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NEW YORK (CNN/Money) -
One year ago, Stephen McPherson was barely into his new job as the head of ABC's nightly entertainment when he announced a series of new television shows that described nicely the network's condition: desperate and lost.
On Tuesday McPherson will once again unveil ABC's coming shows and, once again, the lineup could include an apt description of the network and its overall appeal: hot properties.
This week marks the beginning of the annual advertising sales season for the broadcast television industry. The six main networks, including ABC, Fox, NBC, and CBS, will roll out their coming lineups and then sell the bulk of their commercial time -- estimated, collectively, at around $9 billion or more -- in the coming weeks.
Because so many factors come into play in the "upfront," as the annual ad sales season is known, estimates on the size of this year's market vary widely. Some industry experts are predicting the dollars sold will be less than a year ago, while others predict a slight increase from 2004.
About the only thing the experts agree on: Next to ratings leader CBS, ABC stands to benefit the most from this year's upfront.
Goldman Sachs predicted last week that ABC will see its upfront take increase 10 percent, to $1.76 billion, even as total upfront sales at the four major broadcast networks decline an estimated 5 percent, to $8.1 billion.
CIBC World Markets is forecasting an even more robust upfront for ABC, with ad sales growing 18 percent to $1.9 billion, not counting the expected ad bonanza from ABC's scheduled broadcast of the Super Bowl next year. CIBC, meanwhile, estimates that total upfront sales will increase 2 percent, to $8.6 billion, from a year ago.
A big score for ABC during this year's upfront will likely give Walt Disney Co., the world's No. 2 media company and the parent of ABC, a big boost. Incoming CEO Robert Iger, a veteran ABC executive who will take over from outgoing CEO Michael Eisner in September, has predicted for months that the money-losing network is on track to turn a profit.
"We believe that, barring the unforeseen -- a significant downturn in the market -- the ABC network will likely be profitable in '05," Iger told analysts last week during a conference call held after Disney (down $0.11 to $26.96, Research) posted a 30 percent jump in quarterly income.
What a difference a year makes
A year ago, ABC was the undisputed laggard, struggling to overcome a steep ratings decline that cost the network hundreds of millions of dollars a year in advertising revenues. The network's woes led to a massive management shakeup at ABC Entertainment in April 2004 (See correction).
Now, eight months after the official television season began, ABC is the midst of a major comeback. Overall ratings are up about 10 percent from last year, while ratings among the young adults prized most by advertisers have shot up 14 percent.
While ABC still ranks No. 3 among total viewers and 18-49 year-olds, it's the only network to post big gains so far this season. CBS, owned by Viacom (down $0.20 to $34.02, Research), is essentially flat year-over-year, while NBC and Fox are both down. NBC is a General Electric (Research) unit, while News Corp. (Research) controls Fox.
The credit for that optimism goes to a handful of ratings scores this season, most notably the campy Sunday night soap "Desperate Housewives," the dramas "Lost" and "Grey's Anatomy," and reality TV hit "Extreme Makeover."
ABC has "righted the ship," said Brad Adgate, the senior vice-president of corporate research at New York's Horizon Media. "This is the first year since the [late 1990s] heyday of 'Who Wants To Be A Millionaire' that you're not really concerned about ABC."
Shari Anne Brill, the programming director at ad-buying firm Carat USA, said there's not much that can go wrong for ABC at this point.
"All they need to do is keep the momentum by keeping the development slate strong and use their hit shows to launch the next generation," said Brill.
Don't expect any big scheduling surprises from ABC. According to Cynopsis, a daily industry newsletter, rumors suggest that ABC will announce five new comedies, including one about female real estate executives called "Hot Properties," and six new dramas, among them "Commander in Chief," a political drama about the first female U.S. president, starring Geena Davis.
Of course, "Desperate Housewives," "Grey's Anatomy" and "Lost" will be back.
Winning is relative
Still, for all its success, ABC isn't immune to the television industry's general woes.
Network ratings have steadily declined in recent years as consumers migrate to other forms of entertainment, including cable television, the Internet and video games.
Other threats to network television: the growing popularity of ad-skipping technologies like digital video recorders and problems facing key sources of advertising dollars, among them the automotive, airline and pharmaceutical industries.
Goldman Sachs, in its upfront analysis, said that signs of a weakening economy could hurt networks too. Networks try to sell 80 percent of their commercial time in the upfront, and save the remainder for sale closer to airtime in what is known as the "scatter" market. Scatter market prices tend to fluctuate based on various factors, including a show's ratings and the overall state of the economy.
Signs that a weakening U.S. economy could hold inflation in check as well as soft scatter prices in the current TV season could mean some advertisers will resist buying spots during the upfront.
Given all of the unknown factors, analysts have long predicted that upfront sales, which have risen roughly 30 percent in the last five years, will fall precipitously at some point.
Adgate, for one, doesn't see it happening anytime soon. Broadcast television, he notes, still delivers the biggest audiences of any form of entertainment.
"There are a lot of options out there that advertisers now have besides the 30-second commercial on network television," said Adgate. "I don't think it's going to reach the tipping point" for broadcasters.
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Correction: An earlier version gave an incorrect title for Stephen McPherson. He is president of ABC Primetime Entertainment. Anne Sweeney is head of ABC. CNN/Money regrets the error.
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