The Little System That Could Sell Ads

BY K. C. NEEL With a little more than 59,000 basic customers, Cox Communications’ Roanoke, Va., system is hardly among its bigger operations. But that hasn’t stopped the ad sales department from being one of the MSO’s top performers. Indeed, the Roanoke ad sales team, headed by Cox Media GM of ad sales Tim Morgan, took home several internal awards last month. The system was honored for its innovation, revenue generation and operating cash flow growth in 2002, and Morgan says things are looking strong this year as well. Halfway between New York and Atlanta, Roanoke is smack in the center of one of Virginia’s largest metropolitan regions. The 400,000-home DMA is composed of 25 counties, but most of the businesses and residents are in Roanoke. In addition to Cox — which passes some 85,000 homes in Roanoke — Adelphia, Charter and local operator Nesbe Cable serve customers in the surrounding DMA. Selling advertising in the entire market is difficult because it’s so spread out. What’s more, there’s no hard interconnect, although Cox represents Charter’s systems that count about 29,000 customers with its ad avails, Morgan says. Adelphia and Cox are both represented by NCC, the national cable advertising rep firm, and the two operators have been known to jointly craft advertising proposals on occasion. But normally, advertisers must deal separately with the operators if they want to buy avails for the entire area. That doesn’t bother Mike Coyle, GM of Goodman Honda in Roanoke. Coyle spends about half of his $25,000 a month ad budget with Cox and is thrilled with the results. He says he’d like to run his ads on Adelphia’s system but has had nothing but problems with the system and quit buying their spots long ago. “They have had a lot of trouble running our spots,” Coyle says of Adelphia. “Many of our promotions are time sensitive, and you can’t have an ad promoting 2.9% financing that expires on the 25th running on the 29th. We’ve never had that kind of problem with Cox. In fact, they have been very flexible and reliable with what we want. And our numbers have increased since we began running ads on Cox’s system, so we’re very pleased. When all of Adelphia’s problems became public last year, we were hoping that Cox would buy the system, but so far that hasn’t happened.” Goodman Honda gave up on newspaper and radio ads, using funds once allocated for those media outlets to bulk up on its local cable spots. The locally owned dealer, which sells about 120 cars a month, runs spots three weekends a month. Coyle says the heavy rotation averages one 30-second spot an hour between 4 p.m. and midnight on seven networks that skew toward women. “Honda is big with women, so we concentrate on networks that women watch,” he says, noting that value-added additions to the rotation may push the number of inserted channels to as many as 14 networks at times. “We’re good to them and they’re good to us.” The bulk of Cox’s advertising is local, Morgan says, but the system is aiming for more regional and national sales, especially now that it’s revamped its focus as a media outlet, not just a cable one. Morgan hopes to begin selling more specific programs, as the broadcasters have been doing for years, and begin charging more for marquee shows. “We need to begin selling more according to ratings, as the broadcasters do,” Morgan says. “Cable ratings have gone up significantly, but our rates haven’t. That has to change.” Eventually, the system hopes to begin selling advertising spots on its digital networks as well as on Cox’s high-speed data service. Those services are being rolled out in some of Cox’s larger markets now, Morgan says. It’s just a matter of time before the company’s smaller operations launch such offerings. “We’re going to become more sophisticated in terms of how and what we sell,” Morgan says. “In many cases, that might mean taking on broadcast head-to-head in terms of CPMs. Our goal is to become the No. 1 billing entity in the market, and the only way we can do that is with a mind-shift change. If we can begin to catch up with billing as it relates to ratings, we’ll succeed.” Cox is reworking its ad sales matrix, now incorporating local cost per thousand data with the system’s current demographic information. The average CPM in Roanoke is around $66 per spot, with prime-time avails garnering $120 and early-morning avails fetching about $44, according to SQAD (Service Quality Analytics Data) Inc., which compiles local ad sales data from A.C. Nielsen-metered markets. The push toward regional and national ad revenue is part of Cox’s companywide effort to revamp its ad sales arm. The unit, which was called CableRep, is now referred to as Cox Media. The new name reflects the fact that Cox isn’t just a cable company anymore, Morgan says, adding that Cox also wanted to build on its national brand recognition. The name change is supposed to help communicate to advertisers and media buyers that Cox Media has an array of advanced services, such as in-depth research tools, direct mail, customer promotions and state-of-the-art commercial production. Cox’s Roanoke system sells about 3,800 avails a day across 40 channels right now. But Morgan hopes to begin inserting ads on the system’s digital channels and high-speed data network soon. Being in a smaller market has its disadvantages. For instance, Roanoke falls below Cox’s parameters for offering local telephone service at this point, says VP/GM Catherine McCollough. But the system is fully upgraded, offering digital cable and high-speed data services. And, she notes, sales of those products are strong despite the lack of a three-product bundle. There are also advantages. Roanoke is often used as a test bed for products and services that have yet to be rolled out nationally. McCollough expects to launch a technical VoIP telephony trial within the month and the Roanoke system was the first Cox property to experiment with customer installations of high-speed data. No one was sure the self-installations would really work, says finance/operations director David Kellner. But now, 50% of the system’s data installations are done by the customers themselves. That’s saved the system a bundle when you consider that an installation costs an average $70. “That’s money we don’t have to spend or money we can allocate for other things,” Kellner says. McCollough expects to roll out a high-definition service by summer. In addition to the technical VoIP trial that will get under way shortly, Roanoke is also preparing to activate home networking and maintenance tests later this year. As for the rollout of new services, McCollough says the demand for HDTV is stronger than video-on-demand in Roanoke; hi-def will be introduced first beginning this summer. “People are begging for that service, so that is what we want to give them,” McCollough says. “We have phenomenal customer service, and we pride ourselves on that. “We had one customer who had the DBS installer in their house and called to disconnect us,” McCollough adds. “We talked the customer out of it and they sent the DBS installer packing.” DBS penetration is lower than the national average in Roanoke, but that could change — DirecTV announced earlier this year it plans to offer local broadcast signals as part of its product offerings by summer. McCollough isn’t too worried about DBS competition, saying Cox’s superior customer service, local reputation and broad service offerings have stood the system in good stead. Still, the system is preparing to launch a series of television ads comparing Cox’s cable service to DBS, according to marketing director Bill Sledd. The ads have been created by Cox’s corporate marketing staff. But the system also has a slate of locally produced promotions that concentrate on its customer service and commitment to the community. “We focus a lot on service and that small town community feel,” says Sledd. “We use a lot of the corporate-created marketing material, which helps our budget, and the ads are well-produced. But we also spend a lot of time on our local image. People know where we live. They know where our building is. They know who we are. They stop us in the grocery store and tell us about their cable experiences. The DBS guys can’t do that. And that carries a lot of weight in this small, tight-knit community.” Indeed, the system’s basic cable is 70% penetrated, according to Sledd. Scarborough Research points out that expanded basic and digital basic services are 33% and 37% higher, respectively, than the national average. Only 10% — 40% below the national average — subscribe to a DBS service, according to Scarborough. Roanoke’s position on the East Coast gives it ready access to two-thirds of the total population of the nation within a radius of 500 miles. Still, the area is somewhat removed from the hustle and bustle of the hectic cities that are so close, which, says McCollough, is one of its attractions. It has a small-town feel and people like it that way. The city has lured highly educated residents and tends to skew a little older than the national average. (It’s worth noting that Cox’s most prolific ad salesman, Jack Rice, is 71 years old, legally blind and has been working for Cox since 1986.) Almost three-quarters of the population are over 35 years old, according to Scarborough. In fact, Money magazine ranked Roanoke one of the best places in America to retire. In November 2001, the Center for Digital Government named Roanoke the top e-government city in the U.S. in the 75,000-to-125,000 population category. The city scored 91.7 out of 100, receiving high marks for its website, online job search and application process and its “robust” public-safety program. That’s actually not too surprising when you consider that PC penetration in the area is around 70%, says Sledd. High-speed data sales have been strong, and the numbers continue to grow, although the company declined to provide statistics. Cox Roanoke pushes the two-product bundle, and Sledd says results have been positive. The company is constantly running specials, especially on its website, which gets a lot of traffic, he says. The bundle message is working, too, he says. Basic churn is around 2% a month. HSD churn is under 3%. And digital churn is around 5%. “People are sticking with us,” he says. “We’re ahead of our projections for revenue and RGUs.” Cox, which spends about 1% of gross revenue on marketing, puts most of it into cross-channel promotions, broadcast TV and radio. The system generally eschews buying newspaper ads. “We found that the local newspaper isn’t a good place for us,” Sledd says. “We’ve just never gotten good response rates from the ads there.” That’s something echoed by Goodman Honda’s Coyle. “A full-page ad in the daily paper is $5,500 for one day,” he says. “I can buy a lot of cable for that and get much better results.” EMPLOYEES: 160 HOMES PASSED: 84,859 MILES OF PLANT: 1,136 (231 miles of fiber) PERCENT UPGRADED: 100% BASIC CUSTOMERS: 59,075 BASIC RATE: $37.57/month for 83 channels DIGITAL CUSTOMERS: N/A DIGITAL RATE: $49.80-$90.32/month HIGH-SPEED DATA CUSTOMERS: N/A HSD RATE: $39.95/month with cable; $49.95 without cable TELEPHONY: N/A AD INSERTIONS: 40 channels SOURCE: COX Catherine McCollough
VP/GM McCollough joined Cox in February 2000. She previously was with Scientific-Atlanta in Denver where she served as sales director. Prior to that, she was director of international marketing and new business development at S-A, product manager for Digital Equipment Corp. in Merrimack, N.H., and a marketing representative with IBM in New York City. She holds an M.B.A. from Harvard Business School and a B.A. in economics from Tufts University in Medford, Mass. She is a past recipient of the Women in Cable and Telecommunications’ Atlanta Chapter Women to Watch Award. Tim Morgan
GM of ad sales, Cox Media Morgan oversees all aspects of Roanoke’s advertising efforts including sales, production and sales support. He joined Cox in 1991 as the CableRep manager for Cox’s middle Georgia system. Morgan’s background includes over 20 years of sales, production, programming and promotions experience in both cable and broadcast television with A.S. Abel, Gillette and Scripps-Howard. Bill Sledd
Marketing director Sledd joined Cox in 1985 as controller. He was promoted to head the marketing department in 1990 and then to director in 1998. He is a graduate of Roanoke College in Salem, Va., and is also a CPA. He previously held various accounting-related positions in the Roanoke Valley and is a board member of the Science Museum of Western Virginia.