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Rise in Spot Anticipated

Mar 29, 2004  •  Post A Comment

With the first quarter of 2004 coming to a close, cable operators covering the nation’s largest metropolitan area have said they’re on pace for local ad sales to rise by double-digit percentages by year-end. Ad revenues for New York and vicinity cable systems-covering both local and national spot buys-could rise 15 percent to 16 percent, perhaps higher.
That forecast, from key executives at Time Warner Cable, Cablevision Systems, Comcast and RCN, is based largely on business accomplished so far as well as on the likely impact of two developments on the way: the launch of Nielsen Media Research Local People Meters in the area by late summer and stepped-up efforts by the Cabletelevision Advertising Bureau to spur national advertisers to spend more of their network advertising revenue on cable.
“We’re off to a much bigger start than a year ago,” said Larry Fischer, president of Time Warner Cable Advertising Sales. “You’re seeing it in categories from restaurants to financial firms on Wall Street. For the year, we’re looking for what the cable industry as a whole is looking for, and a little better.”
Kevin Barry, CAB’s VP of local sales and marketing, said local ad revenues will increase at least 15 percent around the nation from last year’s $3.6 billion. The People Meter introduction in New York and other key cities could raise the final tally to nearly $5 billion.
“The larger the market, the more ahead of 15 percent operators are likely to be,” Mr. Barry said. His association does not provide local sales estimates from individual markets.
Each metro area also has its own peculiarities, owing to population makeup, geography or business sectors, so it’s difficult to judge how well specific cities will do from year to year, Mr. Barry said.
Nevertheless, a double-digit rise is already shaping up at Cablevision Systems, with auto dealer and entertainment outlets making big contributions.
“We’ve met and exceeded our expectations for the first quarter,” said David Klein, president of Rainbow Advertising Sales. “Second quarter pacing is very strong. There’s not one zone we operate in where strong sales aren’t coming through.” Retail spending is rebounding dramatically from 2003 levels, along with airline and tourism business. Telecommunications companies, such as Verizon, T-Mobile and Cingular, represent a new local sales well, and health and legal services are getting to that level, Mr. Klein said.
New York’s cable operators handle ad sales business in a variety of ways. Time Warner Cable’s New York system uses an in-house operation exclusively. Cablevision Systems and Comcast have in-house units too-Rainbow Ad Sales and Spotlight, respectively-but they also partner up in the New York Interconnect consortium. RCN, with system overbuilds in Manhattan and Queens, contracted ViaMedia earlier this year to serve as its local sales/spot agent. ViaMedia handles local ads for operators in other areas of the United States, reaching about 1.2 million subscribers. Those operators include WideOpenWest, Service Electric and Grande Communications.
Viewership Shifts
Comcast’s area systems are getting increased local revenues from product categories across the board, including general and specialty retailers, medical care and autos. Ed Mazzella, VP and general manager of Comcast Spotlight in New York, attributed much of the result to an improving economy. “People are spending more, and they’re getting the message that with the power of 40 channels or more to work with, you can reach a range of demographics easily,” he said.
Just as important, companies in industries hit hard by the events of 9/11, such as travel and tourism, are coming back for extended local sales campaigns, Time Warner’s Mr. Fischer said.
“Banks like Wachovia, Washington Mutual, Commerce and North Folk are spending a lot more, and that will put pressure on the other banks to follow. Airlines are back as well as European and Caribbean tourism centers,” he said.
“There isn’t as much worry about world events,” Rainbow’s Mr. Klein agreed.
Year in and out, autos and auto dealers account for a big chunk of local dollars, and RCN’s ad business is likely to reflect that, said Todd Donnelly, ViaMedia’s CEO. “They’re the biggest advertisers by far,” he said, followed by health care, retailers, restaurants and personal services from attorneys and insurance agents.
Consumer electronics dealers will likely increase their spending as 2004 goes along, to tout high-definition and plasma-screen TV sets available at plunging prices. “You’re speaking to a high-end customer paying upward of $100 a month for cable and high-speed Internet,” Mr. Fischer said. “Sounds like a good customer for an HDTV set.”
Mr. Donnelly is keen on raising RCN’s local revenue 300 percent from 2003, when the operator launched its sales initiative. The game plan: show advertisers how cable can maximize their overall marketing goal. “We don’t look at other media as competition,” he said. “Every medium has strength and a weakness. Cable’s strong point is delivering specific audiences or demographics.”
Other metro area operators hammer home the same point, hoping to grab more local ad dollars away from either broadcast stations or print. Mr. Mazzella said attracting dollars from print budgets is the big long-term opportunity, especially from retailers. “The dollar share they spend on newspapers is amazing,” he said. “There’s a lot of opportunity to be had there.”
Operators also want to make 2004 a year with expanded campaigning for clients that largely have resisted local buys. For Mr. Mazzella, the tough sell is supermarkets. Fast-food restaurants are Mr. Klein’s big hump. “We’ve done well with McDonald’s, but we want to do well with all the area franchisees,” he said.
Mr. Klein said he believes more money from both print and broadcast outlays will head to operators when People Meters turn on and Nielsen turns over the results. “There are big viewership shifts that will show up and benefit us. I’ve got my fingers crossed on that,” he said. “Broadcasters get a smaller share of audience, and yet the advertisers are giving them more. People Meters will prove the case that we sell on efficiency, and we deserve more share.”
Betting on the Wrong Horse
CAB’s new upfront sales campaign, urging sponsors to go against the time-honored habit of increasing broadcast network spending despite declining viewership, will filter down locally as well, Mr. Fischer said. “Broadcast TV is clearly the wrong horse. We’ve achieved consistent growth in the last decade, so why would you bet another way?” he said.
Mr. Barry agreed that cable has earned the right to claim a bigger share of advertising dollars. “It’s time to stop filtering 2004 TV audience reality through a 1994 filter,” he said. “Media directors and planners should simultaneously plan national cable network and national spot buys. If you’re going to plan one medium first, plan cable.”
Beyond lauding Nielsen People Meter results or running behind CAB’s upfront bandwagon, New York-area cable system owners are exploring a unified effort to draw more attention to themselves and what they can offer local and national spot clients.
The effort could shape up either as a one-shot event with media coverage or as an ongoing campaign through visits with agencies and media buying companies.
One-shot presentations of a public or private invitation-only nature have been done twice before in New York, as recently as last year by National Cable Communications, the cable industry’s largest national spot rep organization. Both times they were conducted during the upfront sales season.
Last year operators came together on their own in Miami and Minneapolis for CAB presentations in their markets. The Miami event was scheduled at press time to be repeated at the end of March, expanded with participation from other operators throughout South Florida.
“Sure, the New York systems should unite for a campaign, just as I think it should happen in every market of the country,” Mr. Barry said.In fact, Rainbow Ad Sales already has set up spending in its 2004 budget for a joint New York program to be held after upfront season. “It’s beneficial to speak with one voice,” Mr. Klein said. “We want to show the advertising community what we have to offer as an industry. Individually, Comcast and Time Warner have the same story to tell as we do.”
More Than Spots and Dots
Mr. Fischer said he’s interested in a uniform program, whether the operators handle it themselves or National Cable Communications invites them to do something under their purview. It wouldn’t be a first for Time Warner Cable. Last spring the nation’s second-largest system owner joined Cox Communications, Adelphia Communications Corp., Buckeye Cablevision and Armstrong Utilities systems in Cleveland for an advertiser party.
“Clients want to talk with operators [that way], because they see the cable pipe [as ] robust and intriguing,” Mr. Fischer said. “They want to see how we’re developing that pipe with all sorts of services. It’s not about spots and dots anymore, but television’s future.”
Comcast and RCN (through ViaMedia) indicated they would participate in a joint one-shot or ongoing sales pitch if invited. “It can’t do anything but help,” Mr. Mazzella said.
As local operators keep one eye on increasing local and national spot sales, the other eye must be on educating advertisers about opportunities about to hit them in the face-digital and high-definition channels, high-speed Internet access, interactive applications, video-on-demand, ethnic-language networks and digital video recorders.
“We’re talking and deliberating about what the ground rules need to be with VOD and DVRs, and what advertisers can do to enhance their messages while not turning consumers off,” Mr. Fischer said. “I don’t have the answers. Neither do the clients. But we all want to find out how these new services will upset the advertising paradigm as we know it, [and] how we can create a new paradigm out of them.”