Local viewers don't have much trouble with cable; its penetration rate hovers around 70% nationwide. With local advertisers, though, cable has been a much tougher sell. Although it has gained, local cable advertising accounts for only about 8% of the average operator's revenue. It could be more, says Kathy Crawford, executive vice president and director of local broadcast for buying firm Initiative Media North America, a veteran buyer with more 30 years in the local-TV business. At Initiative, Crawford oversees 20 buying outfits, giving her insight into the upsides, and the problems, of local cable sales. She spoke recently with BROADCASTING & CABLE's Allison Romano. An edited transcript follows.
What is the biggest challenge facing local cable ad sales?
The individual systems and the problems they create for buying marketplaces. If you have 25 systems in a market and they are not interconnected, you have 25 different people turning on the lights.
And most of the time, cable just is not cost-effective compared to broadcast.
How has local cable advertising changed in five years?
Several years ago, cable was bought system by system, from 9 a.m. to 9 p.m. It was far looser, far less targeted and far less capable of meeting immediate plan specifications.
At least that has changed. What's needed now?
We have to convince MSOs this is the way to increase their revenue. Ultimately, they need to recognize that ad-based revenue will increase their bottom lines.
National Cable Communications [a spot cable advertising firm owned by four of the largest MSOs] has changed the face of buying and selling. They've interconnected many major markets; I have one buy, one traffic order and one invoice. It's become much more doable from a buying standpoint.
Isn't local cable hurt by charging more for spots than broadcasters charge?
When you go to a specialty shop, you don't expect it to be as competitive. Cable still thinks of itself as a specialty shop. But most viewers have cable or satellite in their homes. These local systems are still living in the days when they got the franchise. They don't realize they are now part of a much bigger picture.
What about a niche or targeted network? Aren't they still specialty buys?
A niche network like the Food Network gets paired with USA to be competitive. The Food Network will be cheaper, maybe $10, and USA will be $100. You take a spot in each, now at $110, and average cost per spot is $55. That makes it more efficient, because you have Food. The Food Network will not have as much coverage as USA, though. You have to be prepared for that, but it's OK. It's similar to the old days of independent vs. affiliate television.
But don't operators recognize they're competing against broadcast?
In reality, they won't grow their revenue unless they compete. They will have to become part of an interconnect, give up some of their time. Then, we can buy [cable] on a more effective basis.
Are certain categories better suited for local cable?
Anyone who is local and not national is better suited for cable.
It's clear, though, if you're in top-25 markets, you could be better served by going national. Those advertisers can buy national more efficiently and get the entire country. It costs less than buying locally market by market because the top markets are so expensive.
How has MSO consolidation impacted local cable?
Consolidation has brought a level of sophistication to the local cable marketplace that didn't exist before. The interconnects can now compete, and the NCC can exist.
Where is local cable advertising working?
Adlink, the interconnect for Los Angeles DMA, is clearly ahead of its time.
And what is an example of a challenging market?
Greenville-Ashville-Spartanburg has 25 different systems and, so, 25 different invoices. It's a tough market because it has a good percentage of cable penetration. But it's very difficult to buy. I would love to see it interconnected and more easily purchasable.
How difficult is it to buy local cable when an operator in a large market, like Time Warner in Manhattan, isn't connected with other systems?
Time Warner has its own interconnect in Manhattan. That puts us in a position where we have to buy two interconnects, not one, and that's a concern.
Has zoning made local cable more efficient?
Zoning is not the end-answer. When all the operators become digital, you will be able to send individualized messages to the home. That makes it far more interesting. Zoning was just something to do until digital became a reality.
So will digital really advance local cable advertising?
There are so many things we can't do in an analog universe. Systems can send out commercials to individual homes, have two-way relationships, send databases back and forth. Cable will have an advantage that over-the-air broadcast can't.
I could almost say to broadcast, "I can get more with cable." When will that day come? It could be three years or five.
As cable matures, have budgets changed? Are your clients allotting more money for local cable?
Our national clients are much more aware of local cable since the NCC began to do its work. We tell our clients we feel strongly that television is television. The viewer doesn't see the difference between what comes out of the box from a cable standpoint or broadcast.
So what influences the decision to buy local cable?
Pricing dictates if it's a good buy or not, especially if the client is in the whole DMA.
Someday, there will be parity. We may put together buys for a whole marketplace for cable, national and local, because it's right from a pricing standpoint.
It's a value issue. The viewer doesn't see the difference. If they don't, why should we?
What's the biggest opportunity sector for cable ad sales?
Retail is the growth category. The good thing about local is, you can target a particular area and just buy that.
Aren't there structural problems about the local avails that cable operators get?
They only have two minutes an hour. That's not in every hour. You really only have a 30-second piece allotted to the interconnect. It's not like they have all the inventory in the world. They don't.
That is another reason why their costs are what they are. It's a bit of a sticky wicket.
What is your biggest frustration with operators?
It's up to NCC and operators to come up with a better pricing model. I'd like to see cable be more competitive with broadcast. It's been going on like this for years, though.
They think of advertising as gravy. They don't see it as being a primary source of revenue. As a result, they don't treat it as if it's as important.