Rate Hikes Scare Buyers: Competition for Cable Media GrowsAs cable networks lure a bigger share of media dollars this year, direct response advertisers expect to be adversely affected by further jumps in rates.
With networks looking to increase rates for scatter time, many advertisers are shifting upfront buys from the networks to cable, which could mean an increasing tightening of available inventory for direct response advertisers.
"Over the last five years broadcast network channels has seen audience erosion and prices are escalating like crazy," said Jean Pool, executive vice president and director, North American media services for J. Walter Thompson. Pool is one of four executives that oversees The Alliance, a media buying concern formed last year between JWT and Ogilvy & Mather Worldwide. "More and more clients are using cable because it's growing and it helps our cost. A lot of accounts have put 5 to 20 percent of their budgets to cable and some have even doubled their cable budget. If that continues to happen it is going to be a problem for DRTV."
Other buyers agreed. "Cable has grown up," said Desiree Dumont, managing partner of Media Direct, a DRTV media agency in New York. "It allows for more vertical, more targeted programmable opportunities. It is becoming very attractive to mainstream advertisers and the more attracted mainstream advertisers are to cable, the sparser the amount of inventory for direct response."
"Viewing habits are definitely changing for people," said Nancy Lazkani
president of Prime Time Direct, a DRTV media agency in Sherman Oaks, CA. "There is a much greater demand on media buyers to shift dollars to cable. It's increasingly harder to find time for two-minute spots."
DRTV advertisers last year spent $85.8 million on cable networks, a 142 percent increase from the previous year, according to Competitive Media Reporting.
Those advertisers can expected increased competition from traditional brand heavyweights this year. Such packaged goods companies as Procter & Gamble and Kraft spend heavily on cable and are expected to boost spending even more. Kraft's four divisions boosted cable spending last year by 49.2 percent, to $76.4 million, while Procter & Gamble's cable spending rose nearly 20 percent, to $242 million, according to Competitive Media Reporting.
"Cable networks grew their share from 22 to 25 percent of television dollars," said Kevin Barry, vice president of local sales and marketing at Cabletelevision Advertising Bureau, New York. "That will tighten up inventory but prices are still below broadcast on a CPM and raw basis. Nonetheless, the trend will help narrow the spread. That is good news for our members, but different news for your [DRTV News'] readers."
"This is going to make it somewhat tighter," said Jim Sandino, managing director, Lowe McAdams Direct, a division of Lowe McAdams. "Unfortunately, clients are being sold into more expensive upfront buys. Good direct response advertisers don't need to be doing upfront buys. You can't get the same levels of efficiency with an upfront buy for direct response. I have heard from a number of clients that they are being given the option of upfront buying while they should be looking more into targeted upfront and DRTV."
Despite a shift and impending rise in rates, direct response media buyers contend the shift reopens opportunities for network and other venues. But just as mainstream advertisers are shifting to cable, some direct advertisers are shifting the other way. In fact, direct response advertisers boosted network spending by about 200 percent, to $32.1 million last year, according to CMR.
"You have to continue to look at new venues including syndication and networks," said Rick Sangerman, senior vice president, director, of account services with Eicoff. "As the economy remains strong it make it a little more difficult for direct marketers because the money has to come from somewhere. We're finding new opportunities on network. It is no secret that ratings have dropped and they can't demand the same dollar."
According to Cabletelevision Advertising Bureau, basic cable saw a 2.3 percent increase in ratings, while broadcast networks saw a 1.5 percent dip. Additionally, ad revenues grew 22 percent for cable in 1997, to about $5.7 billion.
But while some reconsider networks, others are looking at syndication and broadcast. "We have made broadcast work better," Media Direct's Dumont said. "Broadcast used to be less efficient but at certain times of the year they are more willing to negotiate."