The Cable News Network’s blitzkrieg coverage of the war in the Persian Gulf is paying off in skyrocketing advertising revenues, and a flood of new cable subscribers and broadcast affiliate stations.

Rates at the all-news web have climbed more than 500%, while the Big Three webs continue to count their losses.

The 30-second spot on CNN that once cost $3,500 is now going for as much as $20,000, according to sources at CNN parent Turner Broadcasting.

CNN’s coverage of the gulf war may be pushing the organization $20 million over its $200 million budget, but, unlike the Big Three, it should come out of this conflict a winner on the bottom line.

CNN also has signed up 17 new affiliate stations since the war started, according to a CNN spokeswoman. Of the 139 stations that are CNN affiliates, 127 are Big Three network affiliates that have live rights to the service.

The rash of new affiliates is troubling to the nets because several Big Three network affiliates in the top 20 markets bumped their networks in favor of CNN when the war broke out.

Many network affiliates have continued to make heavy use of CNN, including ABC stations in Boston, Dallas and Cleveland, CBS stations in Washington, D.C., Tampa, Minneapolis and Denver, and NBC stations in San Francisco, Detroit, Atlanta and Seattle.

Cable systems all over the country report signing up subscribers at record rates, which they ascribe to the buzz over coverage of the war.

CNN ad sales execs say they’ve got more buyers than they have time to sell. “We’ve been getting so much attention for our coverage, the advertisers are coming to us,” says CNN executive v.p. of sales Joe Uva. “But, because of the war, we have cut back on the amount of commercial time we have available. There’s more demand than there is supply.”

Since 1985, the news net has offered an “instant news package,” for which advertisers pay a premium to take advantage of the ratings boost the all-news web gets when there’s a major breaking news story. With the gulf war underway, according to Uva, who declines to talk specific dollar numbers, a high percentage of buys these troubled days are instant news packages.

“Once upon a time, $200,000 could buy you a lot of time on CNN,” says a senior Turner executive. “Not anymore.”

While the expense of covering the gulf war continues to climb, rates for network commercial time continue to decline. Add to that lost revenues from advertiser-free wall-to-wall coverage during the first 30 hours of the conflict, along with frequent interruptions of regular programming for war updates. Industry analysts estimate each network loses about $5 million a day by preempting all their advertising.

“You can’t get this money back. We’re going to take a tremendous hit,” says a Big Three senior executive. “[The war] throws everybody’s budget out the window.”

Industry analysts already have begun to downscale their ad revenue projections for the networks. Smith Barney media savant John Reidy calls predicting advertising revenues “hazardous” in the current environment and says the networks will be lucky if there’s 2% growth.

Wilkofsky Gruen prognosticator Arthur Gruen was projecting 3% growth in network ad spending for 1991 and has knocked it down to 2%. Wertheim Schroder media maven David Londoner’s most optimistic forecast is that ad revenues will be flat.

There was some hope at the networks that the need to compensate advertisers with so-called “make-good” time from the commercials lost because of war coverage preemptions would eat up some of their excess ad inventory and firm up pricing. But that’s turned out to be wishful thinking.

The deep discounting that started in the fourth quarter last year in network commercial time continues unabated. In the so-called scatter market, commercial time is selling for as much as 50% below prices in last year’s upfront season, according to industry insiders. Scatter prices still are running appreciably behind those in the upfront market.

The prognosis is that the fire sale prices will continue through the second quarter. “The market is going to continue to be soft,” says the media chief of a major advertising agency. “That is unless some sleeping giant wakes up and eats up a lot of inventory. But with a recession going alone there was little hope of that happening. And now, with a war going on, a lot of the players who could make that kind of move are sitting tight to see what happens. A lot of companies, like the automakers, are having bottom-line woes of their own.”

The networks know all too well that these times call for delicate negotiations. Because of the war they extended advertiser options on second-quarter upfront commitments beyond the Jan. 15 deadline to the end of this month. Advertisers have the option to cancel up to 50% of their upfront commitments.

There was some fear that there would be mass cancellations, but according to network and industry sources, cancellation levels are up only slightly over last year. To keep advertisers in the game, say industry sources, networks have been offering advertisers incentives, such as upgrading their second-quarter buys to spots in higher-rated shows.

“The networks have never been more cooperative,” says Dewitt Media topper Gene DeWitt. “They are behaving in an entrepreneurial fashion. They want to do business. Put anything approaching a reasonable offer on the table and they will negotiate.”

The same can’t be said about CNN. The network that its superstar anchor Bernard Shaw once said could “squeeze Lincoln off a penny” is demanding a premium of advertisers who want to be part of the show. There are new advertisers coming aboard, but some old ones are bowing out.

“CNN’s ratings aren’t going to keep up forever,” says a senior media buyer at a major agency. “Our clients don’t need them and the current pricing levels. We’ve pulled all of our clients out of CNN for February.”

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