For local cable advertising executives, the future is not quite here yet. Most of them say that it's a bit too soon to focus on interactive television, local People Meters or digital-network insertion — although a few MSOs might start some initial tests of the latter late this year.
Instead, cable operators say they will spend the next year or so working on meat-and-potato issues: fine-tuning new interconnects and insertion lineups, maximizing political ads and diversifying their client base by trying to convince recalcitrant would-be advertisers that they should buy local cable.
Operators are acting on the presumption that business is bound to pick up over the rest of the year. In fact, if cable ad-sales executives were running for office, their platform would be a throwback, Warren G. Harding style: "Return to Normalcy." That's exactly what they are counting on for the second half of 2001.
After an admittedly sluggish first half of the year, operators say they see signs of recovery.
"The second half of the year looks markedly stronger than the first half," said Cablevision Systems Corp. executive vice president of advertising sales Bob Sullivan.
"Everyone senses a degree of stability. The hesitation we saw in the first quarter is gone and we're starting to see folks coming out of the woodwork."
Cable operators have fared somewhat better than their broadcast brethren in the economic downturn because of cable's ability to offer advertisers a low-priced targeted alternative to broadcast television stations' total-market approach. Moreover, mature industries tend to suffer more in down cycles than fresh ones like cable, said Bob Sherman, the recently named president of Time Warner Cable Ad Sales.
Most cable operators don't break out local ad sales in their quarterly reports. Among those that do, however, the normally robust category slowed markedly.
At Adelphia Communications Corp., local ad sales grew 6.8 percent compared to 15.4 percent for the same period a year ago. At Cablevision Systems Corp., ad sales were virtually flat after growing 26.6 percent. And Cox Communications Co. blamed a "general economic softness" for a 6 percent drop in local ad spending.
All of this has led Kagan World Media Inc. to project local ad sales to grow by $310 million in 2001, cable's worst year since 1997 (see chart).
So what's the master plan to jump-start ad sales?
It's nothing explosive or revolutionary. For the most part, operators say they'll just keep grinding away.
"We haven't changed our focus because of a down year," said Hank Oster, executive vice president and general manager of Adlink, the Los Angeles-based interconnect that serves 3.4 million homes across 80 cable systems. "Business ebbs and flows. The business has been on a great growth track for the last eight or nine years.
"The downturn will eventually end, whether it's the fourth-quarter or mid-year 2002. Our plan has always remained the same."
That means Adlink will continue to aggressively use branded integrated-marketing campaigns to drum up business. For example, Adlink works with Discovery Channel and Sea World for a promotion surrounding Shark Week.
Cablevision's Sullivan agreed: "You don't panic. You keep on doing the fundamentals of business and things will turn around."
While operators pursue their own distinctive tactics to goose sales, their plans tend to fall within similar broad categories:
Work harder to show companies that haven't advertised on cable that they could benefit from the medium, and narrow the disparity between the prices that broadcast stations and cable operators receive.
Broaden the ability to sell in ever-increasing narrower "zones" in order to target customers who only need to reach a limited audience.
Work more aggressively with cable networks and other sister companies on "integrated" marketing partnerships that go beyond just selling spots. Though operators have been doing this for years, they say the economic slowdown has forced them to redouble their efforts in this area.
One area that operators are likely not to soon dabble in is interactive television. While executives keep an eye on such ITV services as Wink Communications Inc.'s offering, they feel it's more important to focus on the basics.
"We're evaluating various projects and partners for interactive TV," said Roger Sverdlik, senior vice president of ad sales for Comcast Corp. "We are talking to a number of major advertisers about tests."
But the core advertising business is a demanding one, Sverdlik added.
"We have a message to get out on the value of the core product," he said. "That's where the focus is. ITV is still in the background. … We're trying to understand it all and see how to utilize it with customers with an eye on being part and parcel of the core ad-sales business."
Another pet peeve likely to go unfixed is research. Operators know the current system of using diaries to count demographics in local markets greatly discounts their audience, but Nielsen Media Research's testing of local People Meters is still in the embryonic stage.
COMING: DIGITAL INSERTIONS
Initial People Meter results from Boston showed a 10 percent drop in the number of homes watching television, but operators downplayed those findings as premature.
"It might be a little soon," said Sherman. "It's only one or two months worth of data. The net effect is that it will benefit us. We're constantly looking for it."
Digital-cable spot insertion is getting more attention. Adlink has been working with AT&T Broadband on digital-into-digital ad insertion in Los Angeles for about a year, and Cox has indicated that it might also have some plans for this year.
Adlink chief technology officer Paul Woidke said the technology has been deployed in six of the operator's dozen headends thus far. Looking ahead, he said, "We expect to complete [digital-into-digital] deployment in the fourth quarter, probably around the end of the year."
But for the most part, operators said digital penetration is close, but remains too limited to work economically.
"We're looking at it now and we continue to look at it," Sverdlik said. "There will come a time sooner, rather than later, that it will make business and economic sense to insert on digital. We're taking it one step at a time."
That means Comcast wants to first sell "deeply and consistently" across 32 networks before it branches out. "Pragmatically, before we rush and insert on 64 networks, we want to get it right on 32 networks," he added.
Inserting on digital networks came to the forefront recently, when two interoperable standards for digital insertion were tested on June 28. (That's not to be confused with digital ad insertion, a technology for inserting on analog networks that has been around for a number of years.)
Cox is conducting lab trials in Phoenix and Atlanta, and intends to take the technology to live to homes in Phoenix in late August or early September, Guy McCormick, vice president of technical operations for Cox's CableRep division, said several weeks ago. He said the MSO would offer digital ad insertion on one to four channels, with ESPNews and SoapNet among the likely candidates.
"It's a high priority for us how to access that inventory and that viewership," said Cox vice president of ad sales Billy Farina.
Adlink is also looking forward to inserting on diginets. Its chief technology officer, Paul Woidke, chaired one of the working groups that developed one of the standards.
"This will raise awareness to help people fight for their budgets, to put funds aside," Adlink's Oster said. "It will put more funds and resources on digital deployment."
Why should so much energy be directed toward inserting on networks that will have such limited penetration?
"If an advertiser truly wants to target kids, they only have a handful of networks to truly target kids," Oster said. "If I can offer them an additional few thousand very attentive families or kids or parents through Discovery Kids, and I'm able to drive CPMs [cost-per-thousand homes] against that, that makes sense. Why wouldn't [advertisers] or I want to do that?"
Ad-sales executives seem more upbeat than they were six months ago. Cable's ability to target smaller categories of viewers, and charge lower prices than broadcast stations, helped to stabilize the operators in the first half of the year. That leads them to be optimistic that prosperity is just around the corner — or only a few blocks away.
Cablevision's Sullivan said the company has lost very few accounts. Mainly, he said, companies cut back.
"We're renewing most customers, not losing customers," he said. "Our market share hasn't gone down. That bodes very well for the future.
"It's not like our numbers are down because we lost 50 percent of our customers," he said.