Cable Ops Feel Auto’s Pain

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Cable operators have long counted on car dealers to make up the bulk of their local ad sales — the auto segment generally accounts for at least one-quarter of most operators’ ad sales revenues — but this year that workhorse has taken a big hit and industry experts don’t expect things to turn around for some time.

So what do operators do to make up the shortfall? Many are trying to tap into new segments, while others are mining existing sectors more deeply. One thing everyone agrees on: relationships are crucial to the success of local cable ad sales, whether they are large or small, direct clients or agencies, new or existing clients.

“You have to work the market,” said Steve Litwer, senior vice president of ad sales at OnMedia, Mediacom Communications’ ad-sales division. “You have to make sales calls and you need to get to know the people who make the advertising decisions. You can’t count on just knowing agency folks. You have to go deeper.”

Bresnan Communications’ advertising executives are also mining their markets more extensively and are offering products that may not have worked for advertisers in the past, but offer more product and pricing flexibility.

“You have to build as many relationships as possible,” said Bresnan regional vice president of ad sales Kelly Enright. “We look at ad sales a bit the way [President-elect Barack] Obama looked at fund-raising. We are adding clients even if the amount of money they can spend is lower. In the end, we have happy clients because we can satisfy their needs and we have more of them.

“The economy in our markets has been a bit less affected than other parts of the country, but we are feeling the affects of a downturn in the auto sector just like everyone else,” Enright added. “We just have to reposition ourselves.”

To be sure, the auto sector across the country is in some serious trouble. While automotive remained the largest advertising category monitored by TNS Media Intelligence, spending $9.6 billion in the first nine months of the year, that’s off almost 13% from the $11 billion spent in the same period a year ago. Domestic automakers spent $4.1 billion in the first three quarters of 2008, off almost 19% from a year ago.

Foreign manufacturers, meanwhile, spent $5.5 billion in the first nine months of this year, off a little more than 7% from 2007, according to TNS data.

Even though the auto sector is suffering, especially on the local level, with a continued loss of dealerships and/or pullback by existing dealers, operators need to keep relationships with their dealer clients intact. And account executives need to understand what the dealers are going through so they can tailor ad packages that meet their needs — now and later — said Insight Communications senior vice president of ad sales Kevin Dowell.

Andrew Capone, senior vice president of marketing and business development for National Cable Communications, agreed. He noted that NCC maintains a consultative approach with clients and agencies so they understand what cable has to offer and how it can better meet their goals.

National spot sales are down, but not as much as other media outlets, Capone said, noting that manufacturers, especially foreign automakers, are still buying media time. To be sure, the Big Three domestic automakers spend more than the foreign manufacturers and General Motors remains NCC’s largest auto client, Capone said. But a few of the foreign manufacturers including Lexus, Kia and Hyundai, may actually increase their budgets in 2009 because they have new products to hype.

At the same time, it’s imperative to expand into new segments that will provide growth opportunities going forward. Health/wellness and travel are two categories where operators see growth potential. It will take time to nurture and cultivate those segments, according to Dowell, but both provide a lot of upside.

“We’re always focused on expanding our business,” Capone said. “The health and wellness category is a multibillion-dollar business that spends virtually nothing with us today,” Capone said. “Our products and services provide them with tools that can better serve their needs than just a 30-second spot. For instance, drug companies and doctors could use VOD as means of better explaining the benefits of a particular drug or procedure.”

Despite the downturn in the economy and the auto-industry slump, operators generally remain optimistic about the future. OnMedia will close 2008 up over 2007 totals when political dollars are considered and Litwer said ad sales without political will still be flat to 1% down from the previous year. Given the reduction in auto sales and the general implosion of the broader economy, he considers that a victory.

“We have sold more accounts this year than any other year in our history,” Litwer said. “That growth isn’t necessarily making up for the loss of the auto sales we experienced this year, but we are developing new business and that is huge.

“When the economy bounces back, some of those small accounts may become large ones. I feel good about our position. I think there will be an explosion of marketing dollars flowing to TV in the next two or three years. We just have to figure out how to get past the next couple of years.”

NCC’s Capone believes auto sales will eventually rebound although things look pretty bleak in 2009. “Auto will be back at some point,” he said. “We have to make sure we keep the relationships we have now strong. We can’t abandon a client simply because they are having a difficult time.

“This will always be a big category for us. Next year won’t be pretty, but the truth is consumers’ appetites for cars will rebound and TV is the best medium to brand a product. The good news is that we have a lot of great stuff to talk about and offer. We have improved products, rising ratings, stronger research, polled data and advanced products and services that will help them sell their goods more effectively and efficiently.”

Research is something Bresnan is using to help sell its products and services, Enright said. The company recently invested in Show Seeker, a software product that enables an ad-sales department to weed through the hundreds of avails on each system so clients can better target their audiences.

The idea: Give clients more bang for their buck and make Bresnan’s own operations more efficient. The company is also focused on offering new products with varying price points that can appeal to a wider range of client, Enright said.

“We’re putting a lot of focus on our Internet offerings in 2009,” Enright said. “The price point for that product is lower than it is for a 30-second spot and can be highly targeted. That’s attractive to a lot of clients.”

Operators will have to go beyond selling the 30-second spot going forward, they said. Broadband sales, long-form programming and video on demand are just the tip of the iceberg, according to sales executives.

OnMedia is preparing to launch an extensive Internet option for ad clients, Litwer said. Bresnan spent much of 2007 and 2008 getting its online ad component up to speed and training its staff to sell the product properly, Enright said.

Insight is heavily focusing on offering clients a broad range of vertical opportunities including online and advanced services, Dowell said.

“We want to be the value-added player for advertisers,” Dowell said. “We have to provide a good value and good results and we have to understand what our clients are going through right now. We have to balance providing solutions for them with our own needs.”

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