Local ad sales among cable companies have come in softer than anticipated for the first half of the year. That’s partially due to national/regional ad sales growth but also because of wartime worries and broadcast poaching, according to top cable ad executives. Mom-and-pop retail stores held back their advertising dollars in many markets due to the sluggish economy while national advertisers generally kept on spending. In some cases, broadcast affiliates have started to pilfer cable’s local ad clientele by charging lower rates for their unused inventory since national advertisers, such as the automotive industry, pulled ads on both broadcast and cable television. “I know it’s a hackneyed phrase but when automotive sneezes, I catch a cold,” says Jim Heneghan, SVP of ad sales for Charter Communications. “And that’s exactly what went on in auto sales.” Charter’s total advertising revenue dropped slightly, to $57 million in the first quarter of this year from $58 million in the same period last year. Advertising numbers for the second quarter have not yet been released, though Heneghan does admit that local ad sales are slowing. Of Charter’s total ad sales in the first half, 68% were local, slightly below the 69% recorded for the same period last year. Granted, ad executives can be a little shy when it comes to sharing, especially if numbers come in lower than expected and, as is the case with Charter, the company is under investigation by the Securities and Exchange Commission. Ad executives from Comcast, Insight, Cablevision and Adelphia either did not return repeated phone calls or would not comment. Second-quarter results, however, could show softer ad sales for many operators due to the slowdown in local buys and withdrawal of some national buyers, several ad executives say. Comcast, Cox and Mediacom are scheduled to report second-quarter earnings this week. Billy Farina, Cox’s VP of advertising sales, says the MSO’s national ad sales grew 15% in the first quarter, while local ad sales increased between 1% and 2%. Farina has seen this soft local trend for a few years now. Cox’s ad revenues totaled $80.5 million in the first quarter compared with $79.5 million for the same period last year. If this trend of waning local ad sales continues, Farina wonders what will happen to neighborhood business commercials in the future. “You’re not going to see a single stand-alone store on a Trading Spaces or a Monk spot,” he says. Larry Fischer, Time Warner Cable’s president of advertising sales, also predicts that this trend will push local companies out of top-rated cable network avails and into the niche networks. TWC’s national ad sales have been growing also, albeit slightly, contributing between 15% and 20% of its overall ad sales in the first half, Fischer says. There’s room to grow here, as cable looks to become more like broadcast, which relies on national advertisers for about a third of all ad revenue, he adds. Last week, TWC reported a 31% drop in advertising sales to $118 million in the second quarter compared with the same period last year. The company attributed this drop largely to a slowdown in advertising from programmers as well as intercompany ad deals rather than a drop in local ad sales, a company spokesman says. But even smaller cable operators that target local markets almost exclusively have experienced larger growth in national ad sales than local buys. Cable One, for example, found that 21% of its ad sales revenue came from national or regional advertisers in the first half, up from 18% for the same period in 2002 and 16% in 2001, says Janice Hurt, Cable One’s advertising business manager. The company does not make its ad revenue public. “The local mom-and-pop shops and smaller companies are tightening the reins because they are reeling from economic instability,” Hurt says. The trend of larger regional chains moving deeper into smaller communities also bolsters stronger regional and national ad buys, she adds. Mediacom Communications also experienced bigger growth in national ad sales, at 12%, than in local ad sales, at 10%, for the first half. First-quarter ad sales grew to $9.1 million for the period compared with $8.2 million last year. While local ad sales increased for the first half, they didn’t meet the company’s budget, says Steve Litwer, Mediacom’s VP of sales development. “We had an enormous amount of cancellations,” he says. “My gut is that the remaining five months of the year will be stronger.”

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