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

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Comcast chief Brian Roberts unveils next generation Xfinity TV system

Comcast Chief Executive Brian Roberts is linking TVs to the cloud.

On Thursday, at the National Cable & Telecommunications Assn. conference in Chicago, Roberts unveiled the latest generation of the Philadelphia cable giant's Xfinity TV system. The upgrade boasts a less complicated remote control and a souped-up "Xcaliber" program guide, which is currently being tested in a few homes in Augusta, Ga.  

The system includes applications to connect viewers via the cloud to their Facebook page, traffic and weather reports and Pandora Internet radio. The term "cloud" refers to computer storage via any Internet-connected device. Think of it as a file cabinet in the sky. For example, consumers can store their iTunes library or photo connections on a "cloud" and not use up valuable space on their computers. 

Roberts differentiated the Comcast cloud from traditional clouds.

"This is cloud computing, not necessarily cloud storage," Roberts said. "The cloud allows you to have faster innovation to be able to take all the brains of the [program] guide -- the search, personalization and recommendations -- and pull it out of the cable box."

Cable companies have invested billions of dollars into the manufacture and distribution of cable boxes -- that soon become outdated as technology advances. "That doesn't happen in the cloud," Roberts said.

The system is faster than those that the company currently deploys in its approximately 23 million homes that have Comcast cable service. Roberts played a video that showed a cable modem downloading TV shows at speeds exceeding 1 gigabyte per second.

The service allows viewers to customize their offerings, including the ability to post on Facebook what they like or if they are watching a TV show or movie. Viewers also can use a search function that quickly identifies programs available on TV that feature a favorite actor like Tom Hanks, a particular program like "CSI" or a baseball team.

"So I'm interested in the Cubs," Roberts said as he demonstrated the feature for a large audience in Chicago. Then one of Philadelphia's favorite sons paused and said, "By the way, not really."

-- Meg James

Photo: Comcast Chief Executive Brian Roberts. Credit: George Widman / Associated Press.

FCC Chairman Julius Genachowski calls on cable industry to increase broadband penetration

Federal Communications Commission Chairman Julius Genachowski gently prodded telecommunications companies to build out their broadband networks to dramatically increase the number of homes that have access to high-speed Internet.

The effort is vital to the nation's economic health, Genachowski told several hundred people attending the National Cable & Telecommunications Assn. annual convention in Chicago on Wednesday. About 67% of the country's homes now have high-speed or broadband Internet, the chairman said.

"Broadband access is absolutely key in helping us recover from the terrible economic situation of the last few years -- and making sure we have sustainable growth," said Genachowski, who heads the agency that serves as watchdog of the public airwaves. Genachowski was interviewed at the convention by NCTA President and former FCC Chairman Michael Powell.

Genachowski announced that he would form a task force of government and industry executives to figure out ways to blanket the country with high-speed Internet lines. Without access to the Internet, Genachowski stressed, many people are hobbled in their efforts to find meaningful employment. Four-fifths of Fortune 500 companies use the Internet to advertise openings and recruit employees, Genachowski said.

The cable industry is a captive audience because, for many cable companies, high-speed Internet service has become a faster-growing, and higher-margin, area of their businesses than the traditional packages of cable television channels. Still, extending cable lines into rural areas is a costly proposition for the companies.

Genachowski singled out Cox Communications and Comcast Corp. for being leaders in rolling out broadband. Earlier this year, Comcast committed to making broadband Internet more widely available, and more affordable, as part of its agreement with the FCC to win approval of its takeover of media giant NBCUniversal.

"Broadband is what powers the American dream," Genachowski said. "I don't think we can be satisfied with this pace of adoption. It's just not good enough."

-- Meg James

Photo: NCTA President and former FCC Chairman Michael Powell (L) chats with current FCC Chairman Julius Genachowski. Credit: John Gress/Reuters.

 

Media chiefs confront challenges facing cable TV industry

A sense of urgency surrounds the annual National Cable & Telecommunications Assn. convention in Chicago this week as big media firms grapple with a host of business challenges that threaten their livelihood.

An onslaught of new technologies, devices and digital-content-delivering platforms and the nation's  growing wealth divide are challenging the cable television industry to no longer take for granted customers who shell out $70 to $100 a month for service.

Young consumers, in particular, do not seem to share their parents' affinity for their pricey cable and satellite TV packages, and are increasingly drawn to the Internet and to services including Netflix and Hulu for entertainment.

The health of the cable industry is crucial to the rest of the entertainment pipeline because it is cable and satellite operators who underwrite the high cost of television programming.

While industry leaders tried to put on a brave face, not everyone was buying it. Typically, question-and-answer sessions at industry conventions turn into fan-fests with softball questions, but Tuesday's opening panel, moderated by Fox Business News anchor Liz Claman, had a sharper tone. 

Claman suggested that cable leaders who said they weren't seeing evidence of cord-cutting -- or people who cancel their cable subscriptions in favor of lower-cost Internet options -- sounded a little too much like Wall Street bankers who, in early 2007, didn't believe the failure of a few subprime mortgages would be much of a problem. 

Viacom Chief Executive Philippe Dauman sought to downplay the threat. He said the cable industry not only survived but thrived during the recessions.  Millions of people didn't cancel their cable subscriptions despite stretched incomes, he said, because they regard their pay TV subscriptions as a good value.

"That's the story here," Dauman said.

But Time Warner Cable CEO Glenn Britt was more cautious. 

"There clearly is a growing underclass of people who can't afford the services they want.  It would behoove all of us to work together to meet the needs of that population," Britt said. "Most of the people want everything but not everyone can afford it. The economics of all of us [programmers and operators] make that difficult, and it would serve us well to worry about that group of people."

The audience broke into applause.

Patrick Esser, president of Cox Communications, said an increasing segment -- estimated at 40% of the U.S. population -- no longer have enough extra money, after the cost of food and housing, to continue to pay their rising TV bills.

"We have to be very sensitive that we serve customers," Esser said.  "They either have disposable income or they don't. I worry more about that than cord-cutting -- making sure we have the products and services, and their affordability."

The panel, which also included News Corp. Chief Operating Officer Chase Carey and Time Warner CEO Jeffrey Bewkes, stressed that the industry must figure out ways to support the cost of making entertainment and delivering it to consumers.

"Don't be afraid of your children," Bewkes said. "Put the TV on the Internet devices, and don't change the business model and don't charge people extra. Make it easy for them to use it."

This spring, Time Warner rolled out its HBO Go option for subscribers to watch HBO programming on their iPads and other mobile devices.  Bewkes said such user-friendly experiences were key.

And the cable industry, which also sells broadband Internet service packages, must improve data transfer speeds to deliver high-quality video.

"We really all have to remember this: It is this infrastructure, this industry, that allows for quality audio and visual display of material," Bewkes said. "We ought to keep rolling this out as quickly as we can so the consumers get a seamless adoption of better technological quality and access to what they want, when they want it. It's all in this room."

-- Meg James

Photo: The cable industry invades Chicago: Credit: NCTA.

 

Chicago Mayor Rahm Emanuel apologizes for agent brother Ari

Chicago Mayor Rahm Emanuel opened the 2011 Cable Show -- the annual gathering of the heavy-hitters and rank-and-file of the cable television industry -- to Chicago by poking fun at his brother -- Hollywood super agent Ari Emanuel.

Ari Emanuel, of course, is the hard-charging and sometimes abrasive head of the William Morris Endeavor talent agency.  The character of super agent Ari Gold played by Jeremy Piven on the HBO series "Entourage"  is inspired by Ari Emanuel.

"On behalf of the entire Emanuel family, we apologize for Ari," the mayor said. "You know him as an agent, we know him as a brother. We thought that we got the worse end of the deal."

Emanuel -- former chief of staff to President Obama and former Illinois congressman -- became mayor of Chicago earlier this year.  He said that midway through the first season of "Entourage," he caught an episode and called his brother Ari the next day.

"What did you think?" Ari Emanuel apparently asked his brother.

"I like Ari Gold better than you," Rahm Emanuel said, referring to the Piven character.

Jokes were at a premium during the opening session. 

The co-chairmen of the National Cable & Telecommunications Assn.'s annual convention -- Discovery Communications Chief Executive David Zaslav and Jerry Kent, chief executive of Suddenlink Communications, put together a pictorial travelogue of the unlikely pair together visiting Chicago's landmarks. In one photo, Zaslav appeared to be reaching in Kent's back pocket to grab his wallet, a reference to cable operators' unhappiness with the escalating costs of sports and entertainment programming.

Zaslav, who earlier this year launched his company's joint venture with Oprah Winfrey, the Oprah Winfrey Network, said he has spent a lot of time in Chicago during the past three years, leading up to the launch of OWN: Oprah Winfrey Network.

"Never heard of it," Kent mused.

Zaslav put on his best unhappy face.  Despite millions of dollars in marketing, the new channel is struggling to attract viewers.

-- Meg James

Photo: Rahm Emanuel. Credit: M. Spencer Green/Associated Press