National cable nets challenged

Jul 22, 2002  •  Post A Comment

Cable Connect, the 60 million-subscriber-strong local cable unwired network, has a controversial new business plan: compete for national cable TV dollars.
Heretofore, Philadelphia-based TelAmerica Media’s Cable Connect has primarily gone after what TelAmerica Chairman and CEO Lance Funston called “remnant time” direct response money. But with the hiring of former ABC and Comcast sales executive Roger Sverdlik to head its national ad sales effort, the company has just begun talking to major national ad agencies about stealing some of the monies blue chip clients spend on national cable buys.
Let’s say, for example, that Acme Foods is buying national spots on Lifetime for a $10 cost per thousand. Mr. Sverdlik plans to tell Acme Food
that it can buy the unwired network for a significant discount to that CPM, perhaps as much as 50 percent off.
The pitch to the MSOs emphasizes the fact that “we will never, ever compete for spot, local spot or national spot dollars,” Mr. Sverdlik said. “We will only compete for network money. We will never tap into the pool our operators locally compete in.”
But Cable Connect’s competition for networks dollars involves all dayparts, except midnight to 6 a.m., and all demos that Nielsen measures. “By virtue of having electronic affidavits from the cable operators, we can now post against quarter-hour NTI data,” Mr. Funston said. “We can now satisfy network buyers as to the tonnage that we delivered within a daypart.”
According to Mr. Funston, the “big difference between our model and the traditional unwired model is that we do not ask either the cable operator or the stations to incur any opportunity costs by blocking inventory. Unwired networks go in and say, `You’ve got to sell me this spot for a dollar certain to be aired at a time certain,’ or at least within a delivery window.”
By contrast, Cable Connect’s window is “broad enough so they can put inventory in that window at the last nanosecond, so [the operator has] got no opportunity cost. … He can exhaust all efforts before he gives us the inventory.”
Generally, the unwired cable network works like this: Cable Connect aggregates and sells to national advertisers the unsold inventory that each cable operator has from the local ad time it gets as part of its carriage deals with cable networks. Typically, each cable operator will have four 30-second spots per hour per network in any given market, with one of the four allocated for the operator’s own marketing efforts. Aggregate the remaining units times, say, 32 networks, deduct the hours between midnight and 6 a.m. (as does Cable Connect), and that’s approximately 2,000 units per day or roughly 700,000 units per year.
If not for Cable Connect’s cable version of an unwired network, all the unsold inventory from among all those units would go back to the various national cable networks for free, per their contracts. Cable Connect’s deals and long-term relationships with 10 of the big MSOs give it a total universe of approximately 60 million households. For advertisers, the Cable Connect draw is a cost per thousand that can be as much as 50 percent below network levels.
“Because the local cable business doesn’t sell out, TelAmerica does access good inventory,” Mr. Sverdlik said. Cable Connect is a “good price-value proposition,” he said of the pitch to advertisers.
Magna Global’s Bill Cella agrees with that proposition. “I’m going to tell [our clients] to take a good hard look at it,” he said. “In situations where you have a very tight market and high prices, you go to an unwired and you get similar programming at better CPMs.”
Some advertisers are already making their own clever uses of Cable Connect’s unwired network. For example, 4Kids Entertainment’s upcoming Fox Box [Electronic Media, July 8] is using Cable Connect to promote its Saturday morning block adjacent to national spot breaks on competing kids cable networks.
Some of Cable Connect’s initial advertising deals are easily in the seven figures, Mr. Sverdlik said. Current clients include America Express, Geico and Compaq and Gateway computers. Potential advertisers from categories as disparate as packaged goods and distilled spirits have also been talking to Cable Connect.
Cable Connect, which sells demos and dayparts, also sells by networks. “Local cable is horizontal, not vertical,” Mr. Sverdlik said. “You want kids, I’ll gi ve you Nick, Cartoon and ABC Family. … You want older adults, I’ll give you CNN, Fox News and MSNBC. … You want men, I’ll give you ESPN and Fox Sports.”
TelAmerica’s other media group is Ad Max, which has more than 310 broadcast television affiliates in the top 100 designated market areas. This year, TelAmerica expects to bring in approximately $40 million in revenues, Mr. Funston said, of which about $30 million will be from Cable Connect.
TelAmerica is headquartered in Philadelphia with an office in Manhattan. Mr. Sverdlik also will be opening offices in Chicago, Los Angeles and Detroit, and is currently looking for account executives.