Cable television gaining in advertising revenue, but not political dollars
Boasting popular sporting events and original entertainment shows, cable programmers long ago surpassed the broadcast networks in viewers.
Now they are beginning to close the advertising-revenue divide.
"For the first time, the cable upfront take will be greater than the broadcast upfront," Bill Koenigsberg, chief executive of Horizon Media, said this week at the National Cable & Telecommunications Assn. convention in Chicago.
This year, many top cable channels, including Time Warner's Turner networks, have been able to raise their ad rates by more than 10% in the so-called upfront market, the period when advertisers place their orders for the bulk of the commercial time for the upcoming TV season.
Of course, it is slightly unfair to compare the ad revenue of scores of cable channels with that of the five major broadcast networks, but cable being poised to take in more ad revenue is nevertheless a symbolic moment for the industry.
Broadcast networks still fetch a premium for their 30-second spots because most of their programs are watched by much larger audiences than those for most cable shows.
With cable, however, advertisers can focus more on select audiences. For example, home-improvement stores buy time on home and garden shows, while movie studios can zero in on the younger audiences drawn by MTV or ABC Family.
Demand for national cable TV advertising is up about 8% compared with last year, Tim Spengler, president of Initiative North America, said at the convention. Cars, banks and other financial services, national retail stores, pharmaceutical firms, technology companies and Hollywood movie studios have been among the strongest advertising categories, he said.
"We are also seeing more spent on online video," Koenigsberg said.
However, he cautioned that the strong upfront market doesn't necessarily mean that economy is bouncing back. "I don't think the barometer of this upfront is a predictor for the future," he said. “The jury's still out on whether or not the money is going to continue to flow in."
Advertisers were encouraged to buy time during this spring's upfront market, because those who sat on the sidelines last year were punished. Prices for commercials spiked by 30% or more later in the year. So this year, advertisers placed their orders early.
One area where cable is not making gains is political advertising. Cable networks hoping for a bigger slice of the 2012 campaign-spending pie might be disappointed, particularly when it comes to the presidential race, warned to two top political advisors -- David Axelrod, senior advisor to President Obama, and Ed Gillespie, former counsel to President George W. Bush.
Cable news networks CNN, Fox News Channel and MSNBC will attract plenty of political dollars -- but presidential candidates most likely will continue to steer the bulk of their dollars to local TV stations, Axelrod said.
"We spent the vast majority of our money last time on broadcast television," Axelrod told attendees at the cable convention. Only 12% of the money went to cable television, he said, adding that about 68% of the dollars went to TV stations in battleground states.
"It's still the nuclear weapon," Axelrod said of TV stations. "We will probably spend a little more on cable this time, but there still are barriers in cable television that we need to overcome."
He explained that more commercial spots are up for grabs on local broadcast stations, and that candidates have a greater level of assurance that their messages hit the right geographic targets. "It is a national campaign, but it is delivered locally," he said.
Decisions also come down to how much money the various candidates raise.
"If the president has a billion dollars to spend in the election, you know they will be buying time on "American Idol" and "NCIS" and our nominee will be buying the Cooking Channel in Butler County, Ohio," Gillespie, the Republican said.
-- Meg James