Greg Schaefer might be considered a traitor by people in the broadcasting business. After all, he spent some 30 years at CBS, Group W Television Sales and Westinghouse Broadcasting before joining the spot rep firm National Cable Communications in 2002. As NCC’s president, he answers to three owners that are among the most powerful in cable: Time Warner Cable, Comcast Corp. and Cox Media. All told, NCC represents systems and interconnects serving 66 million households in 207 markets. There is little question, then, that Schaefer has his finger on the most important issues that will be front and center at this week’s Cabletelevision Advertising Bureau’s Cable Sales Management conference in Chicago. Not the least of the brainteasers he’s intent on solving is how cable can level the playing field with the companies that gave Schaefer his chops as a salesman. Recently, he sat down to discuss this, and much more, with Multichannel News special projects editor Janet Stilson. An edited transcript follows:
MCN: Let’s start with some big-picture questions. What do you see as the major challenges for NCC moving forward? And what do you see as the industry’s major challenge?
GREG SCHAEFER: Well, in many ways, we are the [spot cable] industry. So I think the challenges are pretty similar. I think the major objective for NCC is figuring out how to extract the proper value for spot cable as it’s purchased by advertisers. I think if we’ve learned anything from the LPM situation — the [local] people meters — it’s that there’s a lot more people watching cable than anybody would have thought. And there’s probably a lot fewer people watching broadcast television than people have been buying and paying for in the past.
So it’s our mission to figure out how to get the appropriate share that we deserve based on the audience.
MCN: What’s the percentage difference between broadcast CPMs and cable spot CPMs in primetime right now?
SCHAEFER: Generally, our CPM is higher than broadcast on an individual network basis, which is a reflection of our targeted audience and limited inventory. However, the premium [is] for only the top three to five networks where the highest demand is placed. The way to develop more efficiencies is to buy cable horizontally as well as vertically.
MCN: What do you see as the major opportunities moving forward?
SCHAEFER: The big opportunity will be for us to figure out how to properly market the product so that we can show advertisers [cable’s value]. A lot of this is incumbent upon us to position the product and demonstrate a new effective way to buy it.
We’re selling 40 to 50 insertable networks with half the audience. But it’s so fractionalized, you can’t buy that based on buying parameters that were set up for television stations in the 1970s.
MCN: Is there anything that has emerged over the last couple of years that’s really worked, and conversely, things that haven’t worked in terms of the initiatives that NCC has been involved with?
SCHAEFER: Well, the most successful thing that NCC has done is fixed the backroom. We realized that if you take the insertable networks that we have per market times the 209 markets that we sell — if somebody was not buying an interconnect, but was buying on a zone basis — we in essence have about 140,000 television stations.
So it’s an enormous challenge to not only sell, but to produce invoicing and stuff. The organization was very dedicated, [before I joined NCC], to fixing the backroom, making it an easier medium to deal with. The company spent $5 million [to implement an electronic-invoicing process], because the agencies said they needed that if we were to compete versus television stations. That’s been the most successful.
Moving forward, getting back to my earlier point, I think the most important thing we’re doing now is we’re showing people that the correct way to buy cable is to buy it like a mutual fund, where you literally buy 15 to 20 networks that over-index against a specific target, because cable networks are very niche-driven. They are very specific. There’s no waste in the audience.
When you buy MTV [Music Television] or you buy Lifetime [Television], you know exactly whom you’re reaching. There is no peripheral waste in the audience. You need to get 15 to 20 networks, so you can truly capture that type of demographic audience that you’re trying to reach.
We’re taking that message to the street. The business model as designed in the ’70s is probably not effective. That was set up to reflect the coverage area of television stations and their antennas, and that’s not the world that we live in now, with the multitude of choices that we have in front of us.
MCN: So the mutual fund approach is new?
SCHAEFER: It was a conceptual thing that was done on a local basis, but as national advertisers said, 'Gee, there’s more people watching cable. Maybe we should be in cable,’ the agency’s natural way of fitting that in would be to fit it into a buying parameter that said, 'Here’s my money that I’m going to spend in early-fringe access, primetime and late news.’
And when you think about it, television stations put their programming in based on the daypart. They might put a game show at 7:30. They’ve got early news at 5:00 or 6:00 and they’ve got soap operas at 3:00 in the afternoon. They program by daypart.
Cable networks program by a specific genre. So [Cable News Network] is news. ESPN is sports. It’s like every cable network is a daypart unto itself.
It’s not that the agencies don’t know what they’re doing. It’s that this world has changed, and we think we’ve come up with a way to help the advertisers and help the agencies use this medium more effectively.
MCN: What are your expectations in terms of revenue growth this year?
SCHAEFER: We’re pretty comfortable that we will be in a double-digit [percentage growth] mode, low double digit versus last year. We did $71 million in political last year. So we have to go against those numbers. So we know that some of our more dynamic percentage growth in past years will not be realized this year because of that.
MCN: So it will be lower than last year’s growth?
MCN: I was under the impression that cable hadn’t done that well in attracting political dollars.
SCHAEFER: We were disappointed. We felt like we didn’t get a share commensurate with what we’re starting to realize out of normal national advertisers. The experience was that the people buying political time come in every two to four years. So the education process [had to start] all over again — from 2002 to 2004.
We’ve decided that we need to have a more aggressive marketing of our product in 2005, not at the beginning of 2006. We’ve got to get our ducks in a row now so that political candidates and advocacy groups can take advantage of what cable has to offer.
I think we do very well with statewide campaigns where they recognize cable’s worth — Senate, congressional, etc. Where we didn’t hit a home run was, we didn’t get Bush money.
They bought network cable, and they supplemented in the local market with broadcast. What they should have done was bought network cable and supplemented in the local market, with a mix of broadcast and local cable. And then they would have heavied up where they needed to, in swing states. And we could have helped them substantially.
MCN: Tell me about the pharmaceutical category. I know that on the national level, there are problems.
SCHAEFER: Not with us. It’s actually extremely healthy. It’s up over 20%, the category. Some of these pharmaceutical companies are becoming more sophisticated. They are recognizing that they can do some very specific things in markets by geo-targeting. Whether it’s an allergy alert or [something else], they can specifically pinpoint within each market where their needs are.
And I think also what the pharmaceuticals are now recognizing [that video on demand] is a godsend. You can put a 30-second commercial on, and [tell viewers], “If you need more information on this drug educationally, you can go to Channel 1000,” which is a lot better than driving people to a Web site.
So you’re controlling their experience and developing that product awareness through their television viewing. That’s a marvelous thing. Somebody is going to look for more information because they want to know about that drug. So that’s utopia for the advertiser.
MCN: You recently agreed to represent Una Vez Mas, an Hispanic TV station group. That’s kind of an interesting thing, that you’re representing broadcast stations.
SCHAEFER: Yes, on cable, they are low-power stations that are carried on cable.
MCN: So they’re largely cable?
SCHAEFER: It’s really cable, and certainly, we’re not repping broadcast stations. The reason we did this is on the Hispanic front, we need content. That’s a reality. We had Galavisión and a couple of our news networks that are exclusively programmed in Spanish, and we just needed more product to sell if we wanted to make our market in a more significant fashion on the multicultural category.
MCN: What are you most proud of, that you’ve done personally at NCC?
SCHAEFER: I’m proud of the fact that we’ve expanded our client base. Our client base was very small, and we were only real players in a couple of categories.
MCN: Can you give me an idea of that growth?
SCHAEFER: I don’t know what that was, but I know that when I got here, we had a churn ratio, and we had different clients every year. And right now as of this point, I think we’ve got 96 — it’s either 96 or 97, I lost count — of the top 100 advertisers.
As a matter of fact, we recently went to see, for the first quarter of 2005, what our client base was, and I believe 46 out of 50 of the top 50 advertisers from 2004 were back.
So that says to me that we’ve learned from some of our mistakes in the past, and we’re actually building a business that is capable of taking advantage of this national opportunity.
MCN: What haven’t I asked you that you think is kind of interesting?
SCHAEFER: I don’t know. I think you covered it all. I guess if I was you, I would wonder what the next — what’s the real way that you can distinguish yourself from television, from broadcast television. And I think that that’s the flexibility of cable, the fact that we [will] have the ability to change commercials not only by zone, but down to the household level, in the near future, with digital cable.
So the addressability aspect — I don’t think people are using it enough. And I think if they would think about it, what they could do in a marketplace, it defies imagination what they could accomplish.
MCN: How many of your systems are actually capable of being that granular?
SCHAEFER: Well, manually they can all do it by — not by household but by zone. Every cable zone, we could manually put a different message in that. It’s just a question of what expense you want to go to in terms of production for how many different copy points you want in each market. But the sky’s the limit.