Networks in Lockstep

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Changes in the cable local-advertising business have spilled over into the network world. They have affected the way network-support teams orchestrate a head-spinning array of promotions, support programs and special events designed to help their affiliates make money from selling local-advertising time.

Network representatives say MSOs that participate in the nearly $5 billion-a-year local-cable advertising market are increasingly:

  • asking networks to come up with more customized — and in some cases market-specific — programs and promotions;
  • insisting that networks make prizes for sweepstakes winners available in every local market, not just nationally;
  • and looking for campaigns that tie in with national network sponsorships and advertised brands.

The changes affect a part of the cable programming business that is little-known to industry outsiders. Because they demand license fees from their distributors, many cable programmers believe they face a sort of quid pro quo to help their cable affiliates make money by selling chunks of advertising time made available for the insertion of local commercials.

“It’s really about adding value to the network proposition,” says Todd Greene, senior vice president of affiliate marketing and local ad sales for Rainbow Network Sales.

There’s no doubt the network-guided promotions help affiliates make money. Discovery Networks estimates the cable systems that made use of its “American Chopper Supercycle Sweepstakes” last year generated $4.3 million of local-advertising revenue, with $1.4 million regarded by Discovery as “incremental” income beyond normal budgets, according to network vice president of affiliate advertising sales Michael Van Bergen.

ESPN’s NFL Windfall

ESPN says its annual National Football League affiliate advertising promotion helps shower participating affiliates with close to $40 million in local ad revenue.

But networks also feel pressure to come up with interesting and innovative promotions at a time when cable industry consolidation has created more powerful distribution companies. “The days of canning things are dead,” says Kurt Greve, Rainbow vice president of affiliate advertising.

Historically, most cable networks have made available off-the-shelf campaigns that could be used by any affiliate. Some of those one-size-fits-all promotions still remain popular with cable-advertising organizations because they’re familiar and easy to implement. For example, recurring promotions for ESPN’s NFL coverage and ABC Family’s “25 Days of Christmas” schedule continue to draw strong participation partly because “affiliates don’t have to completely re-educate their staff every year,” says Gary Perrelli, vice president of affiliate ad sales for Disney and ESPN Media Networks.

But Perrelli and other network affiliate-marketing executives are also trying to balance an appetite for generic promotions with rising demand for tailored campaigns. Hallmark Channel, for example, allows for a wide range of applications associated with an ongoing ad-sales promotion tied to its “Great Stories” theme.

“It’s vague for a reason,” says Hallmark senior director Rita Caprino. “Affiliates are looking for more flexibility and more customization when it comes to promotions.”

They’re also looking to capitalize on what’s going on with national-network sales efforts. Turner Network Sales is bridging the national and local advertising worlds by offering affiliates in the top 25 U.S. TV markets an on-air and merchandising campaign tied to Cable News Network’s 25th anniversary programming.

The campaign is narrowly construed to appeal to local auto dealers that sell cars made by Daimler-Chrysler, a national sponsor of the CNN anniversary coverage. But TNS also is responding to the customization demand. Affiliates have wide latitude over how to use giveaway DVDs and portable DVD players TNS makes available. They can also determine when they want to run the promotion and decide which Daimler-Chrysler dealers and brands to involve.

“One of the main things that markets are asking for is more customization and more personalization,” says Jennifer Mirgorod, TNS’s vice president of strategic marketing.

Customization means networks field more requests than ever for talent appearances, trip giveaways and merchandising support. “Everything is driven by an operator’s business needs,” says Marla Hoppenfeld, vice president of public relations and affiliate marketing for The Weather Channel. “And every market is different.”

As a result, the mix of network-administered promotions has broadened. This year Dis­covery Networks alone is stag­ing three “turnkey” ad-sales promotions, three MSO-exclu­sive promotions, two touring events and a range of market-by-market promotions. Its “Animal Planet Expo,” which raises money for local animal charity organizations, generated $1.1 million in local ad revenue, says Danielle Mercurio, director of integrated marketing and promotions.

Networks also are responding to demands for sweepstakes prizes that reward winning entrants in multiple markets.

“In the old days we would create one national promotion with one national prize, like a trip or a car,” says NBC Universal Cable vice president of affiliate sales Brian Hunt. “Now we’re finding the MSOs come to us and say, 'We’d rather have a lesser prize, but more of them.’”

In some cases, that means networks must spend more. This year, NBC Universal Cable staged a 31-market promotion with Time Warner Cable Media Sales tied to USA Network’s Monk series. In each of the markets, a local winner won a trip for two people to Los Angeles to visit the Monk set. “Obviously that was a big commitment for us,” says Hunt.

Networks are also investing in MSO-specific campaigns. For example, Discovery Networks foots the entire bill to produce customized promotional materials tied to Charter Media Services’ exclusive “Monster Garage Go-Kart Giveaway” promotion. ESPN last year staged a 13-market sports memorabilia event tour with Cox Communications.

Shedding Print Costs

Costs have declined in one area, however. Networks that once printed and mailed thousands of elaborate media kits and brochures now rely largely on online distribution of ad slicks, programming schedules, research and information. The shift to online delivery has erased nearly $250,000 in annual printing and postage costs that NBC Universal Cable used to spend, Hunt estimates.

That’s not the only economic benefit for networks that support affiliates’ ad-sales effort. In many cases, they also trade their promotional support for exposure of network brands via local-cable ad inventory. “We do get cross-channel exposure, and that means a lot to us,” says Turner’s Mirgorod.