Solid Year, Solid Forecast

Local and national spot cable see double-digit gains this year, and the potential for a bigger climb down the road

Cable operators are wrapping up a year of solid gains for local ad sales, and anticipate an even stronger one in 2003.

Large and mid-sized MSOs estimate their 2002 local advertising revenue will climb 11 to 16 percent over that of a year ago. National spot, propelled by enormous increases in political spending across the country, will come in anywhere from 19 to 21 percent up over 2001.

These gains are especially appreciated in light of an ad sales slowdown in 2001 that saw cable's long-time double-digit increases vanish.

"Political is going to represent about six percent of [our] growth this year," reports Tom Olson, CEO of National Cable Communications, the country's largest cable ad sales rep, with client systems in 93 percent of all ad-insertable households and 98 percent of all U.S. markets.

Cox Communications, currently in 48 markets (with Cox controlling 28 markets through owned systems and participating in interconnects in the rest), saw particularly strong growth in domestic and foreign auto, media and health care business.

Time Warner Cable Advertising Sales, in 34 markets nationwide, cites similar success, with very strong gains not only in auto and health care, but in entertainment spending. "Entertainment dollars already represent one of the largest categories," notes Larry Fischer, president of Time Warner Cable Advertising Sales. Indeed, he adds, "If you extract political dollars, we're still seeing local and spot sales growth that is exceedingly aggressive, given the strides we've made."

Characterizing his local sales gains in 2002 as on the high side of industry-wide gains of 11 to 13 percent, Fischer, who took over the post in May of this year, credits his unit's success to a newly centralized ad sales business and its adherence to a list of best political practices. "As far as political, we structured our rate card, we understood the category better," he says. "Our industry in the past shied away from political, especially with a 45-day window where you must offer lowest unit rates."

No longer.

"Cable is growing faster than any other medium and cable is systematically removing the obstacles to buying it," notes Kevin Barry, vice president of local advertising sales at the Cabletelevision Advertising Bureau. Barry acknowledges that automotive, representing more than 30 percent of all local cable ad dollars, vastly exceeds any other advertising category, but adds that others, including furniture retailers, HMOs and hospitals, are showing a great deal of promise.

Even small or mid-sized cable operators are rebounding.

"Local is up 16 to 17 percent throughout our markets," says Ron Pancratz, vice president of advertising sales at CableOne. "National spot is up 12 percent, depending on local races, gangbusters in Biloxi, poor in Boise." He too sees strong categories in automotive and retail.

All three MSO ad sales leaders agree on the worst categories as well: fast food, financial, tourism, restaurants and telecoms (although CableOne also added entertainment to its can-do-better list).

Noting cable's long efforts to successfully woo fast food dollars, Billy Farina, vice president of sales at Cox Communications says: "I'm still trying to decipher that decline. We put a lot of effort in it, yet it's still putting more dollars into broadcast."

All three MSO execs see 2003 gains in the mid-to-high teens.

"We're fully digital now," Barry explains, "and we've consolidated all the top markets except two. That means one invoice, one piece of copy, one point of sale."

Those two are Dallas and New York, and, according to Olson, Dallas is now in, with over 80 percent of its ad-insertable homes now represented by a single sales entity. And consolidation within New York City looks promising. "The atmosphere [for talks] is healthier than it's been in recent years," Olson says.

In the past 18 months, NCC added 17 new sales positions and increased its focus on attracting new advertisers. Five years ago, only 25 of the top 100 advertisers used spot cable. Today, 90 do.

Advertising agencies show an increasing willingness to divert money to cable. "I'm placing more clients on spot cable in 2002 than I did in 2001," says Kathy Crawford, executive vice president and director of local broadcast at Initiative Media. "We believe as a company what the numbers and the viewers are telling us: They aren't concerned where these ads come from (broadcast or cable). It's all television. Now we need clients to see things the same as their customers. It's axiomatic that clients should buy more cable because more viewers watch cable."