MAGNA Sees Ad Upside in Digital Must-Carry

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Brian Wieser, director of industry analysis for MAGNA Global USA Inc., which negotiates buys for Interpublic’s estimated $30 billion-plus in media billings, predicted that ad agencies will have a bunch of new opportunities if broadcasters get multicasting must-carry.

Wieser joined MAGNA in October from Deutsche Bank Securities, where he analyzed the cable and satellite sectors.

If the FCC adopts digital must-carry, he advises, broadcast CPMs will continue to fall relative to cable "due to advertisers’ improved leverage over broadcast networks."

The exception, he says, will be event advertising, where scarcity will continue to drive demand. He also sees multicasting as an opportunity for advertisers to more narrowly target consumers and to invest in the new programs needed to fill the channels.

He says that investment could come in the form of supplying infomercials for a new digital channel (see below), investing in an existing multicast network, or developing their own networks and pitching them directly to stations. He cites Coke’s $15 million investment in digital cable net College Sports TV as a possible model, pointing out that Coke is positioned to integrate its marketing efforts with the channel and to benefit directly from its success.

With must-carry protection, Wieser says, multicast channels provide a "more compelling business case" for advertiser-created nets than digital cable does. As examples of advertiser channels he suggests an automobile-enthusiast channel created by a car company or a pharmaceutical company creating a baby boomer channel.

Another potential benefactor of multicasting could be the traditional broadcast networks, he says, though in a round-about way. Wieser outlines one scenario this way: Many basic-cable networks would have to be dropped for broadcast channels; the expectation of low ratings on those channels would mean broadcasters would offer low-cost programming; some of that programming would be infomercials and home shopping; the reduction in entertainment programming would decrease basic-cable viewership; viewers would migrate back to broadcast networks, "which reclaim their status as the primary providers of entertainment programming."

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