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TV Upfront

In a Fight to Stay Relevant, Niche Cable Nets Bank on Audience Targeting

By Published on .

'The Kennedys: After Camelot' airs on Reelz.
'The Kennedys: After Camelot' airs on Reelz. Credit: ReelzChannel via YouTube
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In between waiting in line at Carnegie Hall and Radio City Music Hall to see glitzy presentations from major media conglomerates, ad buyers attending TV's annual upfronts must also slog through more intimate pitches from smaller channels, many of which most consumers have never even watched. Like their bigger brethren, these smaller channels will also show off original programming and tout audiences who they say fill a certain niche or demographic not reached elsewhere on the dial. When buyers leave the room, they usually roll their eyes.

But as audience buying becomes the soup du jour in TV, these smaller channels are angling to serve a new purpose for marketers: finding additional consumers that meet very specific criteria, well beyond traditional targets like age and gender. And a troupe of independent channels is working together to compete for audience-based TV budgets by trying to create some scale and streamline the buying process.

They may face as much skepticism from buyers as before. It's no secret that so-called long-tail cable channels are a harder sell than their much larger peers. That's only been amplified as digital video identifies targetable audiences who are perhaps not heavy TV users, a trend that's not going away, and as skinny bundles threaten niche networks' very existence.

While these channels are certainly cheaper to buy than much of the other TV inventory in the marketplace, advertisers have found little further value in those dedicated to fly fishing or classic movies.

But as ratings continue to contract, eroding the available commercial supply in the marketplace and thus driving up prices, using these channels to help find more specific audiences, like households that are heavy cereal eaters, may create a new purpose for these networks.

"There is some newfound value in these smaller networks thanks to audience buying," said Mike Law, exec VP-managing director, video investments, Dentsu Aegis Network.

To this end, a group of independent cable channels is working to create a programmatic marketplace where agencies and clients would be able to buy audiences across their respective channels.

The Independent Cable Network Consortium started two years ago in response to the desire from advertisers to do more programmatic buying on linear TV, said Liz Janneman, exec VP-network strategy, Ovation TV, a network dedicated to the arts.

Where bigger networks were able to invest their own resources into developing these types of automated systems, Janneman said many independents can't afford to build the infrastructure on their own.

There are over a dozen such networks in discussions regarding the consortium, including Ovation, Reelz Channel, Up TV, Aspire, WGN, Fuse, Weather, TV One and Pop. Any such platform won't be ready in time for this year's upfront selling season. The networks are currently in the process of establishing rules and guidelines with each other, with the hope of rolling out an offering by the end of the year.

Of course, given that discussions have been ongoing for two years, there's also the chance it won't materialize.

"This is really about automated buying and using data to find audiences" rather than a response to the recent noise surrounding the dissolution of smaller TV channels, Janneman said.

Bill Rosolie, who leads ad sales at Reelz, said, "when programmatic came around, the data showed our audiences' worth."

Still, it's hard to ignore the pressure these networks are facing. It's always been a challenge for smaller networks to find an audience for their programming, but with the sheer amount of original programming on not only TV but streaming and digital services, this feat has become that much more difficult.

Ovation, for example, averages 78,000 viewers on any given night and is available in just 40% of pay-TV households.

"They are an efficiency play, but the role of digital is starting to do a lot of the work some of the long-tail cable networks once did," said Lauren Israel, senior VP, managing partner-integrated investment, UM. "We are prioritizing our reach against some of the larger scale TV networks and then we let digital do the work of the smaller channels."

And as more skinny bundles and IP-enabled pay-TV services emerge, there's expected to be a thinning of cable channels. Over the last year, we have already seen Participant Media's Pivot channel go dark, and NBC Universal announced it would shutter the linear channels of Esquire Network and Cloo. Not to mention the looming question over the fate of Viacom's lower-tier networks as it refocuses its efforts on just six of its channels.

Israel said if additional smaller networks disappeared it wouldn't "make an impact on our media plans."

While lower-tier cable networks owned by bigger media companies have more leverage, independents have little negotiating power. It is worth noting, however, that it costs significantly less for distributors to carry these channels than networks like ESPN. So skinnier bundles can appear meatier without drastically increasing the cost to the consumer. This is how Pop, a joint venture between CBS and Lionsgate, for example, has found its way on Hulu's new live TV service, as well as a similar offering from YouTube.

But skinny bundles may not be the biggest threat to niche cable networks. Reelz's Rosolie believes a more meaningful threat will be if more ad supply enters the marketplace from the likes of the Netflixs of the world.

The ICNC is an attempt to plan for a future when more supply comes to the marketplace and digital gets its act together, he said.

Ultimately, smaller cable networks are looking to change the perception that larger ratings are worth more and that niche channels only serve as an efficiency play.

A programmatic marketplace would allow these channels to charge more than they normally could for their inventory, while still remaining more cost-friendly than larger networks, Rosolie said.

"At some point, advertisers are going to stop paying more for less; we can be part of the solution while driving premium pricing for us," he said.

Dentsu's Law said a programmatic marketplace for these networks would allow for one-stop shopping and help those channels create some leverage for themselves.

Of course, it would also likely drive up prices for these networks, which will certainly be a turnoff for plenty of ad buyers.

"I have no problem securing inventory on any of these networks; there isn't a lack of inventory," said Gibbs Haljun, managing director-media investment, GroupM. "So I don't need an automated portfolio."

"When we talk about light TV audiences or niche audiences we don't plan our media in a vacuum," he added. "We can reach certain audiences in digital or event print…Just because you have smaller networks grouped together doesn't mean they will deliver the audience we are looking for or have the distribution we need."