CAB’s Thompson: Bullish on Cable

K.C. Neel -- Multichannel News, 3/31/2008 2:59:00 AM MT

Consumer confidence is down. Housing prices are falling and foreclosures continue to rise. U.S. car manufacturers have been suffering a reduction in sales for months. Companies, including General Motors -- the nation’s third largest advertiser -- are shifting a significant amount of their advertising budgets toward the Internet and away from other traditional media.

Advertising agency giant M&C Saatchi is expecting a challenging 2008 in the U.S. It could be a difficult year for cable advertising, including local spot. But Chuck Thompson, executive VP for the Cabletelevision Advertising Bureau, believes this is a great time to buy cable advertising and isn’t convinced ad sales will suffer this year.

“Any time there is a weak or slow economy; advertisers need to make sure they don’t let their advertising slip,” Thompson said. “If it goes down, you never really gain it back. Those companies that don’t invest in their brands in down times suffer more than companies that continue to advertise and market their brands and products.”

Cable is actually perhaps better positioned to sell its inventory to advertisers because of its value, Thompson said. Being able to target customers and knowing that ratings for cable programming continues to rise are reasons enough to keep on advertising on cable, he said.

To be sure, national cable advertising was up 3.5% in 2007 to $17.1 billion and local spot was flat to slightly up (about 0.5%) to $6.3 billion despite a soft economy in the third and fourth quarters of the year. Excluding the “quadrennial effect” of the 2008 Olympics and the presidential election, Thompson remains cautiously optimistic that cable sales growth will be similar or stronger this year. And when the Olympics and the political season are included, it could be a banner year.

Yet not everyone is predicting a rosy advertising picture this year. Without breaking out mediums, Saatchi CEO David Kershaw told analysts and reporters during a conference call that the U.S. advertising arena will be dicey this year.

“America is the area where [we] have seen the consumer pulling back more dramatically and so clients have followed suit in terms of their budget,” he said during the conference call.

Thompson believes advertisers may change their message, but if they’re smart, they won’t remain quiet. Indeed, he said, advertisers shouldn’t pull back on their ad budget reins. They do, however, have to be smart about their purchases. It’s important to reach your audiences and cable offers not only targeted audiences, ratings continue to rise, he said. “Cable gives advertisers venues to sell their products better,” Thompson said.

Consumers will still be buying products, they may just change the mix of their purchases, Thompson said. Rather than sell SUVs, which have sold well until gas prices started spiking last year, dealers may be well served to hype hybrids and fuel-efficient cars rather than gas-guzzling SUVs.

“People are still going to be buying cars and other products,” Thompson said.

But are they? Consumer spending edged up 0.1% in February, making it the weakest spending performance in 17 months. And if the effects of inflation are removed, spending was flat in February, according to the Commerce Department.

Still, Thompson remains undaunted. “Despite the current soft economic environment, the cable advertising market is poised to be as strong as ever this year,” he said.