Specialty TV Services: Where will ad revenue come from?

Terry Rushbrook, who is director of research for the Media Consulting Group, was involved in preparing six of the crtc specialty service applications.mcg, based in Toronto and Montreal, provides research, marketing and sales consulting services to its clients, the majority of...

Terry Rushbrook, who is director of research for the Media Consulting Group, was involved in preparing six of the crtc specialty service applications.

mcg, based in Toronto and Montreal, provides research, marketing and sales consulting services to its clients, the majority of them media companies.

The seven new specialty services that will be carrying commercial messages will be looking for slightly more than $21 million in revenue from advertisers in their first year of operation and close to $36 million in 1996.

This represents 1.3% of estimated tv expenditure for 1995 and about 2% of the 1996 tv spend.

Where will this revenue come from?

According to their applications to the Canadian Radio-television and Telecommunications Commission, more than one-third of this revenue, $7.7 million in the first year, will be new to radio or tv, coming either from advertisers who are not using broadcast, or as additional dollars from current advertisers.

(One of the crtc’s published criteria for new specialty service licences was that the impact on the revenue of existing Canadian broadcasters and cable services should be minimal.)

While the claim to attract additional advertising dollars to tv may have been politically correct, the new services will find it hard to deliver this particular performance promise.

The new services will attract some new advertisers by providing them with three types of opportunity: the right audience demographics or psychographics; a compatible program environment, and unit costs low enough for smaller advertisers to run a meaningful campaign against a restricted target.

The Country Network will obviously attract record publishers and country music event organizers.

It will also be attractive to advertisers of Western-style clothing, musical instruments and other items that are of special interest to country music aficionados.

Similarly, the other services, with their appeal to more upmarket consumers, women, health fanatics or any other distinguishable group attracted by the special interest programming, will open tv to brands that appeal to these market segments.

Many magazine publishers have promoted the added impact derived from compatible editorial, a theory known as the ‘Presenter Effect.’

Just as some advertisers bought this argument for magazines, some will be enticed into tv because they feel the program content will enhance their own messages and the programs will provide a consistent environment for their products.

For example, health and fitness products will find compatible programming on YOU: Your Channel.

The focussed appeal of the new services, while it may limit audience accumulation, will generate considerable loyalty among viewers.

Advertisers of low volume products will be able to run high frequency tv campaigns against a restricted target group.

The disadvantage of low coverage will be less of a problem when the product and program content or the target market and program appeal coincide.

The program content may encourage current tv advertisers to spend more on tv.

Advertisers will either be looking for the portrayal of lifestyles that are compatible with the brand image or hoping that the prestige of the programming will enhance the brand image.

Also, if the services fulfill their promise of attracting a higher proportion of lighter tv viewers, advertisers may use these services to extend the effective reach of conventional broadcast buys at an economical cost.

Some of this revenue will come from budgets formerly allotted to other media – magazines, newspapers, out-of-home – which had been used to reach specific target groups or achieve specific marketing objectives that could not be achieved through existing tv services.

Some will be diverted from non-media promotion and sponsorship budgets, and some may be new advertising dollars generated by the new opportunities.

However, the bulk of the revenue for the new services will have to be tapped from the existing broadcast (read: tv) budgets.

The new services will face some obstacles to their initial growth. They are national networks with no local advertising capabilities.

This cuts them off from retail and regional advertisers.

As well, because of limited carrying availability on some cable systems, they may not have coverage in some markets in the first two or three years.

Added to this, most program audiences will be so low that, with few exceptions, they will not be measurable by market.

If the new services are to achieve their revenue targets, they must use the lessons learned by their predecessors, particularly tsn, ytv and MuchMusic.

Sell the medium – the benefits of tv advertising are already known by most advertisers and specialty services have already achieved a degree of acceptance. But not every one believes in them.

They still need to be promoted as a viable tv medium.

Individually, weekly reach will be low, but as a group, they will cover a respectable percentage of the population – another reason to sell the medium.

Sell the programming – although average audiences may be low, the interest level among viewers will be high. Recent research indicates this translates into added impact for the advertiser’s message.

Sell integrated marketing packages – the program content and environment lend themselves to special promotions, sponsorships and event marketing.

Advertisers and agencies need ideas on how they can complement their brand image campaigns and get maximum impact from the specialty services.

Sell the audience – the demographics of the audience will be an advantage. Quality, in this case does not mean quantity; it means more disposable income, lighter tv viewing habits, compatible lifestyles and interests.

Sell the ratings – some programs will pull better than the lowest of conventional stations and networks.

Make the most of the high ratings by pricing the programs at what they are worth. This means accurately predicting ratings, and marketing, rather than selling.

Do not sell as a commodity – selling grps will focus attention on the low ratings and ignore audience and program quality.

Because of the uncertainty of the projections, it will be difficult to sell audiences at similar cpms to the existing tv networks.

Buyers will want the services to meet market cost-per-point targets. Eventually, the rate for the lowest value spot will determine the price for the whole package.