Getting Local in New York's Capital

BY JON LAFAYETTE Time Warner Cable is making news in Albany. In October, it launched Capital News 9, a 24-hour local news channel. The service has raised TWC’s profile in New York’s capital city and contributed to a boom in local ad sales, executives there said. The launch, said Stephen Pagano, president and GM of the division, made TWC “a competitor to the broadcasters in the sense that local broadcasters put most of their resources into local news, and we’re doing the same thing now.” Capital News 9 follows the news channel model established by TWC in markets ranging from New York City to Raleigh, N.C. And in Albany, it gives government workers a new place to see and be seen. As the state’s seat, government has insulated Albany from many of the economic ups and downs other New England-area cities have experienced. But the market isn’t expanding. “Albany is just holding its own,” said Pagano, who moved upstate three years ago from TWC’s Staten Island system. “I don’t think it’s struggling as much as some of the other urban areas up here.” Still, “the state government is going to take quite a hit this year. So my guess is it’s only going to get tougher up here in the next year or two.” Albany shrunk in the last census to below 100,000 inhabitants, bringing it closer in line to the other towns covered by the TWC system, including nearby Schenectady and Troy and branching out to the outlying areas of Glens Falls, Amsterdam, Gloversville, Johnstown and Pittsfield, Mass. The most booming town in the area is Saratoga, best known for summer horse racing. The market’s growth is in the suburbs, such as Clifton Park, and to serve those suburbs TWC must expand its plant. In addition to an expanding residential area, high-speed data is putting the operator into the commercial market. “Traditionally we didn’t build those sections of the cities, usually the downtown, heavy urban areas,” Pagano explained. “Generally you bypassed those because there wasn’t a market for your product and they were also the most expensive areas to build.” Now, he said, “in some cases we are biting the bullet and making that investment; in other cases we’re still trying to get a good ROI on those investments before we’ll go in there.” TWC passes 410,847 homes in the area, or about 80% of the TV market. The system — originally a unit of American Television and Communications — became TWC in 1995. Nearby systems were acquired from Newhouse, Cablevision Industries, Fanch, Cablevision Systems and TCI. Last year, TWC built a new regional headquarters and united many of its functions under one roof, including a 175-person customer service center. Mark Loreno, VP of technical operations, said rebuilding all of those different systems into one, relatively standard 750-MHz system was a challenge. “You’re trying to bring together a myriad of different operating procedures, different types of equipment, different cultures,” Loreno said. Nevertheless, the task was largely completed in 2001. Now the system has a master head-end located in Albany, about ten minutes from the division’s new headquarters. All digital signals originate there, as well as cable modem service. The head-end wasn’t moved to the new facility because, Loreno said, “all of the fiber feeds would have had to be rerouted.” There are two satellite head-ends, one in Lake George, one in Pittsfield. “We transport baseband signals to these two head-ends and redistribute them from there,” Loreno said. One of the old, smaller stand-alone head-ends is still in operation, servicing Athol, Mass. That town hasn’t been centralized because it’s so far from headquarters. “It’s about 7,000 subscribers, and we hope to tie it in eventually.” Although the system is now fairly standardized, program lineups can still vary because of preexisting programming contracts the various operators had before TWC acquired them. Digital lineups are the same throughout the system. The system branches out to about 28 hubs, each serving two to 20 nodes. “Locations are governed by the architecture of the preexisting systems,” Loreno said. “We try to get down to 500 homes or less per node.” The system uses equipment from Augat and Philips line gear. Set-tops are primarily Scientific-Atlanta, although there are some Pace digital boxes in use. Some old General Instrument 2200 advanced analog are also still in use. The VOD platform is SeaChange. Cable modems are from Toshiba, cable modem termination equipment from Cisco. With the system expanding into the suburbs, Loreno expects to build about 200 miles of new plant this year. The move to sell cable modems to commercial customers has the team working in business districts, which can be tricky. The system is mostly using the same architecture it uses for residential applications. But, Loreno said, “If there’s special applications, we take that into consideration on the design. We’ve also done a little research on some wireless links to where a hard line build isn’t feasible.” Getting ready to offer HDTV is near the top of Loreno’s to-do list. “We were fortunate enough to be able to carry the Super Bowl in HD from our local ABC affiliate,” he said. “It appears that we’ll have additional broadcasters going to the HD format in the coming year, so along with that we have bandwidth issues, constant grooming of the signals and so forth.” Joe Noonan, VP of ad sales for the Northeast region, said ad sales have been strong. Albany is a $100-$140 million advertising market, according to Noonan, and “if you took into account the cable properties that we don’t own — we have about 78% to 79% of the cable homes in the market — my guess is we’ve got a 20% to 25% share.” National advertisers account for about 25% of TWC’s business, he said. In January, sales were up over 40%. Bitterly cold weather probably helped drive viewers to Capital News 9. “We had literally hundreds of thousands of dollars committed to even before being on the air.” Some of that money came from advertisers that hadn’t run significant cable schedules. But most came from existing advertisers increasing their cable budgets. “With 50 different cable networks — literally we insert on 50 basic cable networks — we had lots of news, but we didn’t have the local news. And now with that, there’s really nothing stopping us,” Noonan said. “It’s a good product,” said Mason Tolman, director of at Sawchuk Brown Associates, which put some of its clients on Capital News 9’s coverage of last month’s state of the state address. Noonan said he set prices by analyzing CPMs at broadcast stations and the share of audience generated by CNN, MSNBC, CNBC, Headline News and Fox News. Pricing is highest in the morning, when advertisers pay $60-$70 a spot. Local time on ABC’s Good Morning America runs more than $400, according to Noonan. “Our expectation is to be competitive on a share basis with those morning news programs at some point.” The news channel doesn’t have ratings yet from Nielsen, but the channel will be included in the local market report for February sweeps. A leading buyer in the market, Ted Akerson, president of Akerson Advertising, expects viewers of a local cable news channel to skew younger than viewers of the broadcast affiliate’s local newscasts. “My generation watches the network newscasts. Younger viewers flip around to see what the local news is,” he said. Al Marlin, VP of news, said TWC’s experience in other markets smoothed the launch in Albany. Getting the channel running cost about $15 million. The local news channel is available exclusively on cable, but Pagano said that’s not the only reason why satellite penetration is very low in Albany (one survey puts it at 7.5%). The satellite services don’t offer local channels, and TWC has been aggressive with its upgrade, offering VOD, SVOD and PVRs. Beyond Capital News 9, there are other ways of attracting advertisers. “We’ve been very quick to adapt into new networks, whenever they’re available for insertion,” Noonan said. Albany is a diary market, and like most cable executives, Noonan contends that Nielsen undercounts cable viewership. But that doesn’t stop him from trying to sell advertisers on the fact that cable nationally garners a 50% share of viewing, rather than the approximately 38% indicated by the ratings books. One way to take advantage of that viewership is to sell roadblocks — spots on every insertable network the system offers. “We know they can deliver 50% of the viewers on the cable systems. That’s a pretty powerful one-call buy,” Noonan said. TWC charges a premium for putting all the networks together. Because it’s expensive, only a handful of auto dealer groups and national advertisers buy the full-market, all-network roadblocks. Akerson, who buys ads for the local Ford dealers, said about $1 million of the $2.5 million he spends on TV goes to cable, and he buys roadblocks from TWC. “It’s become exceedingly difficult to insure that you’re hitting your target market,” Akerson said. “We felt that to get the job done right, we needed to be on all of those networks.” The roadblocks cost more than a spot on a broadcast station. “Even though the prices of individual networks are low, it takes a pretty big pocketbook to get it done,” said Akerson. The system can also sell advertisers smaller roadblocks designed to target key demographics. “We’ll take an advertiser [whose] prime demo is women 25-to-54 and we’ll line up the eight or ten or 12 networks that most highly deliver that audience. And we’ll do a women 25-to-54 roadblock. Or we’ll do a kids 14-to-18 or young adults or we’ll do a news roadblock,” Noonan said. Smaller advertisers also find cable valuable. “It’s important to anything we do,” said Sawchuk Brown’s Tolman, whose clients include a number of technology companies. “Budgets aren’t huge, and I can target geographically, and I can target demographically much better. I buy a little broadcast for reach, but I buy almost all my frequency on cable.” Spots cost as little as $4 and mostly stay below $100 for most of what Tolman buys. The cost per point ranges from $20 up to about $170 on such networks as HGTV, Lifetime, Nickelodeon and ESPN. Noonan said that TWC sells about half its ad volume in a local version of an upfront market. The operator begins selling ad time for the year in December and finishes in late January. “Our goal is to write 50% of our business during that upfront season,” Noonan said. “We’re on pace to do that.” Noonan said clients get some pricing incentives for buying early. “They’re able to buy the prime inventory and lock it in at reasonable rates early.” He said the system sells higher-end shows on a program-by-program basis. “We get huge premiums for the MTV Video Music Awards, we do very well with the NFL, we do very well with NASCAR.” Larry King Live and The O’Reilly Factor also sell out on a spot-by-spot basis. TWC is also growing revenue by adding subscribers to its high-speed Internet services and digital cable. “Our HSD penetration is over 20% of passings,” said Pagano. “That’s our fastest-growing product.” Pagano said that digital penetration is just under 30%. TWC has added SVOD offerings, plus free VOD, from networks including DIY, HGTV, Food Network, Comedy Central, Biography, Cartoon Network, BBC America, Golf Channel and CNN Showcase. “I look at it as a product that will help drive digital penetration,” he said. “Digital, when we first offered it as more channels, wasn’t real compelling.” TWC also just began offering the DVR boxes. “We can’t keep them in stock,” Pagano said. Still, marketing PVRs will be a challenge. “Most consumers don’t understand it. How do you tell people to throw out your VCR because with a DVR you’ll never use it again. But we will. Just word of mouth right now is keeping us real busy.” EMPLOYEES: 874 MILES OF PLANT: 6,515 HOMES PASSED: 410,847 PERCENT UPGRADED: 100% BASIC SUBS: 311,740 BASIC RATE: $34.10 to $40.95 DIGITAL CUSTOMERS: 94,284 DIGITAL RATES: $4.95 HSD RATES: $44.95 for all ($54.95 for AOL with unlimited dial-up) ISPs OFFERED: AOL, Earthlink, Road Runner, Local.net HDTV: HBO, Showtime, ABC affiliate WTEN AD INSERTIONS: 51 channels SOURCE: TIME WARNER CABLE Stephen Pagano
President and general manager Pagano cane to Albany in November 1999 after serving as president and GM of TWC’s Staten Island system. Prior to that, he held a variety of positions in cable TV including VP of marketing and customer service for TWC’s Brooklyn/Queens division from 1986 to 1992. “With new products such as SVOD and the DVR, we’re well-positioned to meet our goals, ever mindful that the most critical measure of our success is our customers’ satisfaction with our products and services,” he says. Joseph Noonan
Regional VP, Northeast TWC advertising Noonan oversees all ad sales for Albany, Binghamton, Syracuse, Rochester and Portland, Maine, divisions of TWC, reaching more than 1.2 million cable households in 11 television DMAs. Prior to this he was GM for Albany’s ad sales operation and the Albany interconnect since 1997. Noonan had been with TCI as GM in northeastern Ohio prior to relocating back to his home state of New York. Noonan began his career in cable in Glens Falls, N.Y., with Metrobase Cable Advertising, the ad sales arm of Harron Communications. Mark Loreno
VP of engineering and technical operations Loreno began his cable career as a service technician with Cablevision Industries in 1978. He was GM of various CVI properties in Pennsylvania and New York from 1980 to 1995. Loreno joined TWC through the acquisition of CVI in 1996 and managed several systems within the Albany division before being named to his current job. Tricia Buhr
VP of marketing Buhr joined TWC in 2002 to work on digital subscriber acquisition and customer retention projects. Her previous experience includes a marketing role at The Washington Post, Internet product development at Hearst Newspapers and media consulting for telecommunications and publishing clients. Peter Taubkin
VP of government relations and public affairs Taubkin is responsible for the negotiation and maintenance of cable franchises; oversight of local and state regulatory and policy issues; press and public relations; local programming and production; and coordination of community support initiatives. Before joining TWC in 1995, he was corporate director of government relations for Cablevision Industries Corp. in Liberty, N.Y. Comparison of Time Warner Cable subscribers in Albany to the top 75 market average.