New Comcast Eyes Spot-TV Prize

With the extra muscle and reach from its just-completed acquisition of AT&T Broadband, Comcast is redoubling its local advertising sales effort, taking direct aim at the more than $16 billion that local TV stations expect to bill this year.

"It's a business that we think can potentially grow faster than the rest of the company," says Comcast President Steve Burke. "The beauty is that we can grow it as the economy and advertising in general grow but we also have the ability to grow it by doing new things and managing the business differently."

Ad sales represented about 6% of Comcast revenue in 2001, but Burke thinks he can take that percentage "up significantly." He wouldn't tell BROADCASTING & CABLE how high or how fast, but he told Business Week
recently that he hopes to double the $1 billion in ad revenue currently generated by the Comcast and former AT&T systems over the next five years.

Taking on local TV

Burke should be able to drive the percentage "well into the teens," says Tom Wolzien, media analyst at Sanford C. Bernstein. "He has advertising in his DNA." Burke is the son of Dan Burke, a legendary broadcaster who headed Capital Cities/ABC.

To carry out his advertising ambitions, Burke hired Charlie Thurston a year ago to head Comcast Advertising Sales. Thurston had spent much of the past decade building Los Angeles-based Adlink into cable's most advanced advertising interconnect. Adlink captured an 11% share of the Los Angeles spot-TV market in 2000, about $138 million.

Comcast—with partners Time Warner Cable, Cox Communications and Katz Media—has been beefing of its national rep firm in New York, National Cable Communications. The partners have reorganized the firm and are in the process of hiring 70 managers and account executives.

The next step in revving up the ad engine lies in completing modern interconnects in the 71 markets where Comcast has a presence, with concentration initially on the top 50 markets. Much of this work is largely completed in eight of the top 10 markets where Comcast now controls most of the cable homes: Philadelphia, Detroit, Washington, Chicago, Boston, Atlanta, San Francisco and Dallas-Fort Worth.

All told, Comcast will have a controlling or subordinate interconnect presence in 22 of the top 25 markets, where 65% of spot-TV dollars are spent, and in 34 of the top 50, where 80% of spot-TV dollars go. "We have a great national footprint," Thurston says.

His plan is to turn Comcast's sizable ad-sales operation into what he calls "a station-group brand" that should compete more effectively with big-market TV-station groups like those owned by ABC, CBS, NBC and Fox.

Past the 'zone' buyers

CBS owns stations in 18 of the top 20 markets, while Fox has outlets in 16, NBC in seven and ABC in six. The network-owned broadcast groups generated between $1.2 billion and $1.9 billion each in revenue last year, compared with $1 billion for the new Comcast. "We're already on the cusp of being in [the broadcasters'] league," Thurston says.

While cable operators have built up a $3.7 billion-a-year ad-sales business, about 60% comes from local "zone" advertisers: the car dealers, retailers and pizza parlors that want to target a only section of a market, rather than the entire market. "These are non-television advertisers," Thurston says. "We have been transferring traditional radio, newspaper, direct-mail and yellow-page advertising to cable for 20 years."

The challenge now, he says, is to attract more advertisers interested in reaching the entire market: the fast-food chains, pharmaceutical companies, and other big national and regional marketers that still spend most of their dollars with TV stations. "This is our new engine."

Along with modernizing the interconnects, Thurston wants all top-50 markets offering the same lineup of 40 cable networks and following the same set of "best standards and practices," including standardization of traffic and billing software, dayparts, billing procedures, and copy deadlines. Such work should be completed by the middle of next year, Thurston says. "It's a fairly significant investment by Comcast Advertising, but, as evidenced by the 15 [interconnects Comcast has built] over the last two years, we feel that it's a real smart investment," he says. "So we're going to move quickly on it, instead of spreading it out over three years."

Comcast has also moved quickly to spur changes at NCC, which, along with enlarging its staff, has reorganized its sales force into three teams, two assigned to large-market interconnects and one to small-market ones. NCC President Tom Olson says the changes have been in the works for some time but were fast-tracked by the Comcast/AT&T merger. NCC also hired a new chief operating officer, Greg Schaefer, a 25-year TV sales veteran who most recently was vice president and station manager of WCBS-TV New York.

Comcast is also planning a major branding campaign to alert advertisers of the new opportunities available at Comcast. It will be unrolled sometime next year.

Key to Thurston's effort will be cooperation by other MSOs, which control large swaths of many big markets but don't always participate in interconnects. In fact, 12 of the top 50 markets lack fully modernized interconnects.

Under the radar

Thurston is optimistic. "All the other MSOs get it and are playing ball with us in our markets," he says. "It's an all-out frontal charge on the part of the industry to move forward as quickly as possible."

How soon Comcast's ad-sales drive might begin to affect broadcasters is a matter of debate. "The threat to local broadcasters is that cable skims their growth," Wolzien says.

UBS Warburg analyst Lee Westerfield sees it differently, forecasting no impact from cable on the spot marketplace during the next two years. "In practical terms, only 10 of the major cable networks provide any useful vehicle for advertisers, because there aren't any ratings below the top 10."

Thurston doesn't mind the skeptics. "That's a 1978 comment. If broadcasters want to think of us as the ugly stepchild, that's fine. We'll stay under the radar. As long as our advertisers are happy with us, that's all that matters."