Chicago -- The cable industry’s ongoing problem of losing customers to direct-broadcast satellite rivals DirecTV Inc. and EchoStar Communications Corp. is having an impact on local ad sales, executives on a panel at the Cabletelevision Advertising Bureau conference here said Tuesday.
“We have been pretty well hammered,” Mediacom Communications Corp. vice president of sales development Steve Litwer told attendees, noting that in 75% of the MSO’s ad-sales markets, DBS has scored a 25% penetration rate or more, and in 15%-20% of Mediacom ad-sales markets, DirecTV and EchoStar have nabbed more than 30% of the multichannel homes.
Litwer added that last week, Nielsen Media Research’s No. 78 DMA -- Springfield, Mo. -- became the first market to exceed 50% DBS penetration of multichannel homes.
The good news: Despite satellite growth, Mediacom managed to grow its local ad-sales business by 27% last year, Litwer said.
But he also noted that local broadcasters -- which receive reports from DirecTV and EchoStar about the number of new customers they pick up because of their local-to-local license deals -- use statistics that detail cable-subscriber erosion to discourage advertisers from buying local cable spots.
Charter Media VP of national sales and development Todd Stewart said subscriber erosion is “definitely an issue, depending upon the market,” and Cox Media Arizona VP and general manager Fran Mallace said the MSO’s bundling strategy “has pretty much gotten satellite penetration to a halt.”
The panel also looked at focusing on cutting into the local advertising revenue generated by newspapers and radio stations and debated about operators setting more of their local ad-sales inventory for advertisers looking to run national spots.
“How are we going to steal from radio, steal from newspaper?” asked Stewart, who noted that much of the cable industry’s focus seems to be on picking up share from local broadcasters.
Mallace said Cox Communications Inc. is targeting the $1 billion spent on direct-mail and newspaper advertising in Arizona, adding that the MSO’s goal is to be the No. 1 local biller in its markets.
Litwer said Mediacom has had success targeting a “whole group of advertisers that never [buy] radio or broadcast because they think it’s too expensive.” For advertisers that usually buy local radio over broadcast, Mediacom shows how the cost of cable advertising is comparable to radio advertising, he added.
Moderator Todd Schoen from Fox Cable Networks Group also prodded the MSO sales executives about how they divide their inventory of local avails into spots that are sold locally, regionally and nationally. Competing with national cable networks that give them the local avails, all three cable executives said they are shifting more of the local avails to national spots.
“National is becoming a much bigger part of our business,” Stewart said. Charter Communications Inc. uses 70% of its avails for local spots and 30% for national spots, but at systems that lie in the top 50 DMAs, 40% of the inventory goes to national spot, he added.
Litwer said that national advertising only represents about 10% of Mediacom’s advertising sales.
Pointing out that national cable networks usually charge advertisers cheaper rates for national spots than cable operators charge for spots sold from their national spot inventory, Mallace said she would like to see operators and programmers team up to sell national spots.
“If [operators and programmers] can get on the same page, and not have lower rates on the national side, it would help our rates,” she added.
