Merrill Bullish on Local Sales
By Jim Forkan -- Multichannel News, 9/14/2003 8:00:00 PM
Merrill Lynch & Co. last week released an optimistic report on local-cable advertising sales, projecting they would double from $4 billion this year to about $8 billion in "the near term."
Although she didn't specify a precise timetable, in the report analyst Jessica Reif Cohen referred to the impact of changes due "within the next two years."
Titled Cable Spot Advertising Gets Connected, Gets Measured, Gets Much Bigger — and released at the investment firm's Media & Entertainment Conference in Pasadena, Calif., last week — Cohen's report cited three key factors as contributing to that upsurge.
"First," she said, "there is an increasing number of new cable interconnects that are 'hard' interconnects," enabling one-stop shopping. The number should soar from 52 such entities in 2002 to a projected 100 in 2004, she estimated.
She did temper her enthusiasm to some degree, writing that "New York remains a problem, [with the New York Interconnect] lacking a hard interconnect between Time Warner Cable and Cablevision [Systems Corp.]."
Cohen was also enthused by the "sharp increase in the number of 'insertable' cable networks, which offer spot-advertising avails for the MSO to sell." The average interconnect alone can insert commercials into 32 networks this year, or double the average for last year — with 40 networks on tap for 2004, she noted.
Among MSOs, Cox Communications Inc. sells time on an average of 45 networks across its markets, she said, while Comcast Corp. is eyeing more than 40 networks in its consolidated markets.
Cohen's report also took note of Nielsen Media Research's plan to use Local People Meters for local broadcast and cable audience measurement in the top 10 markets as by the end of 2005. Four markets will be added next year and five in 2005.
That new measurement tack is "likely to raise cable's measured local audience share," she said.
All told, the network ad-sales market — broadcast and cable — totals about $30 billion, with cable's share at about $12 billion, Merrill Lynch reported. The overall spot ad-sales market generates about $28 billion, with cable's share of it at $4 billion.
"Today, cable's 'local' share of audience and advertising is approximately 30% and 14%, respectively," Cohen said. "This implies that the cable industry has a 16-percentage-point revenue gap."
But as the Local People Meters come on line and the number of insertable cable services grows, she said, "we project cable's share of local gross rating points will rise from about 30% today toward 40%." That's what happened in Boston, the first market to get the new Nielsen meters, she added.
Cable's share of local ad dollars should grow "from 14% today into the 25%-to-33% range," she predicted.
"Today, cable operators derive an average of $55 per subscriber in advertising revenue" — a figure that "could potentially double," Cohen said. But that amount represents "only 6% of an MSO's total revenue," she noted.
The Cabletelevision Advertising Bureau's book 2003 Cable TV Facts includes an estimate of $3.6 billion in local advertising, plus $443 million for regional sports networks, for 2003. That's up from nearly $3.34 billion and $414 million, respectively, in 2002.
| Local People Meter | ||
|---|---|---|
| Nielsen Media Research will be deploying Local People Meters in the top 10 markets by 2005—areas that account for 30% of U.S. TV homes and one-third of TV station advertising. To date, Merrill Lynch reports that Viacom, NBC, ABC, Comcast and Time Warner Cable have all signed new long-term contracts for the new measurement system, which has favored cable audience viewing in Boston. | ||
| 2002 | 2004 | 2005 |
| Source: Merrill Lynch, Nielsen |
||
| Boston | New York | Philadelphia |
| Los Angeles | Dallas | |
| Chicago | Washington | |
| San Francisco | Detroit | |
| Atlanta | ||
No related content found.
Featured Company
-
Digital Rapids
Digital Rapids is the leading provider of professional hardware and software tools, technology and expertise for bringing video to wider audiences and new viewing platforms. Continuing to set new standards in quality, productivity and versatility, our solutions span the critical ..more
VIEW ALL GALLERIES
