It’s been a lousy year for broadcast spot television advertising across the country. But the story’s different for local cable, particularly in the country’s largest DMA: the Big Apple. Comcast and Cablevision’s New York Interconnect (3.5 million homes) has seen double-digit growth this year. The reasons? Advertisers are responding to cable networks’ continued ratings growth, the variety of the Interconnect’s 45 cable channels and its targeted advertising opportunities. "One of the reasons that we’ve been able to continue to grow is the variety of offerings that we have and the value that we provide to our customers," said David Kline, president and COO of Cablevision’s Rainbow Advertising Sales Corp. The contrast between cable and broadcast makes the story sweeter. "Double-digit growth in what has been an extremely challenging broadcast television market [means], in effect, spot cable’s growing and broadcast is declining, which just makes our success even more significant," said Kim Norris, VP of Comcast Spotlight’s Northeast division. Will Katrina Slow Ad Spending in ’06? Like most businesses, advertising abhors uncertainty in any form. Until a few weeks ago it looked like the Interconnect’s bright 2005 was going to be a good lead-in for next year. Katrina changed that scenario fast. Still, N.Y. Interconnect chief Ed Renicker seemed cautiously optimistic for 2006 as he prepared for the Interconnect’s second annual fall preview Sept. 29. "I’m very, very, very nervous about the effects of Katrina," he said in his Fifth Avenue office. "The economic effects are certainly going to hit us. We’ve all seen what’s taken place with oil and gasoline. That’s going to have a reverberating effect on a number of industries, including, obviously, automotive. How’s it going to affect SUV sales? In this particular market, that’s one of the strongest lines of business for automotive. Is that going to force a change by consumers to go to smaller vehicles?" Holiday Spending a Key The aftermath of the devastation on the Gulf Coast could discourage consumers from traveling, which would hurt ad spending by airlines and destinations. On the other hand, a travel downturn might encourage home entertainment options, such as DVDs and on demand. The Christmas holiday shopping season will be a barometer for consumer and advertiser reactions to this year’s events, according to Renicker. Considering the Interconnect’s vitality in ’05, it’s a good bet it will be able to weather the fallout from Katrina. Overcoming the Automotive Downturn Local broadcast TV revenue is hurting. In the second quarter it fell 7.2% for the nation overall, according to an analysis of TV ad spending by the Television Bureau of Advertising. Given that context, the New York Interconnect is "having another tremendous year…[it’s] very solid," Renicker said. "I wouldn’t say we’re breaking new categories but we’re certainly gaining share in categories that we’ve been very strong within." If the advertising market were the human body, the automotive sector would be its heart. The Interconnect’s health is good despite a nationwide slump in automotive, which spurred an 8.4% drop in the second quarter for local TV advertising by car manufacturers, traditionally the biggest category. New York’s television stations were also hurt by a downturn in the movie and studio business, including reduced marketing for new releases and DVDs. Spot television spending by the telecommunications sector was also down 24% in the second quarter. But the New York Interconnect hasn’t been hurt as much by the soft spot market plaguing its competition, and actually has seen an uptick in advertising categories, including retail. "The challenge that we’ve seen this year is that the New York spot market is very, very bad," Renicker said. He projects the New York broadcast spot marketplace will see 1-2% growth in 2005. "We’ve maintained a nice gap between the competition, and it’s something that we’re definitely encouraged about." Pre-Katrina Goals Before Katrina, and then Rita, Renicker and the New York Interconnect had outlined challenges and goals for 2006 that also offer food for thought about the state of spot cable overall: Grow revenue from spot cable while competing with local cable ad sales operations. An interconnect’s biggest challenge is having enough inventory to sell. "There are two to three minutes per hour on average from the cable networks [to sell advertising] on a local basis," he said. "That’s being shared by interconnects, local cable system ad sales groups and marketing." Renicker’s solution: "I’d love to see the networks give us more inventory, or give the MSOs more inventory." Offer on-demand advertising with different interfaces and VOD strategies. Advertisers who buy VOD ads on Cablevision’s and Comcast’s VOD platforms in New York should produce only one message that’s translated for different VOD interfaces. "Our companies can create opportunities that would look exactly the same and be a product just for the Interconnect," Rainbow’s Kline said. Watch for the launch of unified VOD showcases or virtual channels early next year. Emerge from the clutter. New York’s media planners are typically fresh out of college and bombarded with pitches from cable’s competition. The Interconnect has invested in big-ticket events such as its annual fall preview, an upfront-style event for local media buyers and planners (this year’s preview was held Sept. 29), and has beefed up its website to be more of an interactive resource for the agency community. Get MSOs to play nice. Renicker is eager to add Comcast-owned OLN and Cablevision’s Fuse to his roster—but neither is carried by the other MSO in the New York market. "We really try to walk the line between [our owners]," he said. "But if we feel there truly is a network we want to carry, we make a pitch" to Comcast and Cablevision. "[We say,] `This is of value to us, whether it’s promotional or being able to package rating points into a deal.’" Familiarize clients with new technologies. Renicker’s goal for 2006 is to help his staff keep clients better informed about the Interconnect’s opportunities. And he wants clients to have a single point of contact for local news sales, regional sports sales and interactive sales. One solution: Tap senior staff to orchestrate the pitches—he dubs them "maestros"—while providing one-stop shopping for agencies and clients. Be smart about going digital. The majority of networks that NYI inserts on are analog. Renicker’s not convinced digital network insertion is worth the infrastructure expenditure—yet. "We’re waiting for digital penetration to get a little stronger across the market," he said. "Once we start hitting a stronger, critical mass, [digital] networks will become much more viable to us to add." The New York Interconnect at a Glance Launched: March 28, 1993
Ownership: NYI is an LLC owned by Comcast and Cablevision. Rainbow Ad Sales runs the Interconnect on a day-to-day basis.
Management: Ed Renicker, EVP and general manager; Denis Coleman, SVP, sales.
Reach: 3.5 million homes, including parts of the Bronx and Brooklyn plus Long Island, New Jersey and Connecticut. Comcast accounts for roughly 25% of the homes.
Missing: Time Warner Cable’s DMA: Manhattan, Staten Island, much of Brooklyn and Queens.
Networks offered: 45; ESPN Classic, MTV2, GSN, Speed Channel and The Golf Channel were added last month. Does the Missing Link Matter? As if broadcast competition weren’t enough, the New York Interconnect operates without a major New York City MSO. The local spot cable market splintered when Time Warner Cable pulled out of the New York Interconnect in 1998. Although the companies still work together, discussions last year with Time Warner about a new partnership came to naught. "We’re always open to discussing it, but there’s nothing happening at the moment," Rainbow Ad Sales president David Kline said. But is it really an issue? "This marketplace adapted very quickly when the Interconnect went into two pieces," said the Interconnect’s Ed Renicker. "We’re in 3.5 million homes, they’re in about 1.6 million homes and advertisers quickly recognized, `I buy six stations in this market, what’s another phone call?’ They buy broadcast stations, regional sports networks, local news networks. There’s so much out there that another phone call is not going to make a big difference. If Time Warner and Cablevision could ever come together, would it be better for an advertiser? Yes, from the aspect of, OK, it’s now one phone call. But do I think we lose money or that there’s money left on the table [because Time Warner is not part of the NYI]? Absolutely not." —S.B. The Local People Meter Debate Nielsen Media Research’s controversial local people meters have given ad-supported cable a favorable spin in the top six markets. Ratings for ad-supported cable in Philadelphia in July 2005 as measured by local people meters were 80% higher than diary ratings in July 2004. In the New York market, ad-supported cable ratings for viewers 18+ increased 40% and broadcast ratings increased 1%. —S.B.

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