Mom-and-pop advertisers aren’t spending as much on local cable as they have in the past. They’ll be advertising even less in the coming years, Cox SVP, ad sales, Billy Farina says. The problem: Higher ratings have made spot cable too expensive for single-store retailers. In addition, cable’s ad sales systems are still more convoluted than local broadcast’s, but Cox is hoping new technologies will simplify the process and help the MSO attract more ad dollars. CW: Are you losing some of the mom-and-pop local advertisers because of consolidation? Billy Farina: We’re part of the market. The consolidation is a back room—it’s transparent to the agency or the advertiser. At least the operation end of the consolidation is really for internal purposes. Because of the Internet and telephone, it’s just as easy to conduct business from someone in Atlanta or San Diego, as long as you’re staffing it. CW: I’m hearing complaints locally that smaller local retailers are falling through the cracks. Farina: The days of the single-store retailer having a commercial on one of the top cable networks or top cable program are probably over. That being said, there’s still plenty of other product that we can offer the stand-alone retailer that might not have those big ratings. CW: Where do you draw that line? Where should a small local car dealership advertise nowadays? Farina: A car dealer is a big advertiser in any marketplace. I was thinking of a stand-alone jeweler. The marketplace will draw that line. As our shows and our programs and our networks get broadcast television-type ratings, we will sell that inventory for broadcast-type pricing. That will be too expensive for certain advertisers to buy. CW: Advertisers still complain that spot cable is a tough buy, not nearly as easy as broadcast. How big of a problem is this? Farina: Everyone needs to understand that we will always be more complicated to buy than buying a single signal from a stand-alone TV station. We have more options available; therefore it’s more complicated. In Cox markets, we insert an average of 48 to 50 different networks. That’s a lot of information that needs to be communicated to our agencies and our advertisers. There’s a legacy of past interactions and behaviors that aren’t going on as frequently as some people might say they are. There’s still room for improvement. CW: How are you guys doing this year? Farina: It’s been strong. CW: Did you ever get that bump from political advertising this year? Farina: We started to get some political dollars in a couple of our markets—both traditional political as well as some proposition advertising. Because of increased demand from the political advertising, it looks like it’s gonna be a good fourth quarter. CW: Why did it take so long for political advertising to trickle down to you? Are you basically the last choice for advertisers? Farina: I don’t know. We put a big effort in front of that. We tried to attract those dollars on a national level, on the regional level, on the local level. That’s a question we’re going to have to answer. We’re going to have to circle back to people who buy for the candidates and find out what else we need to do to make our product more appealing to them for the next round. CW: What were you hearing from them when they were saying no? Farina: No. (laughs) CW: Why should they buy spot cable? Farina: If you look at what people have been watching for the past one, five, 10 years, the trend lines are showing that more people are watching ad-supported cable networks. We offer programs that have big, broadcast-type ratings in our marketplace. We offer the total marketplace or a geographical area of the marketplace and advertisers can send different messages to different groups. If you’re General Motors and you want to have one car line hit the north side and another car line or truck line hit the south side, we can do that seamlessly. CW: Is Cox going to follow Comcast and Time Warner’s lead by consolidating its ad sales operations centers even further? Farina: We’re well on the way. Two years ago we had 26 different operations centers across the country. We now have 10. We have consolidated where it made sense. I don’t know that we’ll go any lower than 10 operations centers. It seems to be a good number for us. CW: Is cable’s push to roll out set-tops with DVRs hurting your business? Farina: Not right now. It hasn’t hit a critical mass to where its hurting the business. If it’s a product that the consumer wants, it’s in our best interest to be the provider of that product. If we are the provider of that product, then we can start to create applications of new types of advertising that would allow us to create this with the help of agencies or advertisers to make advertising more compelling and more effective to the consumer. We haven’t reached that critical mass point. Right now there are questions being asked but nobody is necessarily pulling anything back or canceling. It’s just not at that critical mass. CW: Eventually it’s going to have to be. Every survey suggests they fast-forward through the commercials. Farina: The cable operator can control the speed of the fast-forward. There’s lots of issues there. There’s lots of different constituents that are going to be included in finding that solution, as far as how do you not break this business model of television, which is based—on the broadcast side—completely on advertising revenue. There’s a business model on that end, the advertising agencies need to create some really compelling content that people won’t fast-forward through. There are ads out there that people want to watch and look forward to when they come on. CW: Your FreeZone and InterACTIVE services seem to be somewhat of an attempt to address those issues ahead of DVRs. Farina: They are sort of interrelated because last night (Oct. 14) we actually did an on-TV polling through our InterACTIVE product in Phoenix where people were able to answer questions as the presidential debate was going on—people were interactive with their television sets while the debate was going on. The last tally I saw, more than 130,000 votes were cast during that debate. It’s just amazing that people are interacting with their television off of a product and application that Cox Communications was offering to them. CW: How did they vote? Farina: They leaned toward Kerry winning the debate. CW: What does that mean for local ad sales? Farina: Our InterACTIVE product in Phoenix allows us, on a traditional 30-second commercial, to overlay an application where someone through the remote control can ask for additional information, can hyperlink to a different channel that could give them video on whatever product the advertiser is selling. People go to our FreeZone service in San Diego time and again and spend a decent amount of time there watching infomercials. CW: What else can advertisers do? Farina: On the Super Bowl, real marquee commercials…I know I’m in the business of selling this, but there are commercials that are better than the content they are embedded in.

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