Phoenix is a great place to be in the business of indoor entertainment. Even in winter, the mercury can hit the 100-degree mark. And microbursts can dump several inches of rain in short periods of time.
Cox Communications Inc. makes the most of those great cable conditions. The MSO uses the state capital as an early launch market for many of its products, including the highly-praised rollouts of interactive advertising, as well as joint venture local channels that widen the advertising net.
Fran Mallace, vice president and general manager for Cox Media in Arizona, says the rest of the country may have misperceptions about the Phoenix market.
“We're not all cowboys and Indians,” she says of the Southwestern hub. “When I go out on calls, there are still people that think of Phoenix as a retirement home.”
Neither is true, she says, noting the city's median age of 35 (actually, 32.9, according to the Greater Phoenix Economic Council). Those thirtysomethings are established in their careers and ready to buy products of all types. Ad agencies note that that demographic is one of the reasons Phoenix serves as a test market for new packaged goods.
DIVERSIFYING THE AD BASE
To reach this rich market, Cox Media inserts local advertising on 63 networks. The ad sales arm has had the greatest success with the traditional targets — the auto dealership category is typically the top revenue-earner. But to make the cable system less reliant on that economically sensitive industry, Cox has reached out to diversify its ad base, attracting spots from health care and financial sectors. Most recently “furniture has just taken off for us,” Mallace says.
“Groceries have been good, too. People have to eat, and they're having more kids,” she says.
For the last two years, Cox, which passes 640,000 homes in Greater Phoenix, has added digital ad placement to its offerings for local businesses.
Biography, History, ESPN Classic, and ESPNews were the beta channels, and advertisers took to them immediately. Six advertisers bought year-long flights right away, she says.
The digital slots are sold on their own, not as a value-added bonus for analog advertisers, Mallace says. “We've never given anything away. Once you give it away, you can't convince someone it has value.”
It didn't hurt that a Cox Media buy can have a very broad reach. In addition to the Phoenix market, Cox serves 1.7 million business and residential customers in several suburban communities. Cox Media represents systems in northern Arizona, including Bullhead City, Flagstaff and Lake Havasu, and represents Comcast Corp. in its Tucson system. Those operations add another 75,000 customers to the mix.
But what may attract the next wave of advertisers is not broad reach, but specific reach. Cox Media began testing its infrastructure in January, and has had the ability to sell interactive applications to clients since April. At this time, only Cox's Albany, N.Y., and Phoenix systems are selling interactive ads.
Cox took the interactive concept straight to some of the advertisers they were sure would “get it,” such as Robb & Stucky, a high-end furniture chain with locations in Scottsdale and Tempe. Cox offered the store the ability to tag its ads with an interactive prompt that gives customers the option to tune to Cox ch. 109 to view more information about the store and its products.
Lance Hanish, chairman and CEO of LBC Advertising in Santa Monica, Calif., placed the ad buy for the furniture chain.
“It's helped us refine our buys,” he says. By tracking consumer traffic to ch. 109, the furniture chain has already been able to determine what networks and shows actually perform for the business, Hanish says.
The ad buyer is skeptical of video-on-demand long-form programming. Operators eventually will charge consumers to access that destination, he believes. Interactivity doesn't charge for an expanded informational experience, he adds. The linear channel Cox has set up is devoted to home and interiors from 5 p.m. to midnight, the hours when Robb & Stucky runs most of its ads, Hanish says.
As a result of the ads, over the last month, the chain's stores have had the highest amount of visitors they've ever had, he says, which is a direct reflection of the traffic driven by Cox's advertiser channel.
Another early adopter is Legends Cadillac, Mallace says. The car dealership can tag its ads so that, when prompted, a viewer can hit the “A” key on their remote to request a coupon. The responses are forwarded to the advertiser, who is responsible for the fulfillment. The coupon can be worth thousands of dollars, depending on the model purchased by the consumer.
Cox also uses the interactive capacity for the promotion of its own products. During commercials for Cox telephone (in areas where telephony is available), Cox business and EZ pay services, the cable company tags the spots to allow subscribers to indicate interest. These “hot leads” are turned over to outbound telemarketing for follow-up.
'ZONING ON STERIOIDS'
“This kind of advertising can set us apart in a big way,” Mallace says. Interactivity is akin to “zoning on steroids,” allowing advertisers to target a 100,000-subscriber zone, perhaps smaller. For instance, if the company were to do a campaign with a fast food restaurant, they could tag the spot with the information on the very closest outlet of the chain.
Cox also hopes to sell the option to grocery chains, emphasizing the zoning feature and the ability to alter the ads on a daily basis.
Interactivity also has potential in the political arena. Cox just started pitching the capability to local candidates, noting they could solicit feedback on commercial effectiveness while the spot is on-screen. Mallace says the focus is only on local candidates at this point.
The new technologies are just the latest strategies the system has developed to generate ad revenue. It was also out in front with creative local partnerships, including one with a traditional competitor: broadcast.
The local Arizona News Channel grew out of retransmission consent agreements more than 12 years ago, Mallace says, and has turned into something “really fabulous,” both for the operator and its partner, Belo Corp. which bought the local WB Network affiliate two years ago.
“Even though we are competitive, this has been a great partnership,” Mallace says. The WB and Belo buy a lot of time on the joint channel to promote programming on the broadcast station, she adds.
The WB and Belo also produce Mas Notas, a Spanish-language channel that Cox executives describe as “CNN meets MTV.”
The local major league sports teams have also entered lucrative partnerships. Phoenix was one of the first markets to create revenue-sharing agreements with its big-ticket franchises to help drive the gate. Cox has deals with the National Basketball Association's Phoenix Suns, the National Hockey League's Phoenix Coyotes (yes, there is ice hockey in the desert) and the Women's National Basketball Association's Phoenix Mercury.
The franchises buy time on Cox systems, and the operator helps promote the teams.
A notable exception, this time of year, is Major League Baseball's Arizona Diamondbacks. Though the operator has signage and monitors wired throughout its home, Bank One Ballpark, the cable company hasn't been able to convince the team's owners to join the fold. “But if they continue to lose the way they have this season …” Mallace says, hope audible in her voice.
Though innovation has driven ad sales growth in part, plain old population growth undeniably has been a factor in Cox Media's success in the Phoenix marketplace.
Throughout the 1990s, Arizona was the second fastest growing state in the country (the No. 1 spot was claimed by Nevada). In all, the population has increased 54% during the decade, well in excess of the national average of 15% growth.
As of 2002, the median income is $45,776 —the national average is $42,228 — according to U.S. Census data. The population boom is continuing, too. Housing permits for the Phoenix region are up 44.9%, compared to 25.9% nationally.
If Mallace had any doubt about the growth, she only has to look at the history of her own staff. When she joined Cox 12 years ago as a sales manager for the then-Greater Phoenix Interconnect, there were 23 ad sales employees. Today, there are 140 people in the unit, including 31 account executives in Phoenix.
It doesn't hurt the sales effort that the region's top executive came from the ad side.
“[Vice president and general manager] Steve Risley hired me. It's wonderful to have someone who understands my side of the business,” Mallace says.