Cable TV

Cable television was hailed as ushering in a new era of programming choice, and broadcast alternatives. Yet, until just recently cable’s reality lagged behind the promise of the concept, plagued by complaints of lousy customer service, hard-to justify rate increases, and a failure to live up to technological expectations.

When cable television burst onto the scene more than two decades ago, it was hailed as ushering in a new era of programming choices and broadcast alternatives. Yet, until just recently cable’s reality lagged behind the promise of the concept, plagued by complaints of unsatisfactory customer service, hard-to-justify rate increases, and a failure to live up to technological expectations. It is only in the past few years, with formidable challenges from alternative PAY-TV sources, not to mention technological revolutions imposed from outside, that cable has made a concerted effort to get its act together.

Part of the effort is a broad-based upgrade of cable companies’ physical plants. These upgrades are particularly impacting cable TV advertising. Advances such as digital ad insertion technology, the growth of interconnected markets, and better billing and traffic software have made cable more appealing to advertisers.

The Cabletelevision Advertising Bureau states that revenue derived from cable advertising grew from $5.7 billion in 1995 to an estimated $11 .5 billion in 1999.¹ As good as these increases are, the Television Bureau of Advertising (TVB) projects continued growth with a 14 to 16 percent increase in overall cable ad revenues in 2000.²

In spite of its past problems, the cable industry has steadily added subscribers over the years. As of May 1999, households with basic cable numbered 67,607,910, or 68 percent of all American TV households. However, the industry faces new challenges. Direct-broadcast satellite (DBS) has captured more than 11 million subscribers in just a few short years, and is poised to acquire viewers in unprecedented numbers now that the government has granted permission for satellite companies to offer local channels. Moreover, digital broadcast TV may force burdensome channel loads and further audience fragmentation on cable operators. Indeed, many operators are seeking future revenues from non-traditional sources such as telephone service and highspeed Internet access, areas that will not support increased cable TV ad buys. Cable advertising must rely on more than inertia and a few new toys if they expect to compete in the future.

Growth Spurt: Cable now reaches 68 percent of all U.S. homes, and even more (80 percent vs. 49 percent in 1985) among households with an annual income over $50,000.5 Inexpensive: Considered by many advertisers to be “discount television,” cfble offers some of the same benefits (e.g., motion, visuals, sound) as over-the-air television, at considerably cheaper rates. Targetable: Cable offers a considerably more targetable audience than over-the-air TV. Almost all cable homes (99 percent) receive 30 or more channels, and 60 percent of viewers have 54 or more choices.. .allowing advertisers to target specific consumer groups according to their programs of interest. Consumer Appreciation: Most consumers like the cable they pay to receive. In 1998, Americans spent an estimated $33.7 billion subscribing to cable services. Summer Season: Cable’s ratings typically increase during the summer, when over-the-air television ratings decline due to reruns.

Small Audiences: Because it offers so many viewing options and not all cable channels are carried by local providers, cable audiences are considerably smaller than those of broadcast TV. During prime time, even the top cable networks rarely exceed three percent penetration among TV households.8 As more channels are added, the pie will be further fragmented. (See Broadcasting & Cable for exact numbers). Limited Commercial Impact: Cable still has not been invited into a third of all U.S. homes. Cable (basic and premium) accounts for just 38 percent of total TV viewing among U.S. adults. Ad Clutter: It’s even worse than over-the-air television. While network TV typically carries a 24-unit commercial load every hour, cable often carries as many as 28 units per hour – making commercials that much more annoying and therefore more susceptible to zipping, zapping, and time-shifting. Quality: Local advertisers, whose ads are often placed adjacent to national sponsors’ offerings, are forced to spend an ever-increasing portion of their budgets in an attempt to achieve comparable video quality.