Cable ad spending heats up

NEW YORK (CNNMoney.com) -- Cable television shows, unless they are the series finale of "The Sopranos," often don't generate the types of ratings that come anything close to what even the least-watched programs on the free broadcast networks get. But cable TV is actually among the hotter segments of the media business these days.

Even as reports come in about healthy gains in upfront ad sales - that is, advertising commitments for the 2007-2008 TV season - from networks like News Corp.'s (Charts, Fortune 500) Fox, GE (Charts, Fortune 500)-owned NBC and Walt Disney's (Charts, Fortune 500) ABC despite well-publicized prime-time ratings declines, ad spending growth on cable has outperformed network TV so far this year, according to two recent reports.

Connecting with cable Cable TV ad spending growth is expected to outpace all other areas of the media except for the Internet this year. Category Est. change from 2006 Internet 16% Cable Network TV 5.9% Outdoor 4.6% Consumer & Sunday Mags 4.5% Spanish Language 3.7% Network TV 1.3% Syndication TV 1.2% Radio -0.3% Business-To-Business Mags -1.5% Newspapers -2.9% Spot TV -5.5% Source:TNS Media Intelligence

Last week, Nielsen Monitor-Plus, a service of the Nielsen Company, which compiles television ratings, reported that national cable TV spending increased by 2.5 percent in the first quarter of this year, compared to an 8.5 percent decline in network TV ad spending. Overall ad spending declined 0.6 percent.

Another report from research firm TNS Media Intelligence earlier this month showed that cable TV spending increased 6.3 percent while network TV ad spending fell 7.2 percent. Overall ad spending was down 0.3 percent in the first quarter, according to TNS.

And, according to a separate TNS report from last week, cable TV ad spending is expected to increase 5.9 percent this year, compared to expected growth of just 1.3 percent for national network television.

In fact, the projected growth rate in cable TV ad spending is second only to the forecast growth rate of 16 percent for Internet display (i.e. banners, videos and other graphics but not search) advertising.

This should be good news for major media firms such as News Corp., GE, Disney, Viacom (Charts, Fortune 500) and Time Warner (Charts, Fortune 500), which is the parent company of CNNMoney.com, since they all own popular cable networks.

But the cable ad spending boom should also benefit smaller companies such as Discovery Holding (Charts), the controlling shareholder of the company behind the Discovery Channel, Travel Channel and Animal Planet, as well as E.W. Scripps (Charts), the newspaper publisher that also owns the Food Network and DIY.

"Increasingly, ad-supported cable networks are getting a bigger share of prime-time ratings. And the ad dollars do follow the eyeballs," said Brad Adgate, senior vice president of corporate research for Horizon Media, a marketing and media buying firm. "Cable is going to probably continue to be among the fastest growing media businesses."

One factor that benefits cable, particularly in the summer time, is that popular cable networks such as GE's USA, Time Warner's TNT and TBS, and News Corp's FX save their top programs for the summer doldrums, a time when most broadcast networks are either airing reruns or original reality shows that don't have the same ratings power as their regular season shows.

To that end, TNT's "The Closer," its most popular show, had its third season premiere June 18 while the fourth season of FX's "Rescue Me" kicked off June 13.

And TBS launched a new comedy, "House of Payne," earlier this month. The first episode of the show, created by Tyler Perry, the writer and actor who is a huge draw with black audiences, was the most-watched sitcom on ad-supported cable in history.

"Cable networks continue expanding, and their ratings and popularity of many of the programs are growing," said Gary Carr, senior vice president and director of national broadcast with TargetCast tcm, another media buying firm in New York. "Cable television is television. A lot of stuff on network TV in the summer is low rated, so if you are an advertiser, you might as well buy cable."

Adgate said, however, that networks still enjoy a big advantage over cable networks, namely that the top five broadcast networks (the fifth is the CW, which is co-owned by CBS (Charts, Fortune 500) and Time Warner) tend to offer advertisers much bigger audiences day in and day out.

Cable, as a whole, is doing well but the industry is so fragmented, with hundreds of channels battling for viewers. Still, Adgate said a trend worth watching will be whether the media companies that own both broadcast and cable networks will seek to sell ad packages that factor in spending on both

NBC Universal, for example, announced last week that GroupM, the media buying agencies owned by advertising firm WPP Group, agreed to buy nearly $1 billion in ad spending across all NBC Universal platforms, including broadcast, cable and digital networks.

Adgate said this could bode well for companies such as News Corp., since it owns Fox News Channel and FX in addition to Fox, as well as Disney, which owns the ABC broadcast network and popular cable networks ESPN and the Disney Channel.

"You will probably see a lot more cross-platform deals like NBC Universal's in the future," Adgate said.

The reporter of this story owns shares of Time Warner through his company's 401(k) plan.