Cable Continues To Win; TV Ad Spend Moving Online In The UK

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January 3, 2012 – 12:03 am

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2012: Cable Wins

One of the most often hyped stories in 2011 was the threat of “cord-cutting” to cable companies. To be sure, MSOs across the board did experience a good deal of subscriber losses. But for the most part, that was largely due to the shifts among providers and was more of a boon to aggressive satellite packages that attracted cable customers, as opposed the emergence of over-the-top services such as Roku, Boxee and Netflix. Though those companies did make their respective streaming presences known in 2011 compared to past years.

With all that in mind, Bernstein Research’s Craig Moffett is calling 2012 a winning year for most of the large cable providers. “We’ve long argued that cable stocks are misunderstood,” Moffett wrote in an analyst note (subscription). “They aren't media companies; they're infrastructure providers. And they've got the winning infrastructure. Whether video is delivered via a cable subscription or over broadband via Netflix or Hulu, the cable operators will get paid.”

Despite the subscriber losses, the cable companies remain successful when it comes to extracting money from their customers.  For example, monthly video revenue per U.S. cable subscriber rose 5 percent to $73.65 in 2010 and is likely to have increased another 6% this year, according to a recent SNL Kagan report.

Still, Moffett sees growth for Comcast and Time Warner Cable, but not so much for Cablevision.

Part of that growth that the industry will realize will come from areas beyond the set-top box. In essence, it’s the expansion of TV Everywhere that will allow cable companies to strengthen their ties to subscribers and, ultimately, build an additional range for advertising.

For example, the cable MSOs are extending Wi-Fi networks in shopping malls and downtown areas. “Think of the implications; customers will have Wi-Fi in their home, in their office, and in most of the places they congregate,” Moffett says. “It doesn't really matter who offers the service – as long as it's available, it can come from an employer, cable operator, Starbucks, or McDonald's.”

Those locations may only account for 10 percent of square mileage, but they represent 90 percent of time spent on net, he adds. That’s the kind of cord-cutting the cable companies are eager to get behind.

Most Brits Are Still Linear; Ads Are Less So

With all the talk of time-shifted TV, online video and audience fragmentation constantly circulating throughout the media industry, it’s always easy to forget that the millions of people still do most of their viewing the old-fashioned way: plain-old linear style. However, ad dollars are reflecting that reality to a lesser degree than ever before, at least in the UK.

That’s the takeaway from UK-based research consultancy’s Oliver & Olhbaum Associates (via paidcontent UK’s Ingrid Lunden), which says that Britons watched 14 billion hours more linear TV in 2010 than they did in 2006.

But advertisers continued to shift their spending from TV to online. In the U.S., broadcast has largely suffered that same fate, though cable advertising has generally remained strong. O&O says that in the UK, the top TV advertisers are slowly moving their money to the web. Specifically, in 2010 marketers spent 2.3 percent of their budgets online, compared to 1.9 percent in 2005. While that’s hardly a catastrophic shift for TV, it is one that is surely going to gain steam over the next 12 months.

DVR Viewing’s Sweet Deal For Advertisers

That’s how Horizon Media research director Brad Adgate explains the economics of DVRs, audience measurement and ad spending to the NYT’s Bill Carter. After all, TV networks only get to charge advertisers for ads viewed within three days after airing, according to the current measurement scheme. So when 18 million viewers watch ABC’s Modern Family within a week of airing, only the 13 million who saw it within that three-day threshold are counted, giving advertisers an extra 5 million viewers it didn’t have to pay for.

Ultimately, the dam’s going to burst” on that arrangement, Adgate says, and networks will demand more money for delivering more viewers.

A more immediate question is why this imbalance has lasted so long, especially given the increasing amount of DVR penetration, which are now in 43 percent of American homes, the NYT’s Carter writes.

For one thing, the upfront season still benefits the TV networks. The three-day limit on DVR viewing would lead to a confrontation with media buyers on other areas.

Secondly, the networks concede that a week-old show may be new to a viewer, but a week-old ad may actually look its age to a consumer who’s seen it a few dozen times already.

And there may be another benefit to networks. A show that appears to perform lousy during its live airing may actually have greater popularity in total viewing. That value can also be taken into account, saving a show that might have been canceled in the past, saving the network from having to pull out greater expense to support a replacement program.

But Wait. There's More!

By David Kaplan

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January 3, 2012 – 12:03 am

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