In Baltimore, a new TV channel that's being distributed by cable operator Comcast Corp. is providing a welcome boost to local advertising revenues.
But the beneficiary isn't Comcast. It's WBAL, the NBC affiliate owned by Hearst-Argyle, which is running NBC's new Weather Plus channel as one of its multicasting channels carried by the cable system.
Those multicast channels are opportunities for broadcasters but just more competition for local cable ad-sales staffs. The irony, of course, is that multicast channels get much of their audience largely because cable operators carry them. And viewers and advertisers are now learning they exist.
“We began selling Weather Plus as soon as we launched it,” says Jordan Wertlieb, WBAL's general manager. “It has been very well received in the marketplace.”
Multicasting is still tiny. FCC Chairman Kevin Martin wants to establish a multicast must-carry rule, although he has delayed that vote for now. But if he succeeds, multicast could proliferate quickly.
As stations launch digital channels like NBC Weather Plus, the Hispanic-targeted LaTV and The Tube, a youth-oriented music network, they're arming themselves with a reservoir of local advertising inventory that can be packaged and presented in fresh ways that broader-based broadcast fare cannot. That could bring local cable operators more competition for local-TV advertising budgets.
“The addition of these multicast channels will change the landscape a little bit. We'll be selling different demographics at different price points than we traditionally have done,” says Mike Ruggiero, a multicasting consultant who was part of a panel about multicasting at last month's Broadcast Cable Financial Management Association (BCFM) conference. The Tube is one of his clients.
For stations, the addition of digital channels means not just more local advertising inventory but the possibility of doing business with local advertisers that traditionally haven't advertised on over-the-air TV because of cost or other considerations.
“It can open up a whole new group of advertisers,” says Abby Auerbach, the Television Bureau of Advertising (TVB) executive VP who heads the trade association's multiplatform committee. Targeted networks like The Tube, she explains, can provide an outlet for stations to court advertisers with narrower demographic targets than primetime broadcast schedules typically deliver. “You haven't been on MTV before,” she says, “but now you can be.”
One example: In Memphis, a local business group, the Beale Street Merchants Association, has booked for a year the entirety of local commercial time made available by The Tube over Raycom Media Inc.'s WMC, according to The Tube founder Les Garland. He advises affiliate stations to look for similarly creative advertising deals that bring in incremental money: “If it were me, I would look for new revenue, for incremental dollars from advertisers who haven't been on television before. I'd bring them into this environment.”
The big question mark for TVB is how lucrative the multicast market can be for stations, mainly because most stations are still figuring out how many multicast channels they'll start. (One advertising executive says that, in a major market, some multicast channels are bringing in $500,000 a year in revenue.) While those new channels may take advertisers away from newspapers and radio, it will make it tougher for local cable ad staffs, too. Says Auerbach, “It certainly gives them a lot more competition.”
An “Easy Buying Process”
The TVB has worked with traffic-systems providers and advertising agencies to produce a new set of software codes that will identify digital multicast channels in commercial schedules. Auerbach thinks that technology helps makes it an “easy buying process” for advertisers.
Nearly all of the 85 stations affiliated with NBC Weather Plus have begun selling local advertising time on the channel, which launched in November 2005. It allocates roughly half of its total commercial time—or around 100,000 30-second spots per year—to its affiliates, says Michael Steib, general manager of the NBC Universal-owned channel.
He says, in some markets, close to 80% of advertisers on the channel are new to the television station.
“The most successful stations are those that have recognized a new way to sell against other platforms, such as cable,” Steib says. Even though NBC Weather Plus isn't rated yet by Nielsen, he adds, some stations “are making substantial dollars” by selling local time.
Raycom Media Inc., which distributes NBC Weather Plus and The Tube in many of its markets, has seen “moderate success” so far in advertising sales on its multicast channels, says President/CEO Paul McTear. He told a BCFM panel that the channels open broadcasters to “a different business than the core television business.” But he cautioned ad execs against giving away multicast spots to big existing advertisers as a sweetener. “You don't want to throw it in as a closer. You really need to look at separate target advertisers.”
Not every station buys that strategy. In some markets, says NBC's Steib, stations are packaging multicast inventory alongside primary station inventory to extend the reach and frequency of commercials from incumbent advertisers. WBAL's Wertlieb says NBC Weather Plus “is a great complement to some advertisers. It's not necessarily an exclusive sales item.”
One of the ironies of the digital multicast market is that, while stations may compete with local cable ad-sales organizations for advertiser budgets, the same stations depend on cable for distribution of their digital channels. Although channels like NBC Weather Plus and The Tube can be received using digital rooftop antennas, few homes are likely to be outfitted with the devices, industry executives believe. That leaves cable and the Internet as the primary delivery system for the channels, which typically get cable carriage through retransmission-consent negotiations.
That sort of interdependence could lead to joint ad- sales efforts in which cable and broadcast providers are more friend than foe, suggests Robert Gessner, president of Ohio's Massillon Cable.
“Our local ad sales people already intimately know the people in that market. Perhaps we could provide the sales effort to go along with the distribution of the programming,” Gessner says. It's also possible that cable operators could arrange to vary the commercials that appear within digital multicast channels based on cable “zones,” or geographic selling areas.
“Cable has a technology available at its headend, that, if they make it available to broadcasters, would enable us to deliver ZIP-code–effective advertising for our core channels,” Ruggiero says. “So there are still lots of things that can be talked about in common over the long haul to create value for both parties.”