When TV operators get together at conferences there's usually a panel about grabbing market share away from competing media like newspapers, radio or cable TV. Now Sinclair Broadcast Group is going after direct mail advertising.
In fact, it has already jumped into that business, in a modest way. The company expects to generate close to $20 million in incremental revenue this year from its direct mail sales efforts.
But there's nothing modest about the direct mail advertising base in the 39 markets where Sinclair operates its 63 television stations. Sinclair estimates that about $1 billion in direct mail business is done in those markets each year.
Here's Sinclair's game plan: The broadcaster will enter into partnerships with direct mail outfits in cities where Sinclair owns stations. Sinclair's sales force then sells local advertisers on the idea of a mailer, and tries to convince them to supplement the direct mail effort with daytime TV spots on Sinclair stations. The Sinclair partners physically produce and distribute the mailer.
Using that model, the company says it wants to roll the new business out to every one of its broadcast markets, over the next three years. By the time the business is up and fully running, Sinclair believes it can generate between $80 million and $100 million in direct mail advertising annually.
The company is in the process of hiring as many as 600 new sales personnel to mine for direct advertising gold across its markets.
Analysts are intrigued by the Sinclair initiative and believe that if it pans out, other broadcasters may follow its lead.
"If it works for [Sinclair CEO] David Smith, it would presumably catch on with others," says Lee Westerfield, media and entertainment analyst at the New York investment bank Jeffries & Co. "What you like about him can unnerve you too—he'll try anything. A lot of other TV operators are watching skeptically right now, but by this time next year, they may very well be asking 'How did he do that?' "Westerfield also says he wouldn't be surprised to see Advo Inc., a leading direct mail company in the U.S. counter attack with a TV partnership of its own if the Sinclair project really takes off. Last week, an Advo spokeswoman declined comment.
Sinclair hopes to convince direct mail advertisers to supplement their campaigns with daytime TV spots, many of which go unsold. That's an issue for many TV broadcasters, especially those that don't carry soap operas, says Westerfield. "They wouldn't be doing it otherwise and it should amount to entirely incremental advertising revenue," he says.
Through the first half of 2003, where Sinclair has experimented with the direct mail effort, it has brought in $9.4 million. On a recent conference call with analysts and investors, Smith was practically drooling over the expectations. "We have made just a fortune at it," he said, about initial efforts, and "we think we haven't even touched the tip of the iceberg."
Just a few months ago, Sinclair started putting together a direct mail sales unit in Baltimore that will operate separately from the TV sales staff there. Similar efforts are underway in five other cities, including Pittsburgh and Columbus, Ohio. Those efforts should be operational by year's end, says Smith. "If we like what we see, we will roll it out every place else as fast we can."
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