January 2007 - Marketing Methods

Is the Decline of Cable an Opportunity for DRTV Marketers?

By Peter Koeppel

This is the time when all the media experts attempt to predict advertising spending for the coming year and analyze trends for the past year. In reviewing various reports and articles, one trend that stood out was the growing weakness in national cable TV sales. The growth in total cable ad spending was expected to slow to 6 percent in 2006 from 11 percent in 2005, according to TNS Media Intelligence. This represents a significant drop in ad spending. Cable ad sales were described as very weak across the board.

Cable TV has enjoyed consistent growth over the last 25 years, as the service expanded across the country and advertisers shifted their budgets to this medium. Now those days are over, according to the Wall Street Journal. Money is shifting to the Internet and Internet ad spending is experiencing double-digit growth in the range of 15 percent to 30 percent annually.

The cable networks are now trying to diversify to offset the losses in ad spending by investing in other ventures. For example, Discovery Communications, which owns 15 cable channels and saw its ad sales and viewership drop in 2006, has started an Internet-based, ad-free subscription service, called Cosmeo, that helps kids with their homework. Discovery is investing about $100 million into this venture. Other networks are selling ring tones for mobile phones and song downloads for portable music players to off-set lost ad revenue from cable TV, as reported by WSJ.

The weakness in cable TV ad sales could be good news for DRTV advertisers. For years, we have seen cable ad rates increase, as general advertisers shifted more of their budgets into this medium. If declines in cable ad spending and viewership translate into lower rates for DR advertisers, it would be a trend the industry would welcome, but keep in mind that declines in viewership also could lead to lower response rates.

Also, fluctuations in ad rates do not always follow logical patterns. TV networks have consistently tried to raise rates, despite a loss of viewers, due to factors such as media fragmentation and viewers zapping through commercials with DVRs.

Savvy DR marketers need to try and capitalize on the weakness in the cable marketplace. They also need to realize that consumers are spending more time on the Internet; and therefore, they must take this into consideration in their media planning. However, to put things in perspective, time spent on the Internet is still only 20 to 25 percent of total time spent with all media, and Internet penetration is only 70 percent, according to a December 4 article in Ad Age.

So, there’s still room for significant online growth. This means that a balanced, multichannel advertising strategy, incorporating several mediums into your media mix is more important than ever if you want to succeed in today’s rapidly changing media environment.

Peter Koeppel is president of Koeppel Direct Inc., a full service media buying agency based in Dallas. He can be reached at (972) 732-6110, or via e-mail at [email protected].


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