News

N.Y. Disconnect Enjoys Sales Boom

5/30/1999 8:00 PM Eastern

Time Warner Cable's exit from the New York
Interconnect had Rainbow Advertising Sales Corp. (RASCO) reeling last year.

But since then, Time Warner's ad-sales unit and the
interconnect have turned lemons into lemonade.

Since last fall in particular, the interconnect -- like
other top 10 interconnects, and cable in general -- has enjoyed a boom. Its growth has
been fueled by spending increases in several key categories, and by a considerable uptick
in inventory last October.

Still, last spring and summer, the "Big Apple"
interconnect was facing the loss of 1.1 million Time Warner subscribers, or 25 percent of
its base, interconnect vice president and general manager Eglon Simons noted. RASCO
president and chief operating officer David Kline added, "We were braced for the
worst."

But, Kline said, the worst didn't happen. Instead,
"It's stronger than it's ever been."

The interconnect reaches 3.46 million homes via its
remaining MSO participants -- RASCO parent Cablevision Systems Corp., Adelphia
Communications Corp., Comcast Corp., AT&T Broadband & Internet Services (formerly
Tele-Communications Inc.) and MediaOne Group Inc. And AT&T Broadband parent AT&T
Corp. is in the process of buying MediaOne.

"I don't think we've lost one agency"
since the "disconnect" robbed the No. 1 DMA of one-stop shopping, Kline said. He
attributed that to the "good relationships" Simons and his sales force had built
and to New York being a must-buy market. "It might have been more detrimental [had
that happened] in Detroit or another [secondary] market," Kline added.

The inventory hike also bolstered the interconnect's
sales, Simons said. Last fall, the operation increased its dedicated inventory on
participating systems to 25 percent from 16 percent for its original 10 insertable
networks.

That's still significantly lower than Adlink's
inventory, the executives pointed out. The Los Angeles interconnect sells 35 percent of
its systems' inventory across 30 networks.

That's the main reason why Adlink's total sales
far surpass those of its New York counterpart. Adlink is en route to a $100 million sales
year, up from $83.1 million in 1998.

New York Interconnect executives won't talk dollars.
But when asked where sales are in relation to the $32 million ad-volume figure quoted for
1997 in correspondence with Time Warner during last year's dispute, Kline said,
"It's significantly more than that" for both 1998 and 1999.

Overall, national and local sales on the hardwired
interconnect are soaring -- up 104 percent for the first quarter in an apples-to-apples
comparison that deletes Time Warner from the equation, Kline said.

In the second quarter, May has been particularly strong so
far, he added.

Entertainment, including movies and various cable networks,
is "running neck-and-neck with automotive" this year, Simons noted. Home Box
Office is a new client among networks.

Technology, including Web-related companies, is another
strong riser, as is financial/banking, the latter due to increasing competition, he added.
Still others on the rise, he said, include packaged goods (including Kraft Foods) and
retail (Macy's, Inter IKEA Systems B.V. and Cablevision-owned The Wiz).

In automotive, General Motors Corp.'s takeover of its
dealer ad spending as of April 1 helped the New York and Los Angeles interconnects, Simons
said. GM has budgeted "well over seven figures [$1 million] per quarter" for New
York, he said, adding that he's begun discussions with GM about eventually targeting
advertising beyond the current zoned approach.

Moreover, foreign automakers have hiked interconnect
spending, including making more annual buys, Simons said, noting that BMW AG's annual
buy is in seven digits. AB Volvo, which had concentrated its dealer advertising on the New
Jersey zone, is advertising marketwide now, he noted.

Although Time Warner's exit had forced the
interconnect to shelve several plans, Kline said, "Now, it's full-speed
ahead."

For instance, its marketing campaign aimed at the
advertising community is back on track. The interconnect, which hasn't done such a
campaign since 1984, expects to have new promo spots and print ads ready to go within
three months.

The interconnect will also review proposals for a new
traffic-and-billing system, he added.

One thing RASCO doesn't plan to revisit anytime soon
is getting Time Warner back. "There's nothing happening" in terms of
resolving their differences, Kline said, adding that there haven't been any meetings
since January.

Meanwhile, Time Warner CityCable, the MSO's New York
City ad-sales operation, also benefited, as it has much more inventory to sell now that it
no longer has to dedicate a percentage to the interconnect.

Time Warner CityCable president Larry Fischer said,
"One and one does equal three" if the New York Interconnect's numbers are
up. "Obviously, we're having the same sort of success. We're having a
record year," he said. Sales are up by more than 60 percent so far this year, he
added.

Fischer said he hoped his organization and the interconnect
could get back together, especially in light of the success that Adlink and other
interconnects are having and the technology advances that make interconnection easier.

Given current sales growth that far outpaces that of local
broadcast networks, the combined forces would probably be at least as big as the
lowest-ranked broadcaster, he added.

But in the meantime, media buyers apparently aren't
having much trouble making two calls to place their cable ads, Fischer said.

Want to read more stories like this?
Get our Free Newsletter Here!
October