Conan O'Brien on TBS: Can He Bring Cable Ad Rates in Line with Networks?

As media executives are constructed of 95 percent bombast, take the following with a slight grain of salt: Time Warner CEO Jeff Bewkes said on the company's second quarter conference call yesterday that Conan O'Brien's new late-night show on TBS has finally gone where no cable show has gone before -- it commands ad rates that are "parity" with what Jay Leno and David Letterman's shows get on network TV.

Of course, no financial details were given, but there are four reasons why this could, actually -- finally -- be true:

  1. Late-night is still that rare part of the day where the viewer demographics (if not necessarily the total number of viewers) compare favorably to network TV on an ongoing basis -- instead of just during programs like that very special episode of Jon and Kate Plus 8 where their marriage starts to fall apart. As I noted in a post a few months ago, Comedy Central's one-two punch of Jon Stewart and Stephen Colbert routinely outdo the networks in total viewers age adults 18-49. O'Brien's new network is a leader in both that demo and the even more desirable 18-34.
  2. O'Brien, obviously, comes from network TV, and that gives him the patina many advertisers still look for. It may not be fair, but little is in television ad sales. Even if Stewart and Colbert get more viewers than O'Brien once the novelty of his new show wears off -- and I think that's a real possibility -- he'll still have a halo effect from once being an NBC star.
  3. Since young viewers don't make the distinctions that older viewers do between network and cable, the premium advertisers pay for network isn't as easy to justify. You know this is true, if you've ever found yourself explaining about the days when there were only three TV networks to a 25-year-old. (They tend to look at you like you're telling them about that run-in you once had with a teradactyl.)
  4. Turner Broadcasting System sales president David Levy has probably been the most outspoken cable exec on the disparity between cable ad pricing vs. network, going so far as to call the premium advertisers pay for similar audiences in network TV a "legacy tax." Between the reasons stated here and advertising spending being on the rebound, Levy has found the moment he's been looking for. In fact, he's using O'Brien's show as the door-opener to his ultimate aim, which is to see parity pricing come to primetime cable. He told Mediaweek: "We're still not at a parity with all our original TNT dramas, but we're getting closer all the time. Conan's the proof we have when we say, 'You can't just throw all this stuffâ€"â€"our shows, USA's, Discovery's, you name itâ€"â€"in a separate cable bucket. That's just not going to work anymore."
My guess is that because most cable dayparts don't stack up to network like late night, old-style pricing is still going to work for a while, despite what Levy said. But you've got to begin somewhere. And 11 p.m. is a good place to start.

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