Flattery From the Enemy

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If success can be measured by the defensive tactics of one’s rivals, then those involved in local cable advertising should feel rather pleased as they attend this week’s Cabletelevision Advertising Bureau Sales Management Conference in Chicago.

Sure, there are plenty of challenges to discuss at the event — from the lack of political spending to how local cablecasters can run their businesses more effectively. But any negative issues will be balanced by one heady, significant fact: the hottest discussion about local cable these days isn’t coming from local cable, it’s coming from local broadcasters. The issue isn’t cable’s growing audience. It’s broadcast’s shrinking local ad dollars.

Cable network cost per thousand (CPM) rates are lower than that of broadcast networks, says Gary Belis, vice president of communications at the Television Bureau of Advertising, the trade organization protecting the interests of broadcasters. But “it’s exactly the opposite on the local level,” he says. “Local cable CPMs are two, three, even four times as high as local broadcast.”

Although many cable executives agree with Belis, they say that it’s not true for all markets, or in all instances.

Belis and Hearst-Argyle Group president and CEO David Barrett are the prime movers behind the first-ever joint broadcast network anti-cable attack ads running in several trade magazines and The New York Times since April.

Consider the numbers. In 2003, local broadcast revenues were flat to up 2%, according to the TVB. On the other hand, spot cable had robust double-digit growth. And despite this summer’s broadcast-heavy presidential campaigns and Summer Olympics, that growth is expected to continue in 2004, with regional sports increasing 13.3% (to $571 million) and local spot up 12.0% (to $5.3 billion).

But there’s a huge glitch. As good as those numbers are, total broadcast spot dollars still overwhelm local cable, even with local cable’s growing viewer numbers. While on cable, local and regional spot sales should bring in over $600 million in revenue, local broadcast will be a $17 billion business this year, thanks to greater demand by advertisers — at least for now. So while cable’s growth is real, buyer perception is critical.

“The headline to me, when thinking about U.S. television advertising, is how irrevocably viewers have moved to cable,” says CAB president and CEO Sean Cunningham. “All share numbers show cable grows every week, every month, every quarter. The big tipping point is we are now equal in reach.” And reach means more equal buyer dollars.

As Kevin Barry, the CAB’s vice president of ad sales, puts it: “We have to reshape TV advertising’s view of cable. Over a half of our revenues come from direct competition with broadcast. But we need to go after the sub-DMA business — those regional franchises that spend over a $1 million dollars or more in a local market but don’t need the entire DMA.”

According to Barry, whether the market is San Francisco or Fargo, N.D., spot cable competes against local broadcast (and local print) for car dealerships, movie franchises, regional sports advertising, even for local broadcast programming promo dollars — anything where viewership is geographically targeted and makes buying broadcast inefficient.

EXAMINING THE METRICS

“What our Chicago conference will focus on this year is how to run our business better,” Barry explains. “We need to look at our metrics. How best to measure an account executive’s performance. We need to explore account list management: how best to work with advertising agencies buying spot TV. We will explore how to recruit, hire and train. And we’ll look at how to capitalize on the 'next big thing,’ whether it’s [digital video recorders], video-on-demand, addressability or interactivity.”

Not on the conference’s printed program, but part of the CAB’s ongoing agenda is the “one TV world” mantra that Cunningham — once a major agency planner and buyer — warmly embraces.

“Except for those advertisers who only need TV for say four or five key events of the year — Oscars or Super Bowl or whatever — and thus will only use broadcast, no one plans that way anymore,” Cunningham says. “By 'one TV world’ we mean there is an interchangeability for advertisers that includes substituting some cable for some broadcast, but essentially says 'buy both,’ especially since the Nielsen [Media Research] numbers offer no quarrel [with our view of cable’s growth].”

In May, as a prelude to its conference, the CAB released findings of a study conducted with Knowledge Networks/SRI that “contradicts long-held notions of TV viewing,” according to the CAB. The study, How People Use TV in 2004, includes several key points: TV is TV; primetime isn’t primetime for all demos; and cable is central to many viewers’ lives, and those viewers say advertising works better on cable. The study also showed that 43% of respondents were more inclined to buy products seen on cable, whereas only 36% were inclined to buy products advertised on broadcast TV.

“Ad-supported cable viewers have a very powerful connection between cable brands and cable programming,” Cunningham claims.

That’s where those higher cable CPMs come in. “Broadcast has awoken to the fact that spot cable is hurting them, but it’s too little too late,” says Larry Fischer, president, Time Warner Cable Ad Sales. “Spot cable costs more because more people want to buy it. I saw recently where the local ABC affiliate here in New York did a 2.2 rating in prime time. Could you ever imagine a flagship station in the top media market with such a small number? Yet we did a 35 rating in San Antonio when TNT carried the Spurs’ [National Basketball Association] games. That was a huge number. People are going to cable, and that translates into higher cable prices.”

Indeed, according to Fischer, spot-cable billing in New York is fourth behind the local NBC, ABC and Fox affiliates, beating four other broadcast nets (CBS, UPN, The WB and PAX) in the process.

POLITICAL FRUSTRATIONS

While those results are reason to break out the champagne, Fischer is frustrated by the lack of political dollars. While both President Bush and Sen. John Kerry are running ads on national cable networks, neither is spending much on local cable. “One issue for me at the CAB conference is why political isn’t happening,” Fischer says. “We’re quite capable, and we’re getting nothing.”

Indeed, the CAB created a Washington, D.C.-based political-action team that has spent the last year talking up cable to the Republican and Democratic National Committees and a host of governors. “We thought we convinced them, but the money hasn’t happened,” says Fischer. “We’ve been told to hang in there; that money might be coming in down the road. But if Florida broadcast is already sold out, why not buy spot cable?”

Local operators may have to play a game of patience on the political front, but the CAB wants to help them do something to alleviate other problems. One of the key breakout sessions at the conference includes “Maximizing Program Value,” a course in increasing inventory management skills by better allocating networks and fixed positions.

Another breakout session, “Collaborative Approaches to Maximizing Promotions,” offers more of the same, but links local ad sales and network promotions with win-win marketing of “public affairs and building ad revenues.”

Some networks are clearly bent on increasing those opportunities. For example, Court TV decided to dedicate half of its affiliate-relations group to local ad sales this year. And the network is sending six members of that team to the CAB Chicago conference.

“Court TV will be meeting with attendees to educate [account executives] on developing successful promotions such as ours, and to educate them on the value of Court TV,” says the network’s senior vice president of national accounts and regional sales Ellen Schned.

“Local ad sales are going to be a significant growth area for local cable,” notes Bob Rose, Court TV’s executive vice president of affiliate relations. “Indeed, a recent Merrill Lynch report notes that cable stocks can move up significantly if local ad sales increase. We want to help the cable industry reach that goal.”

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