"For advertisers, the question is: `Can I sell across multiple platforms?' " says John Sims, VP-research for the Cabletelevision Advertising Bureau. "That's where it is. That's where it's going, and that's where it's going to end."
The recently announced merger of America Online and Time Warner will raise the profile of cross-media selling opportunities. The combined AOL Time Warner has the potential to offer advertisers a one-stop shop to reach readers of Time, viewers of CNN and AOL cyber-surfers clicking banner ads.
"We believe that AOL Time Warner will provide companies worldwide with a convenient, one-stop way to put advertising and commerce online as well as take advantage of the best in traditional marketing," AOL President Bob Pittman said the day the deal was announced.
Others in the cable industry view the AOL Time Warner merger as confirming the strategic power of combining content, connectivity and scale.
"We're trying to get into a one-to-one marketing mindset and also a media mix mindset," says Billy Farina, VP-advertising sales for Cox Communications.
ASSEMBLING THE MIX
Mr. Farina identified four areas of cable technology that will be part of the mix. The first is traditional 30-second and 60-second advertising on analog cable channels. The second is more targeted marketing by ZIP code or 1,000-home nodes, using digital ad insertion. The third is Internet advertising, and the fourth is interactivity on the TV screen through the new generation of digital set-top boxes.
"The technology is there," says Mr. Farina. "What's not there is the scalability."
Mr. Sims agrees the potential of digital cable technology to target viewers with direct marketing is alluring, but points out that it remains to be widely deployed.
"The conceptual promise is very powerful," he says. "But digital cable service in 1 or 2 million homes is not enough to excite advertisers."
Yet, Mr. Sims notes that even without widespread digital services, cable has positioned itself with better niche programming that is pulling in more viewers, and therefore, more ad dollars than it ever has. Cable now reaches 68 million homes, according to CAB.
"Between 1994 and 1999, the cable industry was growing three share points a year," he says. "No one in the history of TV has ever done that."
While that pace has slowed, incremental ad dollars have already flowed toward cable.
The 25 largest national cable advertisers, led by Procter & Gamble Co., MCI WorldCom and General Motors Corp., spent $2.6 billion on cable in the 1998-99 season, an increase of 25% from the year before, according to CAB.
Cable's gains come even as the leading digital satellite TV services, DirecTV and EchoStar Communications Corp., add upwards of 100,000 subscribers a month apiece.
The current universe of 11 million U.S. homes with mini-dish satellite TV could double in the next five years at current growth rates.
In addition, both satellite TV companies are creating a new breed of consumer electronic products, combined with program packages offering several hundred channels. In partnership with Microsoft's WebTV, EchoStar has launched a set-top box that allows e-mail and Internet functionality on the TV screen. DirecTV, in partnership with AOL, is due to launch a similar service called AOL TV.
A wild card for the satellite TV industry is a new generation of satellite that has two-way high-speed services to the home. This service, expected to launch in 2001, would allow subscribers to use Internet and e-mail service direct by satellite.
"It's very sexy," says Leslie Ellis, a technology analyst with consultancy Paul Kagan Associates.
For the time being, however, cable has the edge on two-way Internet connectivity to the home. The current number of 5.1 million cable modems in use is expected to double by the end of this year, and reach 38.1 million homes by 2005, according to Kagan estimates.
Along with that will come wide-scale deployment of bundled cable services.
"What's changed is the cost of server storage, the availability of two-way plant and the dropping cost of digital boxes," says Ms. Ellis. "Bundled voice, video and data is the endgame for the cable guys."
That explains the multi-billion-dollar bets placed on cable over the past few years by AT&T Corp., Microsoft Corp. and, now AOL. Only the future will tell which technologies will win.
Stephen Keating is a Denver-based writer and author of "Cutthroat," a book about the cable industry.