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local stations that send their signals nationally via satellite to cable operators to make their programs available to subscribers. Programming on superstations such as TBS and WGN generally consists of sports, movies, and reruns of network shows (Exhibit 11-4). The superstations do carry national advertising and are a relatively inexpensive option for cable households across the country.

Cable has had a considerable influence on the nature of television as an advertising medium. First, the expanded viewing options have led to considerable audience fragmentation. Much of the growth in cable audiences has come at the expense of the three major networks. Cable channels now have about 40 percent of the prime-time viewing audience, while the total share of the three networks has declined to around 50 percent. Many cable stations have become very popular among consumers, leading advertisers to reevaluate their media plans and the prices they are willing to pay for network and spot commercials on network affiliate stations. The networks, recognizing the growing popularity of cable, have become involved with the cable industry. ABC purchased ESPN, while NBC started two cable channels in the early 90s—the Consumer News and Business Channel (CNBC) and Sports Channel America—and in 1996 entered in a joint venture with Microsoft to launch MSNBC, a 24-hour news channel.24

Advertising on Cable Cable advertising revenues have increased steadily since the mid-1980s and exceeded $12 billion in 2002. Much of this growth has come from advertising on the national cable networks such as CNN, ESPN, USA, and MTV.

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However, many national advertisers have been shifting some of their advertising budgets to spot cable and purchasing through local operators as well as the national cable networks. Over the past four years, spot cable revenues have averaged 20 percent annual growth, reaching nearly $33 billion in 2002.

Like broadcast TV, cable time can be purchased on a national, regional, or local (spot) level. Many large marketers advertise on cable networks to reach large numbers of viewers across the country with a single media buy. Regional advertising on cable is available primarily through sports and news channels that cover a certain geographic area.

Many national advertisers are turning to spot advertising on local cable systems to reach specific geographic markets. Spot cable affords them more precision in reaching specific markets, and they can save money by using a number of small, targeted media purchases rather than making one network buy. The growth in spot cable advertising is also being facilitated by the use of interconnects, where a number of cable systems in a geographic area are joined for advertising purposes. These interconnects increase the size of the audience an advertiser can reach with a spot cable buy. For example, Chicago Cable Interconnect reaches more than 1.7 million subscribers in the greater Chicago metropolitan area; the ADLINK Digital Interconnect delivers 3 million cable subscribers in Los Angeles and four surrounding counties. New York Interconnect reaches 3.6 million households in the largest market area in the country and offers advertisers 31 different cable networks (Exhibit 11-5). More sophisticated interconnect systems are developing that will pool large numbers of cable systems and allow spot advertisers to reach more viewers. These new systems will also allow local advertisers to make more selective cable buys, since they can purchase the entire interconnect or one of several zones within the system.

While spot cable is becoming very popular among national advertisers, it has some of the same problems as spot advertising on broadcast TV. The purchasing process is very complicated and time-consuming; media buyers must contact hundreds of cable systems to put together a media schedule consisting of spot cable buys. Local cable systems also do not provide advertisers with strong support or much information on demographics, lifestyle, or viewership patterns.

Advantages of Cable Cable TV has experienced tremendous growth as an advertising medium because it has some important advantages. A primary one is selectivity. Cable subscribers tend to be younger, more affluent, and better educated than nonsubscribers and have greater purchasing power. Moreover, the specialized programming on the various cable networks reaches very specific target markets.

Many advertisers have turned to cable because of the opportunities it offers for narrowcasting, or reaching very specialized markets. For example, MTV is used by advertisers in the United States and many other countries to reach teenagers and young adults. CNBC is now the worldwide leader in business news and reaches a highly educated and affluent audience (Exhibit 11-6). ESPN has become synonymous with sports and is very popular among advertisers who want to target men of all ages. As discussed in IMC Perspective 11-3, ESPN has become more than just a 24-hour sports channel and is changing its strategy to attract a broader audience.

Advertisers are also interested in cable because of its low cost and flexibility. Advertising rates on cable programs are much lower than those for the shows on the major networks. Advertising time on network shows can cost two to three times as much on a cost-per-thousand basis

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