Chicago -- Increasing the number of insertable networks and
selling advertising in conjunction with local Web sites are two areas of potentially
significant ad-sales growth, several MSO executives said during the local-ad-sales panel
at the National Show here earlier this month.
That's true whether those operators are in major or minor
Two of the speakers -- Darrell Campbell, president of TCA
Cable TV Inc.'s VPI Communications Inc. (including its CableTime turnkey ad-sales
operation), and David Brickhaus, vice president of ad sales at Fanch Communications Inc.
-- offered the small-market perspective.
Campbell said total ad sales at TCA have grown from
$714,000 on 19,000 subscribers in 1988 to a projected $90 million on 3.4 million
subscribers by the end of this year.
That growth has been fueled by the trend toward digital ad
insertion and satellite delivery of commercials, which have made cable much more flexible
to buy, while also saving operators money.
The switch to delivering spots via satellite has saved TCA
$500,000 in shipping costs yearly under the old videotape-based system, Campbell said.
As part of the greater flexibility, CableTime can get a
spot on the air in 20 minutes, versus two days under the old tape system, he added.
Local sales volume has risen from $634 million in 1990 to
$2.2 billion in 1998, he said, with net billings per subscriber also climbing from $12 to
$30 in that same time frame. Ad revenue as a percentage of overall system revenue is also
on the rise, from 3.8 percent in 1990 to 6.3 percent by 1996, 6.9 percent last year and
7.2 percent this year, he said.
Basic cable's ratings growth has helped to boost ad sales
from national down to the local level, Campbell said, but so has the widespread
implementation of digital insertion technology.
Industrywide, the average number of networks inserted by
operators has soared from 7.6 channels in 1989 to 20 in 1997, he pointed out.
Since there are some 60 basic networks that offer local
avails, he observed, "There's still great growth [potential] out there."
Advertising on the Web is also shaping up as an area of
great opportunity for operators, as well as networks, Campbell said.
"There's a lot of revenue to be spent locally on the
Internet," he said, and CableTime is seeking its share via its Couponslocal.com and
Aggielinks.com sites. Those sites are being pitched to clients in categories ranging from
automotive to apparel retailers, he noted.
MediaOne Group Inc. vice president of ad sales Ed Dunbar
concurred that the Internet is a growth area that will, for example, support operators'
cable revenue streams from photo-classified and real estate channels.
In addition, the MSO is working with high-speed-data
service Road Runner on advertising applications, he added, but first it needs to reach a
critical mass of distribution before it can begin selling local ads in earnest.
Brickhaus also felt that the Web offers
"substantial" opportunities for ad-sales growth. At America Online Inc., for
instance, he said, 22 percent of total revenue comes from ad sales, up from about 18
percent last year.
On the spot-cable side, Brickhaus anticipated that cable's
share of overall spot dollars should jump from 7 percent now to well into double-digits in
the near future. The only possible obstacle to attaining those heights would be "a
severe economic downturn," he added.
Dunbar, who projected MediaOne's gross ad sales for 1999 at
$240 million for a net of $40 per subscriber, foresaw spot-cable sales climbing
"north of 20 percent" if the economy stays strong.
Automotive remains its top category, representing 25
percent of the MSO's total sales volume, he added.
Campbell lauded spot-cable rep firm National Cable
Communications' role in making spot cable easier to buy by expanding electronic data
interface into more than 100 markets. But Dunbar said, "The backroom is still a
hurdle" for agency buyers.
Charter Communications vice president of ad sales Wes Hart
said he's "watching very carefully what the interactive companies are offering."
Hart cited WorldGate Communications Inc.'s "Channel
HyperLinking" capabilities as one such opportunity, offering viewers the chance to
click from a program on Cable News Network or a commercial for ERA Real Estate, for
example, to related Web sites for more information.
During the question-and-answer segment of the panel,
cable's local-ratings difficulties came up.
Dunbar said MediaOne uses Nielsen Media Research ratings,
but it's also been using ADcom Information Services Inc.'s ratings in Jacksonville, Fla.
One of the advantages of the ADcom data is that that firm uses a larger sample size than
Nielsen does, he added.
For smaller markets, Nielsen is "pretty
high-priced," Campbell said. Brickhaus added that many of Fanch's clients use another
form of research to gauge cable's effectiveness -- the cash register, a reference to
cable's impact on clients' retail sales.
At yet another National Show session, the topic of
"[That] application is in the mail -- it's not here
[yet]," Comcast Corp. vice chairman Julian Brodsky said. At some future point,
however, "It's going to be huge [in producing revenues]," he added.
Charter vice chairman Barry Babcock, who said Wink
Communications Inc. is testing interactive TV and advertising on some of the MSO's
systems, agreed that interactivity is "a little slow in coming."