With its bold bid to take over the Disney empire stalled, Comcast Corp. is moving ahead on other fronts for a bigger piece of the $28 billion TV advertising market.
In fact, a much quieter offensive under way in Chicago and other major cities will likely yield the most immediate gains for the nation’s largest cable TV company and will have a profound effect on the ads viewers see.
Since entering the Chicago market two years ago, Comcast has upgraded 7,000 miles of its cable lines from analog to digital, enabling it to target viewers in specific towns or even neighborhoods–something its broadcast competitors can’t do.
The company also has linked its cable lines with those of other area providers and centralized its advertising staff in New York to sell “Comcast Spotlight” to the biggest media buyers. The new system lets buyers place an ad on cable TV in the entire seven-county Chicago area with just one phone call.
Comcast executives expect to double the company’s $1.12 billion in ad sales by 2007 because of the ability to offer “zoned” advertising for a specific audience, broad advertising for the entire market and a three-fold growth in the number of channels it can sell.
The Philadelphia-based company appears to be the first major cable provider to put these pieces in place, according to analysts who say Comcast is technologically ahead of its chief competitors, Time Warner Cable and Cox Communications.
“For the industry, Spotlight has pretty much been groundbreaking,” said David Mantell, a cable and media analyst at Loop Capital Markets. “What Spotlight does for Comcast is it allows them to go to national advertisers and say, `We have a footprint that offers you a significantly larger opportunity to reach your targeted markets.'”
Comcast rolled out Spotlight last month to consolidate a hodgepodge of advertising groups accumulated through a string of acquisitions, most notably the 2002 purchase of AT&T Broadband.
The $30 billion AT&T acquisition handed Comcast nearly all of the Chicago area, as well as 22 of the top 25 markets in the country and a cable line into 22 million homes and business. Comcast now is in 70 percent of Chicago-area homes, while its nearest cable competitors have about 5 percent of the market. Satellite has about 10 percent.
Joe Stackhouse, Comcast’s top executive in Chicago, expects Spotlight and the new technology will help the company stand out from its broadcast rivals.
“We’re a new entrant in some ways, so we’re looked at differently than our competitors,” said Stackhouse, whose operation is based in Schaumburg. “But our technology offers us some distinct advantages.”
In addition to “zoned” advertising–allowing an auto dealer to pitch pickup trucks in one town while selling SUVs in another–the digital upgrade will let Comcast sell premium offerings such as video on demand and high-definition television, Stackhouse said. Those services, he said, provide more opportunity for ad sales, as does the recently formed Comcast SportsNet, a partnership between the Cubs, Bears, White Sox and Bulls.
That’s a big switch from cable’s early days, when the industry pitched commercial-free programming in exchange for monthly fees from subscribers.
“The cable industry only dabbled in advertising over the past eight or 10 years,” said Fred Wray, Midwest director for Initiative, a national media buyer. “They’ve always had pipes, but only now are they finding resourceful ways to use those pipes for revenue.”
In years past, large corporate advertisers viewed cable as difficult to buy because it required arrangements with several operators, acknowledged Vicki Lins, a Comcast Spotlight vice president based in New York.
Comcast’s “interconnects” in Chicago with RCN Corp. and Wide Open West lines have simplified that. In 2003, Comcast also completed interconnects in 55 of its 72 markets nationwide.
TV stations unfazed
Despite Comcast’s improved reach and heightened ambitions, Chicago network TV executives say they aren’t worried by the cable giant’s more aggressive sales pitch.
Longtime Chicago television manager Larry Wert, currently at NBC affiliate WMAQ-Ch. 5, acknowledges that Comcast’s decision to repackage its advertising group makes the cable company “much more formidable.”
But local news and sports on the network channels, he says, still attract more eyeballs in a single viewing than anything cable has to offer–a point backed up by Nielsen Media Research. As a general rule, says Nielsen’s Jack Loftus, broadcast stations during prime time attract more viewers than any particular station on cable.
Nonetheless, Loftus says the growth in cable viewership is outpacing that of the networks. And cable already has a significantly larger share. As of December, 68 percent of television households had cable, according to the National Cable and Telecommunications Association.
“It’s a giant cable pep rally,” Wert said in reference to Spotlight. “We’ve found that their sales pitch has vulnerability on both price and audience, and our game is still about the largest qualitative reach.”
For cable providers, advertising sales are limited to about 2 minutes an hour on “insertable” channels–everything from popular venues such as ESPN and TBS to niche stations such as the Food Channel and Home & Garden, where ratings are minuscule. And while cable has at least as much time to allocate for advertising as the networks, it has no access to non-commercial channels such as HBO, Showtime and Cinemax where viewership is strong.
Ed Pearson, general sales manager at ABC affiliate WLS-Ch. 7, asserts that while cable may have advanced technologically, its audience remains fragmented. “They will beat us to death in a single community for a single retailer. But anyone looking to buy the entire region will pay too much on a cost per thousand,” he said, using the industry measurement for reaching an audience.
Different structures
Comparing prices offered by a cable company such as Comcast with those of the networks is made difficult by their differing structures, said Kathy Crawford, an executive at MindShare, a national media buyer. Though network pricing is generally less expensive than cable when selling an entire region, cable companies can offer other attractive strategies.
“If I have to buy `Law and Order’ on cable, it’s going to cost more, generally, on a cost-per-point basis than broadcast,” Crawford said. “But if I can combine `Law and Order’ on the cable side with other spots on smaller cable channels, I can actually buy time cheaper than broadcast.”
Come June, the nagging question of whether cable or network broadcast receives higher ratings–and for which demographic groups–will be better answered when Nielsen installs Local People Meters in Chicago. Stackhouse contends the new devices will generate detailed data on viewing habits that should allow Comcast to fashion advertising packages that better compete with the networks.
“It’s about being able to deliver the whole market or deliver pieces of the market,” Stackhouse said. “With that direct line into the home, we can do things that have never been done before.”
