Why Bargain Prices Lure Cable Advertisers

Businesses find cable television a successful, low-cost way to reach key prospects.

Tweet

Utica National Bank & Trust Co. in Tulsa used to advertise on local spots during CBS-TV's "60 Minutes." Then the bank encountered tough economic times and was forced to cut its advertising budget, says senior vice-president Dick Barber. So the commercial bank switched from its conventional television advertising to Cable News Network's "Freeman Reports," a one-hour interview program. "It's a think program that appeals to the chief executive officers we want to attract," says Barber. At $30 a spot, the bank is able to run 40 spots a month, compared to the 1 spot for $1,200 it ran on "60 Minutes."

Totem Lumber Co., a division of Industrial & Wholesale Lumber Inc. in Schiller Park, Ill., wanted to reach customers in its northern Illinois trading area. "My manager in Spring Grove pointed out that Lakes Cablevision, with more than 9,000 subscribers, was up there," says John R. Kathrein, executive vice-president of the company that employs 90 people in four locations. Kathrein signed up for four spots per day for 13 weeks at a cost of $6.40 a spot to advertise the company's windows and screen doors. Since it is more like a special-interest magazine than broadcast television, cable allowed Kathrein to tailor advertising to the rural lumberyard's customers. "What's hot for people around our northern yard isn't right for our suburban Chicago customers," says Kathrein. "Vacationers want screen doors, while people in the city want grates over their doors."

As growing numbers of local cable TV systems offer commercial time to advertisers, many businesses are finding that, for the first time, they can afford to advertise regularly on television. Attracted by prices that compete with radio air time and newspaper space, companies are signing up for local spots on satellite-delivered programming -- for example, the all-news Cable News Network (CNN), the 24-hour Entertainment and Sports Programming Network (ESPN), and the nonstop-rock and roll Music Television (MTV) -- as well as for locally produced programming. With cable, advertisers can choose specialized programming that suits their products and services, sponsor their own programs, or experiment with longer commercials while reaching a precisely defined audience within the boundaries of a cable franchise.

Across the country, prices for cable fluctuate like the price of a leather handbag in an Italian flea market. "I have hundreds of rate cards," admits Tulsa Cable Television's advertising manager, Ray Klinge, whose accounts include auto dealers, banks, furniture companies, trade schools, coin dealers, radio stations, and shopping centers. Klinge notes that while prices generally range from $20 to $80 a spot, some special programs command more. A 30-second spot during the Sugar Ray Leonard and Tommy Hearns fight fetched $1,000, for example. "None of us in cable knows what it's worth yet,' adds Donald M. Olson, executive director of broadcast operations at Colony Communications, a cable company that operates systems in suburbs of New York, Boston, Miami, and Providence. When Colony first offered commercial advertising time two years ago, its rates were pegged to the cost of local radio -- about $15 for a 30-second spot. Today the cost ranges from $30 to $40.

While salespeople tout cable's bargain rates, specialized programming, and its ability to target an audience practically by zip code, a lot of cautious advertisers are confused by cable's vast offerings of satellite-delivered programs and local shows. For instance, cable companies franchising metropolitan areas are typically offering 36-, 52-, 104-, and even 166-channel systems with an array of special-interest programs, from news in Spanish and portuguese to all-music and homeshopping channels.

Cable TV now reaches more than 29 million U.S. households, or 35% of the total 83 million homes that have television sets, according to A. C. Nielsen Co. "These audiences have a different ebb and flow than regular broadcast television viewers," notes Bob Woletz, an analyst with Paul Kagan Associates, a communications research firm based in Carmel, Calif. "For example, people constantly tune in and out of 24-hour news programs so advertisers have to buy a lot of spots to increase the chances that a viewer will see a commercial."

Many advertisers and ad agencies are also concerned by the lack of audience data, such as those provided by A. C. Nielsen and Arbitron Co. for regular broadcast TV. Although some systems are hiring research companies to measure response, most local systems are still able to tell an advertiser only the number of cable subscribers. They cannot document, for example, how many or what type of people are watching a program.

 1 | 2  NEXT