Cable declines pose growing problem for local advertisers

How does an advertiser reach a Westchester County, NY, television audience without having to pay for New Jersey, Connecticut, New York City, and Long Island?

How do you reach Northern Virginia without buying Maryland or DC?

How do you reach western Henrico County without paying for the Richmond/Petersburg metro?

The answer is cable television. But it may not be for much longer.

Cable subscriptions down — again

According to a Leichtman Research Group report released yesterday, the nine largest cable companies lost 540,000 video customers in this year’s second quarter (and it’s little consolation that the loss is only 90% of the same period’s last year).

The 13 largest multichannel cable, satellite and telephone company operators lost 325,000 customers — slightly more than same time last year.

Satellite television companies alone lost 62,000 subscribers, and DirecTV (possibly because of its losing 26 Viacom channels including AMC, MTV and Nickelodeon) suffered its first net loss of subscribers (52,000 of them) ever.

If this trend continues, it could pose almost as big a problem for local advertisers as for cable and satellite systems.

No good choices

Viewers’ desertion of cable for online streaming video — either from broadcast and cable channels themselves or from less-expensive-than-cable sites such as Hulu, none of which run local advertising — can potentially leave smaller local advertisers with only bad alternatives.

Cable is already at best a mixed blessing. While it gives relatively tight geographical coverage, its huge number of channels is both a blessing and a curse.

It’s a blessing because the proliferation of channels makes for unprecedented demographic, psychographic and behavioral targeting (e.g., home owners interested in home improvements watch HGTV, business travelers the Weather Channel, males the various ESPN channels, etc.). But that same proliferation creates fragmentation. On, say, a 300-channel system (a number chosen to make the arithmetic easy), any given channel will reach 0.33% of the total audience, on the average.

Newspaper advertising isn’t such a great choice for geographic targeting, at least in Richmond. Unlike, for example, the Miami Herald, the Times Dispatch doesn’t print separate county or neighborhood sections. True, there are local papers like the Henrico Citizen and the Chesterfield Observer, but they’re weeklies and their circulation’s lower.

You can target geographically, as well as to some extent behaviorally, with e-mail blasts to well-defined lists, but response rates average only 0.03% to 0.12%. Paper direct mail offers the same kind of targeting, but its average 1.28% to 3.4% response rate, while better, is nothing to write home about.

Of course, those are phenomenal compared to clickthrough rates (to say nothing of conversion rates) for display online advertising.

Think about it

If these trends continue, over the long run Richmond (and Westchester County) advertisers will need either new, more effective media or more effective ways to advertise on existing ones.

It’s not something you need to think about this year or next. But it is something worth thinking about.