," Mr. Howe says. "2011 was Syfy's most watched year ever, and the first quarter of 2012 was our most watched quarter ever. So we are going into upfront with a lot of momentum."

Despite the concern that video content available on the Internet and mobile devices would pull viewers away from their television sets, Mr. Cunningham says, "If there has been one overarching change in U.S. consumer behavior over the past five years, it's that they are watching more video content. But all the research shows that they are still watching more TV as part of that equation."

Even for the tech-savvy, multiscreen generation, TV remains the overwhelmingly dominant platform to view video content. Adults ages 18 to 24 said they spent more than 120 hours watching TV in their homes monthly—113 hours of that live, seven hours time-shifted. By comparison, that same group said they watched 7.5 hours of video content on the Internet and 5.5 hours on a mobile device, according to the 2011 Nielsen Cross-Platform Report. That's 90 percent of video viewing done on TV sets—and the percentage is even higher for older consumers.

Mr. Cunningham points out that in addition, many of the top Internet sites are run by and fed with cable network programming. He says one or two of the Top 5 websites in every genre—news, sports, weather, kids, comedy, etc.—are cable network brands. "We are gratified that the same brands they watch on TV are driving the viewer behavior on every screen," he says.

Mr. Levy of Turner says that consumers seek out cable brands online because "quality video content is scarce today, and advertisers and consumers will seek out who has the best video content."

Some of that time spent consuming video is simultaneous screen usage: consumers watching TV with a laptop open, an iPad on or a smartphone at hand. Second-screen experiences help a network persuade fans to watch their favorite shows live, rather than on DVR. "Social TV" facilitators GetGlue and Miso SideShows allow viewers to comment, chat and unlock stickers and prizes using websites or Facebook accounts—while also keeping them engaged in the show's content.

The cable networks are working to provide content for alternate screens—so that a Food Network fan can watch programming live on the television set while checking out the recipes online. A "Burn Notice" fan can both watch the show and participate in USA Network's online Character Chatter. Viewers can watch the new series "Brooklyn 11223" on Oxygen, but pull out a phone to participate in an Oxygen Live chat event. Someone watching "Coast Guard Alaska" on the Weather Channel might be checking on the actual weather forecast using the Weather Channel app on his iPad.

Syfy has allowed viewers to direct its programming in real time. The network has used a live online "Panic Button" for its "Ghost Hunters" series. As the hunters explore a building, views from four cameras are featured live on the Syfy website. If viewers spot anything on the camera feeds, they are invited to hit the panic button and post that information—and the show's TV host then points the ghost hunters to that part of the building.

Syfy will take the concept of multiscreen programming to a new level next year. The network has begun production on what it calls a "transmedia experience": "Defiance," a weekly scripted show set to premiere in spring 2013. "Defiance" is a joint venture with gaming leader Trion Worlds, which will simultaneously launch its game version of "Defiance." The story lines of the TV show and the multiplayer online game will interact on a weekly basis. Characters may leave the TV show and then appear in the game or vice versa.

"This is our No. 1 priority for 2013," Mr. Howe says. "We want to bring our advertisers along as partners in 'Defiance'—not just as adjuncts."

Mr. Levy expects digital to be an "increasingly big part of the upfront," he says, as networks continue to expand second-screen offerings and advertisers seek opportunities to get involved. He believes sports programming has seen increased ratings because of second-screen chatting and social networking. "Second-screen opportunities are enhancing TV viewership," he says, pointing to TBS' synced app with its "Conan" late-night show as an example of how the second screen can keep viewers engaged with simultaneously provided content.

"Think about watching 'Dallas' 20 years ago. You would have to wait until you went into work the next day to stand around the watercooler and talk about what happened on the show," he says. This year, when TNT debuts its new version of "Dallas," viewers will be able to immediately participate in an online "postgame show," chatting with the talent and other fans about each episode.

"Networks are trying to build that simultaneous screen usage," Mr. Cunningham says. "You get an ever-more- engaged customer that way."