BY JON LAFAYETTE This could be the year that simple-minded SpongeBob Squarepants gets a lesson in supply and demand. Fewer kids are watching commercial TV. Except for Kids WB, with its Japanese animation hits Yu-Gi-Oh! and Pokemon, and Toon Disney, which is adding distribution on cable, ratings are down this season. If this continues, it will mean the networks have about 8% fewer sets of kids eyeballs to sell to advertisers looking to peddle toys, snacks, clothing and movie tickets. But this could be good news for cable’s Nickelodeon and Cartoon Network. Because in the Alice-in-Wonderland world of ad buying, prices could go up like a Powerpuff Girl. And the leading ad buyers aren’t happy about this. “If there’s less ratings in the market, then unfortunately it does affect pricing where you’ll have to pay more for less,” says Donna Speciale, Mediacom’s director of national broadcast. Mediacom clients, including Hasbro, Dannon, Warner Bros. and Conagra, account for about $120 million of the $650 million that is expected to be spent in the kids upfront. (With scatter added in, ad spending on kids reaches nearly $1 billion per year.) “I don’t know why that always happens.” Thanks to Cartoon Network’s growth into a full-fledged competitor to Nickelodeon, ad buyers have gotten used to having a growing pool of gross ratings points to buy for their clients. But so far this season, the trend has reversed. Gross ratings points are computed by taking the ratings in a particular demographic and multiplying those by the number of spots for sale. Adding those up gives you the GRP inventory, according to noted media consultant Erwin Ephron. An analysis of Nielsen season-to-date ratings data by the crackerjack Turner Broadcasting research staff shows that the number of GRPs available per week among kids 2 to 11 is down 8% from last year. Among the broadcasters — mostly on Saturday morning — GRPs are down 14%. On cable they’re down 7%. Similarly, among kids 6 to 11, there are 10% fewer GRPs available weekly for advertisers. GRPs are down 4% for the broadcasters and 14% on cable. Some of those viewers may be moving to the Disney Channel, which does not accept traditional advertising. On broadcast, delivery is off sharply for Fox, which sold its kids block to 4Kids Entertainment before last season, while the Nick block on CBS is struggling. On top of that, UPN, which had been airing programming from Disney, last week said it was getting out of the kids business, further tightening broadcast inventory. On cable, Cartoon Network’s delivery is off nearly 20%, although the network has been running shows from the WB to close the gap. Cartoon also has several new series in the works and has begun ordering new episodes of its current programs earlier than before. ABC Family is also generating fewer ratings points with kids. Speciale hopes changes being made by Nick and Cartoon will help before upfront deals are made. “You could have a good month of some ratings surges, and then the whole marketplace will change on you,” she says. “To make a determination now for what the fourth-quarter ratings are going to be, it’s too early. Kids are so fickle. Today they’re watching one thing, and tomorrow it’s not hot anymore.” Even though kids mostly watch cable, advertisers pay nearly twice as much per kid to reach them on broadcast channels. While more than 80% of kids viewing is done on cable channels, only about 66% of ad dollars goes there. But if broadcast prices rise, serious dollars could start flowing into Fairly OddParents and Dexter’s Laboratory. “It’s our take that the market probably over-allocates to broadcast,” says John Wagner, media director and lead kids negotiator at Starcom Worldwide, which spends more than $100 million for clients such as McDonald’s, Nintendo, Kellogg’s and Disney. “The price value just doesn’t seem to make a lot of sense.” Going into the upfront, “the most important thing is whether or not advertisers will continue to respond to an increasing share of the kids market that lies in cable,” Wagner says. “We saw a little bit of a shift in the market last year where people were starting to catch on.” Starcom’s clients already buy a lot of cable. “There are advertisers and planners who still think that if they see a mix that’s 70% or 80% cable on kids, then something’s wrong. And the reality is that when you do the analysis, that’s where the viewership is and that’s where the best return on your investment is,” Wagner says. “I think our clients are already there.” And those clients certainly aren’t suffering. “If cable can’t create a brand, how could SpongeBob be what it is? And if it’s good for SpongeBob, why isn’t it good for your brands? But our clients believe that already. It just looks like there’s a big chunk of the marketplace that just seems to be trailing that insight,” he says. “Kids are kids, and wherever they are, that’s where you want to be,” says Speciale. “I would say, yes, broadcast is too high. Cable would say they’re too low.” The kids upfront used to launch with Toy Fair, which starts this week in New York, and move with a rush in April. But for the past five years, buyers and sellers say, the market starts later and deals continue to be made until summertime. “Without the pressure, I think it helps both sides,” says Julie Friedlander, SVP and account manager at Zenith Media. “Buyers don’t get stampeded into higher prices, and sellers have time to look at what they’re doing and develop strategy.” Deals are also more complex than in the past. “When you look at the added-value elements — the online, the print — I think everybody is pretty much multichannel, on-channel, off-channel in terms of their properties and how they sell things,” says Starcom’s Wagner. “And those details take time to work out, too. To get a really good promotional platform that includes a vendor’s assets across all things beyond just television, you can’t hash those things out in three days.” The more leisurely pace reflects the inventory cable has poured into the market over the years and the fact that advertisers scramble only to get spots in during the pre-Christmas season — known as the “hard eight,” or hard eight weeks — and just before Easter. These days, ad buyers talk about an even more compressed peak season — a “hard six” just before Christmas. “There are high-demand periods and then there are other times of the year when they have trouble selling out,” says Zenith’s Friedlander. “In January, February, where their ratings are very high, there just aren’t enough advertisers to ever fill up all the pods in cable.” The timing also reflects the declining importance of the toy category. Nickelodeon used to hold its upfront presentation during Toy Fair. This year, its presentation won’t be till mid-March. Toymakers were once the dominant spenders in the kids market, accounting for more than 50% of the ad dollars. Now, according to Wagner, toys and packaged goods are pretty much on par. Growing factors in the market are food companies, movies and home video, which will also determine how big the kids market will be this year. “I think it’s going to be flat at best, and that would be a good thing given the last couple of years it’s probably been down,” Wagner says. “The real question is how much toys continue to shrink. Is this the year toys really bottom out or is it going to contract again?” But some see the toy business heating up. Network ad sales executives say Mattel is now buying scatter time for the second quarter to support its Barbie and Hot Wheels brands. Barbie is under assault from the Bratz doll line from MGA, which was a hot toy last Christmas. Mattel has a Hot Wheels movie coming out, which should generate incremental spending. “Right now the way people are spending in the scatter market, it looks healthy, but the next couple of months will tell,” says Speciale. “The fourth-quarter retail wasn’t great, so I think it’s just a matter of what the rebound is in the next couple of months.” The networks, naturally, are more upbeat. “I feel very confident in saying the market will be up,” says Jim Perry, Nick’s SVP of ad sales. “I can’t tell you how much, because toys and games are a bit of a wild card still.” But he’s optimistic because, in addition to Mattel’s spending, “a lot of midsize toy companies are coming up and spending a lot more money, and that’s helped generate momentum in the toy category.” While Nick’s ratings are off slightly this season, they’re not off nearly as much as the category as a whole, which means Nick’s share of kids viewing is up to 51% from 48%. And that should help the network drive prices higher in the upfront. “Anytime there’s less GRPs out there and our share goes up, it’s a good place to be,” Perry says. Kim McQuilken, EVP of ad sales and marketing at Cartoon Network, is also happy to see inventory tighten, even though much of the reduction is the result of lower ratings on his channel. Cartoon also has taken some kids inventory out of the market by expanding its Adult Swim block, which now runs 11 p.m. until 2 a.m. five nights a week. “We’ve seen a lot of activity in the fourth quarter, we’re seeing a lot of activity in the first quarter, so I’m optimistic there will be some very good money in the market this year,” McQuilken says. “I would be looking for mid-single-digit growth.” “If things continue the way they are, it’s going to be an up market, no doubt about it,” adds Ken Ripley, VP of ad sales at Discovery Kids. But what buyers want to see is a lot more inventory. Specifically, they’d like Disney Channel to go commercial. “That would be interesting, if they opened it up and commercialized it. Then you might see a different story,” says Speciale. “The irony is Disney Channel is doing OK.” A Disney spokesman says the company has no plans to accept paid advertising. Disney is in the midst of restructuring how it sells kids ads across its media platforms, and declined to make an executive available. Buyers note that as market leader, Nickelodeon is having a pretty good year, so few radical moves are expected. “The only thing I think Nickelodeon is thinking about is their Slam Block,” says Speciale. The block was designed to appeal to boy viewers, but “some of it didn’t do as well as expected.” With Hasbro as a major client, Speciale wants more boy GRPs in the market. “I hope they try to pump that up a little more,” she says. Nick’s Perry says Slam Block will continue. “We’re very happy with the boy-girl skew,” he says. “We’re delivering about 65% boys, which is actually beyond what we set out to do. We’re always looking to make some tweaks to get the ratings a little higher, and I think you’ll see some positive changes moving forward.” Nick won’t be making programming announcements until its upfront presentation next month, but it’s already having preliminary discussions with advertisers. Compared with the broadcasters, which tend to go up and down, Perry says, “people continue to see us as a stable and hot place to be, so we’re seeing some very good strong signs for the year ahead.” Some buyers view Cartoon as a better vehicle for reaching boys. “If you want to reach boys, Cartoon has a much stronger story,” says Zenith’s Friedlander. “But in absolute numbers, Nick beat Cartoon in boys and in girls.” McQuilken notes that Cartoon’s Toonami block of Japanese action shows skews toward boys. “But if you look at the overall mix of our programming, we’re within a decimal point or two of total viewing boys to girls. We’re right around 50%, give or take a few percentage points. It is a factor on some key dayparts, but overall we’ve got to work both sides of the street pretty hard.” Cartoon is also altering its programming strategy by trying more strictly to tie shows in specific dayparts to specific demographics, says GM Jim Samples. Part one of the plan was to create and program Adult Swim, the animation block for grown-ups. Now, Samples says, the network is beginning to intensify its program development for kids 6 to 11 — a demographic the channel has been falling short on this season. But animation takes a while between the time it’s ordered and the time it airs. It “takes 12 to 18 months before you can really roll that stuff out,” Samples says. Some of the new shows are starting to hit the air, beginning with Codename: Kids Next Door, which premiered in December. “And we’ll have more of that 6-to-11 programming hitting beginning this summer.” In the wings are Duck Dodgers, based on a theatrical short featuring Daffy Duck in outer space, and Teen Titans, a squad of wet-behind-the-ears heroes led by Robin, the Boy Wonder. “The other thing that we’re doing that’s exciting — you saw some of this in fourth quarter, too — is program sharing with Kids WB,” Sample says. Cartoon is having its upfront presentation later this week. “I think the big selling point is an unprecedented amount of new programming and episodes,” Samples says. “Last year we made the decision to step up the level of production on new shows like Ed, Edd n Eddy and Dexter’s Laboratory and Powerpuff Girls.” That means the network will be able to show new episodes of those popular series throughout the year, instead of concentrating them during the summer. Cartoon is ordering new episodes of shows even before kids see its current batch, meaning a bigger library of episodes builds up faster. Later this week the network will announce that it plans to order a third season of Kids Next Door less than three months after its launch. “We have already greenlit the second season and we’ll move onto the third season before the second season hits the air,” Samples says. “They do need to do that. For kids television, you always have to refresh, refresh,” says Friedlander. “They’ve got wonderful library product. I think they are benefiting somewhat from their relationship with the WB. But good original product is still the lifeblood of the network.” However, new episodes can only go so far. “Their numbers have fallen off, and we’re going to have to adjust accordingly,” says Starcom’s Wagner. “They’ve got some things that they’ve put in place as stopgaps, but we’ll see how those go.” Wagner adds that Cartoon is the easiest network with which to build promotional partnerships. “They really do drive a great value,” he says. Sample is also in charge of Boomerang, Turner’s noncommercial digital animation network. “At this point we’re just past 8 million homes, and so [whether to accept ads is] probably not an ’03 decision,” Samples says. Boomerang doesn’t accept sponsorships, either. “The operators have the right to insert, but it is noncommercial from our standpoint at this point.” (Nick’s digital channels aren’t ad supported either.) Samples notes that there’s a lot of co-viewing of the vintage animation shown on Boomerang, with young parents watching with their young children. “Popeye does very well on Sunday evenings,” he says. “There’s still an appetite for that stuff, but we’re looking for ever more clever ways to package it to make it cool and retro but also to appeal to parents who are viewing with kids. The 6-to-11-year-olds, those are the ones we’re targeting with our originals and new product.” Discovery is getting ready for its second season as a small, but significant, player in the kids market. The first season went well, according to Ripley. “We have much more demand than we have supply,” he says. “We’re very pleased with the representation of advertisers that we had and speaking to a cross-section of them, they want to return for year two.” Having one foot in broadcast, through its deal with NBC, and another foot in cable, with Discovery Kids, has helped attract important advertisers and push prices. “Eighty percent of the people who purchased [ads on] Discovery Kids on NBC also purchased Discovery Kids channel,” Ripley says. “So it was a big driver for us to bring in a much broader client base.” Among the sponsors of Discovery Kids programming are Kraft, Procter & Gamble and Lego. Those advertisers are paying a healthy rate, according to Ripley. “The pricing on Saturday morning is reflective of a network CPM and a network delivery,” he says. “The pricing on Discovery Kids channel is similar to other kids networks at their stage of growth.” Next season, Discovery will pitch advertisers looking to sell products to girls and older kids, the tweens — in between kids and teens. “Discovery is skewing younger than the old NBC block had done,” says Zenith’s Friedlander. The block was aimed at teenagers before the time period was sold to Discovery. “We like our ability to reach girls, specifically the last half of our block, which has been the shows Endurance, Scout Safari and Strange Days at Blake Holsey High, which have drawn a large percentage of girls and girl tweens,” Ripley says. “It’s a funny thing,” he adds. “In the adult world, it’s easier to reach women than it is to reach men. In the kids world it seems to be harder to reach girls than it is boys. If you look at a lot of the programming on Saturday morning, it’s boy-oriented, whether it’s anime or superhero-type programming, and there isn’t a lot of product that’s more accessible by girls. We think our programming does that.” Discovery will introduce something different during its upfront meetings: animated shows. “To date, we’ve been all live action,” Ripley notes. “We’re calling the first block Real Toons. It fulfills the same mission that Discovery does in that the ‘toons themselves make sense coming from Discovery.” One show is called Kenny the Shark, about a 6-foot tiger shark that moves in with an 11-year-old girl and her family. “It’s kind of nice when you have a shark as a pet. The bullies don’t bother you, but then again, when the shark gets hungry, he’ll eat the whole table,” Ripley says. In another show, Tutenstein, the sarcophagus of an ancient Egyptian boy king in a New York museum gets struck by lightning, which reanimates the mummy. The 9-year-old awakens in present-day Manhattan and tries to understand why he’s no longer all-powerful, along with other mysteries of the modern world. “We’ll teach the kids a little bit,” Ripley says. “But more importantly, we’ll entertain them.” And maybe, ad buyers will be entertained as well. kids leader Nickelodeon also has the cable industry’s toughest standards and practices department, according to ad buyers. Still, while protecting children is a worthy objective, ad buyers say they aren’t told till the last minute that some ads can’t run, throwing their plans into the sandbox. One major buyer reports the situation is so bad, his agency may reconsider buying schedules on Nick. “Their commercial clearance department is a very rigorous approval process, and I have a long list of clients who are growing beyond the limits of frustration with what Nickelodeon requires them to do to get commercials on air,” says John Wagner, media director at Starcom Worldwide, one of the biggest buyers of advertising aimed at children. “A lot of times we find out that spots aren’t cleared for air, and we’re two days away from when the flight starts. We’ve tried to work with Nickelodeon on this, and I know they have tried to work with us, but at the end of the day, we’re just not seeing improvement fast enough.” “We’re always looking to improve our customer service,” insists Nick’s ad sales chief Jim Perry. “We take a lot of pride in our standards and practices and what we put on the air. I’m surprised that this is put out there as something going on in the marketplace.” Donna Salvatore, EVP and director of national broadcast at Mediacom, another major kids buyer, calls Nick “the worst offender” when it comes to last-minute snags in the commercial approval process. Salvatore points out that often commercials that are approved in the storyboard phase get kicked back when animation is completed; the network decides it looks “too real” and could mislead kids. “It’s getting a little better. It’s not perfect,” Salvatore says. “Last year, that was a big conversation with us because it’s great to buy [Nickelodeon], but if I can’t get commercials cleared, then I’ve got to put it somewhere else.” And that’s not always in the brand’s best interest. Nick got less money from Mediacom last year, Salvatore reports. But that was because budgets were down across the board. She expects the issue will come up again while this year’s upfront deals are being negotiated. Wagner is even more blunt: “I have clients who are asking me, Why should I continue to give them” a large share of their budgets? “They say, ‘I can’t afford to have them take up such a big position in my schedule when they won’t run my copy.’” He adds, “Before we cut deal one, we’re going to have to come to a clear understanding with them on what the commercial clearance procedures are going to be, because while they have made an effort, it’s just not getting better fast enough.” “In this business, there’s a lot of last-minute stuff going on in clearances and approvals and scheduling, but I think we end up doing a real good job,” Nick’s Perry retorts. “And certainly I haven’t had anyone walk off the air because of it.”
— J.L.

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