The good news is that a bunch of local cable news channels are running full throttle. They're finding more viewers, and new local and national advertisers are hopping on board. Some channels will boost ad revenue by more than 20% from last year.
The bad news is that the economics of regional news networks can still be perilous. The networks are costly to start and have stiff competition from local broadcasters and other media. Some local cable news operations aren't thriving and have sluggish sales, while others have even folded. Not all local cable news channels are built equally.
On the plus side, consider New England Cable News (NECN), one of the granddaddies of the business, with 3 million cable subscribers in the Greater Boston area. Despite a generally flat TV advertising market in Boston, NECN expects to close 2004 with about 12% growth in ad revenues, double last year's sales.
“We're just breaking more into the top 50 advertisers in the marketplace,” says Ted Grosso, vice president and general sales manager for NECN, a joint venture of Hearst Corp. and Comcast Corp. “We're just gaining confidence.” New advertisers include the local auto dealer groups for Mazda, Honda, Volkswagen and Hyundai.
Another positive example is Comcast's CN8, a regional network that serves 6.4 million cable subscribers from Boston down to south of Baltimore. Although not strictly a news channel, CN8 runs three daily newscasts in most of its markets, along with talk, entertainment and sports programming.
“It's been a wonderful, wonderful year,” says Jeff Broder, director of network advertising sales for CN8. “Ad-sales growth has been tremendous.” He estimates that the network's ad revenues will jump at least 30% this year, up from 21% in 2003, thanks in large part to such new national clients as Dunkin' Donuts, Perdue Chicken and Bayer.
Then there's the other side of the story. In the most glaring example of tough times, Time Warner Cable and Belo Corp. shut down their joint venture of three cable news channels in Texas and North Carolina four months ago. The two companies abruptly closed the 24-hour channels in Houston and San Antonio in late July, laying off 190 employees. Looking ahead many believe that local broadcasters, with established news staffs, will use their digital multicasting channels to to begin round-the-clock news operations, which will further jeopardize cable efforts.
Time Warner folded the operation of the third regional channel, News 14 Carolina in Charlotte, N.C., into its sister channel in Raleigh. The cable operator still runs six regional news networks in New York, North Carolina and Texas but has put on hold ambitious plans to launch news channels in Milwaukee and its other cable markets.
“It was a big blow to our business,” says Deborah Cuffaro, vice president of news and multicultural sales for National Cable Communications (NCC), which handles national ad sales for 17 news channels across the U.S. “It certainly hurt our footprint in Texas, the Southwest and overall. It's just not a positive story.”
Plus, the presidential election in most cases did not produce the expected advertising bonanza for many channels.
Local news channel Bay News 9 in Tampa Bay, Fla., was kept busy with hurricane coverage and benefited from its location in a battleground state. Most other local cable news channels did not.
“We just didn't do a lot with the president,” Cuffaro says. “What we got was a mere pittance.”
Time Warner Cable's NY1 operation saw so few presidential campaign ads this year that it actually produced a story for its viewers about the political commercials they were missing.
NY1 expects to increase its ad sales by 15% this year but hoped political spending would add even more. “It was disappointing for us,” says Steve Paulus, senior vice president and general manager of NY1, which serves 2.1 million cable homes. “There were not a lot of presidential dollars available.”
Despite such setbacks, the regional news networks made strides in attracting new advertisers this year, including some who had never appeared on broadcast TV before, much less cable. They have pulled off this sales feat by offering much lower ad rates, providing more-flexible scheduling, and designing sponsorship, entitlement and other customized packages that rival local broadcasters can't match.
In the Mid-Atlantic region, CN8 has lured such local institutions as the Philadelphia Museum of Art, Deborah Hospital, the New Jersey Travel & Tourism Bureau, and Drexel University by creating specially sponsored program segments. For example, Deborah Hospital now sponsors a 30-second segment on heart-healthy recipes during one of the network's cooking shows.
“We can do a lot more than sell spots and dots,” Broder says. “There's so much customization we can do for them.”
At NECN in Boston, Grosso plans to target a range of “non-traditional TV advertisers,” including smaller banks, insurance companies, utilities, health insurers and law firms. He cites such names as Keyspan Energy, Blue Cross Blue Shield of Massachusetts, the Mintz Levin law firm and Constellation New Energy.“The law-firm category is a big one,” he says. “We feel like we have a niche.”
With the help of nationwide ad-sales organizations like NCC and NECN's Major Market News, the local news channels this year have also drawn more national advertisers than ever before. Stressing their growing market coverage, upscale audiences and the ability to customize, they've brought in major automotive, financial, fast-food, retail and other accounts.
CN8, for instance, attracted Dunkin' Donuts by proposing a new “Hot Topic of the Day” segment within its daily Sports Connection report. Dunkin' Donuts, looking to spur sales of coffee along with its doughnuts, jumped at the chance to sponsor the segment.
As a result of moves like these, CN8's national sales are up about 68% this year, Broder says. Similarly, Grosso says that Major Market News, which represents NECN and five other news channels, has increased its national sales by 47% this year.
For cable operators, that's news they can use.