Comcast Ad Sales pools together a roster of interconnects servicing 48 markets that has enough size and heft to challenge national broadcast spot sellers, and which is already seeing an 11% increase in spot sales this year. Interconnects are a way of linking local cable systems so a national advertiser can easily buy across several markets.
At a recent media conference in New York sponsored by Goldman Sachs, Brian Roberts, Comcast president, said national spots sales are gaining significant ground. "In the last quarter ... local ad sales right now aren't so hot," Roberts said. "We had 2% to 3% growth. [But] our national business grew 18%. And the whole thing averaged in at 8% or 9%."
$2 billion by 2008
The Comcast Ad Sales unit, according to executives at the company, is expected to pull down over $1 billion in revenue from a total of local and national spot pool of about $27 billion in total spot sales, including broadcast. Comcast Ad Sales unit's goal is to double the carrier's advertising revenue to $2 billion by 2008.
"Forty-eight of the 71 markets Comcast has a presence in were interconnected by the end of July 2003," says Charlie Thurston, president, Comcast Ad Sales. Although the top 15 to 20 networks have seen the most demand in the spot upfront, which began in August, the interconnect is now moving significant ad dollars across 40 networks.
"The key way we try to sell our inventory across 40 networks is by clustering together demographic ratings," Thurston says. "So if you are looking for men 18-49 we can serve 15 or 20 networks that target that demo and reach it through different dayparts and programs."
Media buyers credit Comcast with positioning cable to better compete with broadcast spot. "We have come a long way, and Comcast and National Cable Communications get 95% of the credit," says Kathy Crawford, president-local broadcast group at WPP Group's MindShare. "But the problem is that not all [interconnects] are competitive because they have limited inventory, and because we can buy specific programs in broadcast and we can't do that in local cable and be competitive."
Vicki Lins, VP-marketing at Comcast Ad Sales, says Comcast has set up interconnects to rival broadcast networks' station group brands and their local affiliates. "Clearly, we're going after that $23 billion in broadcast spot money. We want more of the spot dollars shifting to cable," she says.
Comcast sells two minutes of advertising for every hour of programming on every channel it carries in every market. And according to some media buyers, the money in certain zones is not that big, anywhere from $10 to $500 for a 30-second ad. But according to Thurston, "when you're looking for a national spot advertiser that is trying to buy CNN or ESPN across the whole interconnect, the pricing will be more competitive with the TV stations."
Merrill Lynch analyst Jessica Reif Cohen predicted in a recent study that spot/local cable ad sales will double from about $4 billion to $8 billion in the "near term," primarily due to the increasing number of interconnects. "We expect that market to grow dramatically, mostly driven by Comcast," Cohen says. "After all the mechanics are in place ... they should be able to go after national and regional spot, just like TV stations and radio stations."
After acquiring AT&T Broadband in November 2002, Comcast spent about $15 million building a national spot sales team, hiring 50 sales people "who get paid commissions the way broadcast advertising sales get paid," Roberts says. To lead the unit, Comcast hired Thurston, recruiting him from Adlink, the Los Angeles interconnect, where he was president-CEO.
According to many buyers, spot cable's cost-per-thousand prices are as much as 25% higher than local broadcast in many markets. "The next big hurdle is making them more competitive," Crawford says. "And the old story of local cable as being upscale is really no longer true, it's a mass medium in the scheme of things thanks to the interconnects."