Connecting the Interconnects11/10/2002 7:00 PM Eastern
As part of its effort to make spot cable more buyer-friendly — and less time-consuming — National Cable Communications has spent a considerable amount of time, money and energy over the past two to three years convincing MSOs to interconnect key markets among the top 100 designated market areas (DMAs).
The spot-rep firm's crusade — formalized within its CableLink Interconnects Division — yielded seven operational link-ups during the latter part of 2000 and the first half of last year. The first was in Providence, R.I., and New Bedford, Mass. The most recent, in late June 2001, serves Albany-Schenectady-Troy, N.Y.
An interconnected market is one in which an agency or advertiser can buy 80 percent or more of all cable homes within a DMA from a single contact point, according to NCC CEO Tom Olson. But in CableLink markets, that penetration rate is far higher — from 96 percent in Cleveland to 100 percent in Buffalo, N.Y.
On average, these interconnects sell avails across 23 cable networks. Owned by AT&T Broadband, Comcast Corp., Cox Communications Inc., Time Warner Cable and Katz Media Group, NCC is the nation's largest media ad-sales rep firm. Katz also serves as managing partner.
"Having interconnected markets is an important influence to persuade agency buyers into spot cable," said Olson.
The fact that those seven CableLink markets, which reach 4 million homes, have generated significant ad-sales gains through third-quarter 2002 — on top of similarly solid growth last year — has earned NCC Multichannel News's Innovator Award for advertising sales.
Business in booming
For the first nine months of this year, Olson said those seven markets — which also include Hartford-New Haven, Conn.; Grand Rapids, Mich.; and Wilkes-Barre-Scranton, Pa. — were "tracking just about identical with how NCC is doing overall."
For the January through September span, national spot cable jumped 16 percent en route to a projected 19 percent game for the full year, Olson recently reported. Those results were bolstered by a 23-percent gain in the third quarter alone, he added, with the fourth quarter likely to leap a hefty 28 percent.
Political campaigns are among the biggest contributors to that upsurge, according to Olson.
In terms of cash, Olson said the cable industry expects spot cable to garner $560 million by year-end, with NCC accounting for the lion's share.
CableLink's performance was one of several positive influences on NCC's overall nine-month results, Olson noted. Sales gains were also linked to expansion of its in-house electronic-billing system, a 12-percent uptick in its sales force, a broadening of its sales-development efforts and increased participation in cable networks' sales-promotional opportunities.
In 2001, the seven interconnected CableLink markets tallied a combined 12-percent rate of ad-sales growth. That stood in sharp contrast to the rest of spot cable — and broadcast. Sales of both media plummeted a combined 20 percent, as economic sluggishness and the Sept. 11 terrorist attacks derailed most ad-sales efforts.
Over the past two years, the CableLink markets have expanded their roster of advertisers, bringing in accounts that would not have taken cable schedules under a "disjointed" multi-stop configuration, Olson said. In Cleveland, for instance, a media buyer seeking cable time would have needed to make 33 separate contacts.
"Retail has probably given them the biggest lift," said Olson of the interconnected operations, adding that financial, insurance and beverages were other categories that have come in "and continue to be the drivers."
$6 million investment
Costs of interconnecting systems within a given DMA are "not necessarily in keeping with market rank," but depend on the number of digital ad-insertion locations within the market, Olson noted. SeaChange International Inc. is the CableLink insertion vendor.
Capital-equipment expenditures tend to be "in the neighborhood of $600,000 to $700,000 per market," he said.
Add to that the $1.5 million that was needed to build the 30,000-square-foot CableLink master-control center in Bloomfield, N.J. — where commercial-inventory management, schedule uplink and billing operations take place — and NCC has thus far probably invested roughly $5.5 million to $6 million in CableLink.
In 2000, only 10 of the top 100 markets were consolidated, according to NCC. By contrast, according to Olson, 54 of the top 100 DMAs have been consolidated to date — including the seven CableLink markets. Next year, that number should climb to 75, he said.
"Interconnected markets used to be a fairly short list," Olson observed, citing Adlink in Los Angeles and enterprises in New York, Chicago and a handful of other cities.
Prior to its CableLink venture, NCC had built and managed interconnects in Chicago, Detroit and Washington, before eventually turning operations over to its MSO partners.
Although Olson declined to identify the DMAs now being considered for consolidation, he said "at least five could be with the CableLink platform, and some are real close."
The interconnect planning process is pretty straightforward, Olson noted.
"We literally sit around a table and ask what's needed to get this market done, and how and by whom, and what's the timetable?" he said. "Speed to market is a key selling point to operators. We can bring a market up in about 90 days."
As the pending AT&T Broadband-Comcast Corp. merger draws nearer, "there will be an even more heightened focus on interconnecting," Olson predicted. Comcast is committed to that strategy.
The Philadelphia-based MSO operates 16 interconnects, including three in the top 10 DMAs. It recently named Charlie Thurston — a 14-year veteran of Adlink — as its vice president of ad sales.
"Our role has been as much the catalyst as anything else," said Olson, who noted that the rep firm's MSO partners must make the final decision on whether to connect a market.
Consolidation and the other enhancements "have raised our ability and our image and the industry's" in the ad community's eyes, said Olson.
And since NCC is owned by MSOs, "theirs goes up, too."