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Can the Big Apple Win Big in '06

Cable World, Oct 10, 2005

The country's biggest spot cable market is growing even as broadcast spot falters. Will Katrina let the New York Interconnect maintain that momentum in '06?

By Shirley Brady

It's been a lousy year for broadcast spot television advertising across the country.

But the story's different for local cable, particularly in the country's largest DMA: the Big Apple. Comcast and Cablevision's New York Interconnect (3.5 million homes) has seen double-digit growth this year. The reasons? Advertisers are responding to cable networks' continued ratings growth, the variety of the Interconnect's 45 cable channels and its targeted advertising opportunities. "One of the reasons that we've been able to continue to grow is the variety of offerings that we have and the value that we provide to our customers," said David Kline, president and COO of Cablevision's Rainbow Advertising Sales Corp.

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The contrast between cable and broadcast makes the story sweeter. "Double-digit growth in what has been an extremely challenging broadcast television market [means], in effect, spot cable's growing and broadcast is declining, which just makes our success even more significant," said Kim Norris, VP of Comcast Spotlight's Northeast division.

Will Katrina Slow Ad Spending in '06?

Like most businesses, advertising abhors uncertainty in any form. Until a few weeks ago it looked like the Interconnect's bright 2005 was going to be a good lead-in for next year. Katrina changed that scenario fast. Still, N.Y. Interconnect chief Ed Renicker seemed cautiously optimistic for 2006 as he prepared for the Interconnect's second annual fall preview Sept. 29.

"I'm very, very, very nervous about the effects of Katrina," he said in his Fifth Avenue office. "The economic effects are certainly going to hit us. We've all seen what's taken place with oil and gasoline. That's going to have a reverberating effect on a number of industries, including, obviously, automotive. How's it going to affect SUV sales? In this particular market, that's one of the strongest lines of business for automotive. Is that going to force a change by consumers to go to smaller vehicles?"

Holiday Spending a Key

The aftermath of the devastation on the Gulf Coast could discourage consumers from traveling, which would hurt ad spending by airlines and destinations. On the other hand, a travel downturn might encourage home entertainment options, such as DVDs and on demand.

The Christmas holiday shopping season will be a barometer for consumer and advertiser reactions to this year's events, according to Renicker. Considering the Interconnect's vitality in '05, it's a good bet it will be able to weather the fallout from Katrina.

Overcoming the Automotive Downturn

Local broadcast TV revenue is hurting. In the second quarter it fell 7.2% for the nation overall, according to an analysis of TV ad spending by the Television Bureau of Advertising.

Given that context, the New York Interconnect is "having another tremendous year...[it's] very solid," Renicker said. "I wouldn't say we're breaking new categories but we're certainly gaining share in categories that we've been very strong within."

If the advertising market were the human body, the automotive sector would be its heart.

The Interconnect's health is good despite a nationwide slump in automotive, which spurred an 8.4% drop in the second quarter for local TV advertising by car manufacturers, traditionally the biggest category. New York's television stations were also hurt by a downturn in the movie and studio business, including reduced marketing for new releases and DVDs.

Spot television spending by the telecommunications sector was also down 24% in the second quarter.

But the New York Interconnect hasn't been hurt as much by the soft spot market plaguing its competition, and actually has seen an uptick in advertising categories, including retail.

"The challenge that we've seen this year is that the New York spot market is very, very bad," Renicker said. He projects the New York broadcast spot marketplace will see 1-2% growth in 2005. "We've maintained a nice gap between the competition, and it's something that we're definitely encouraged about."

Pre-Katrina Goals

Before Katrina, and then Rita, Renicker and the New York Interconnect had outlined challenges and goals for 2006 that also offer food for thought about the state of spot cable overall:

* Grow revenue from spot cable while competing with local cable ad sales operations. An interconnect's biggest challenge is having enough inventory to sell. "There are two to three minutes per hour on average from the cable networks [to sell advertising] on a local basis," he said. "That's being shared by interconnects, local cable system ad sales groups and marketing." Renicker's solution: "I'd love to see the networks give us more inventory, or give the MSOs more inventory."

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Can the Big Apple Win Big in '06

Cable World, Oct 10, 2005

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