TCI Joins Expanding NCC as Partner

Author:
Publish date:

After years of persistent rumors that the two national
spot-cable ad-sales rep firms would form a "superrep," National Cable
Communications late last week seemed to approach that stature without the benefit of a
merger.

NCC said last week that it will be expanding in the wake of
a revamped partnership agreement. Tele-Communications Inc.'s TCI Media Services
became NCC's fifth MSO partner, joining Comcast Corp.'s Comcast Cable
Communications Inc., Cox Communications Inc., MediaOne and Time Warner Cable. Although
Katz Media Group formerly had a 50 percent interest in NCC, the announcement said all six
companies will now be equal partners.

Under the partnership's new terms, NCC is widening its
focus to encompass 97 of the top 100 markets by "early 1999," said John Sawhill,
NCC's president and CEO. That's up from 78 of the top 100 currently, he noted.

Between now and early 1999, NCC will replace rival Cable
Networks Inc. chiefly on TCI and Time Warner Cable systems in 19 of the top 100 markets,
Sawhill said.

Larry Zipin, vice president of ad sales at Time Warner
Cable, said it will switch 10 markets, all within the top 10, by Jan. 1.

Jerry Machovina, executive vice president of ad sales at
TCI Communications Inc. (TCIC), TCI's cable arm, said he was unsure how many systems
it's switching out of CNI, but he was clear on why: The pact will enable the MSO
partners to in effect discount the rep commission rate by giving their systems a year-end
"rebate," drawn from NCC's profits.

When asked to explain how the new arrangement came about,
Sawhill said, "The five MSOs genuinely want a greater customer focus" in their
dealings with the advertising community. Initial discussions had begun among the MSOs
(minus NCC) about a year ago, he added.

In a prepared statement, Sawhill said, "The expanded
NCC will represent all of the cable subscribers served by these [partner] MSOs, which,
when combined with NCC's existing clients, represent 51 million cable households, or
82 percent of insertable cable homes." All told, NCC said it reps systems in about
175 markets, including eight of the top 10.

NCC has been representing virtually all of the systems of
Comcast, Cox and MediaOne, but Sawhill explained in an interview that Rainbow Advertising
Sales Corp.'s (RASCO) CNI had repped "many" Time Warner systems and 45
percent to 50 percent of TCI's prior to the reworked agreement.

The new pact calls for the MSO partners to "accelerate
upgrades of their advertising-distribution capabilities," according to the
announcement.

Sawhill said that refers more to digital ad-insertion and
electronic-data-interchange capabilities than to the addressable advertising plans of
Kraft Foods via TCI systems (and via NCC). The latter innovation will happen
"eventually -- many years from now," Sawhill predicted. But Machovina called
that "part of our strategy."

Citing digital insertion, Sawhill said it's more
important that cable operators be able to offer clients 24-hour turnaround as a way to
compete with broadcast-television stations.

"Most big markets can do that now," he said,
adding that the aim is to make that more universal.

As a result of the new partnership deal, NCC will staff up
and add new offices, Sawhill said. Although he declined to specify a personnel figure,
since the board has yet to vote on that, Sawhill said there will be new offices in Denver,
Seattle, Cleveland and "probably St. Louis." Another due in San Francisco is
unrelated to this expansion, he added.

"The beneficiary [of the new NCC] is going to be the
national advertiser," Sawhill said.

"We are now in a better position to communicate [such]
advancements [as market consolidations, digital platforms, programming investments and
improving audience measurement]," Sawhill said in his statement, "and to
translate the full range of advertising capabilities that the cable industry can offer to
advertisers."

Those are the key points that NCC -- in association with
the Cabletelevision Advertising Bureau and CNI -- will try to drive home to ad agencies
and their clients at its National Spot Cable Forum in New York Oct. 28. That pitch will
also tour six other key spot markets next month in what NCC vice president Steve Houck
described in July as the spot-sales equivalent of the networks' upfront sales
presentations.

However, Sawhill and Machovina were adamant in disputing
the idea that NCC will now be in a better position to represent the so-called national
interconnect that five of the top six MSOs were said to have green-lighted during the
summer.

"There's not any plan for a national interconnect
that I've heard talked about by MSOs or others," Sawhill maintained. "We
aren't talking about that in any fashion."

Machovina, calling press coverage on the topic "a
nomenclature mistake," concurred, saying, "We never discussed a national
interconnect in those terms."

On the other hand, the primary benefit of such a nationwide
interconnect sounds very much like the goal of the new NCC -- to bolster national
spot-cable ad revenues by means of the one-stop-shopping concept. Machovina agreed
somewhat, but he said a nationwide interconnect is "not the strategy."

NCC will soon be able to offer "one-stop shopping for
the top 100 markets, except for three," Sawhill said -- the missing ones being
Albuquerque, N.M.; Buffalo, N.Y.; and part of Cleveland.

Both executives stressed that NCC has no plans to pursue
network business.

Related