For decades, the cable industry faced an uphill battle — convincing advertisers and ad agencies alike to “follow the viewers” and allocate their media budget accordingly. The battle cry from cable networks was to “stop paying more for less," to realign advertising strategies with consumer viewing habits by shifting money from broadcast to cable.
Cable’s battle cry was heard, and the shift of ad dollars to cable gained momentum. Cable networks could now capitalize on the development of two significant revenue streams and, as a result, the top-tier of those networks made substantial investments in original programming.
Fast-forward to today: We see incredible original cable show successes, including AMC's "The Walking Dead" and A&E's "Duck Dynasty." Given the emergence of such hits, top-tier cable networks now can truly position themselves as a legitimate "broadcast replacement." Interestingly, the early buzz around this year's upfront is the "topping out" of broadcast dollars and the subsequent shift of funds to cable, where overall viewership continues to climb.
But top-tier cable networks’ successes come at a price; one passed along to advertisers. Why? Because the overall cable viewership growth is not being driven by the top 10, 20 or even 25 cable networks. In fact, the growth in cable is being driven by the bottom 25 networks.
You read that right. The bottom 25 cable networks are experiencing the most growth. Yet despite that fact, nearly two-thirds of all cable advertising dollars goes to the top 25 networks. All of this is happening as the top-tier cable networks shout for pricing parity for those hit shows they consider a true alternative to prime-time broadcast shows.
It is a plan that they have attempted to implement in past upfronts, and its continuance has already become a point of contention between some top-tier networks and the buying community for the 2013-14 upfront. A media executive was recently quoted in the press as saying..."That's asking us to pay a lot more for cable and I'm not sure advertisers will tolerate that."
Ironically, the top-tier cable networks' quest to become an alternative to broadcast has led them to face the same challenges broadcasters faced when cable was becoming a real competitor. How do they convince advertisers to put more money toward diminishing ratings and, in many cases, pay higher CPMs than the marketplace conditions seem to allow? At what point will advertisers fight back and find relief in the up-and-coming tier of cable networks experiencing tremendous ratings growth? These offer a much more affordable alternative.
I am not discounting the need to reach as large an audience as possible as an essential part of any media plan, but if the top-tier networks seek to push their pricing parity initiative amid a falling ratings trend, advertisers will be placing a disproportionate amount of dollars on a weakening commodity.
Now is the time to start building the relationships with the sector of the marketplace that is the growth-driver of our business and has the most potential. The added benefit is that many of the emerging networks provide advantages to advertisers, such as reaching a more targeted audience, the ability to work collaboratively to develop customized content for less, and providing efficient CPMs to help offset the dizzying pricing of top-tier networks.
Advertisers and buyers have now reached a point where they have a choice to make: Repeat history and continue to pay higher costs for diminishing ratings, or capitalize on the growth and pricing benefits at the cable long tail to build a stronger foundation for their future media strategies.