Cable Television Advertising for Small Businesses

Roy Cook, Wayne State College
Rick Small, Wayne State College

(Reprinted with permission from The Small Business Advancement National Center, published 1985)

ABSTRACT
The purpose of this paper is to explore the use of cable television as a viable advertising alternative to be utilized by small businesses. With the continual increase in the availability of advertising time and a marked increase in viewership, cable television is presenting an attractive and cost effective means of reaching specific target audiences. This paper discusses the basic mechanics of forming a local cooperative advertising corporation. In addition, the actual operations of such an organization along with the benefits to be derived from this form of special purpose corporation are discussed.

INTRODUCTION
Television advertising has typically been the domain of large organizations possessing the financial capability to make significant expenditures for air time. By accessing air time on principal net work and independent channels, large advertisers have been able to blanket the major heterogeneous metropolitan trade areas on either a national, regional, or local basis.

Nonspecific coverage of large trade areas and the high costs of air time on network and independent channels have limited the opportunities for small advertisers wanting to include television as an integral part in their advertising plans. Small businesses-utilizing television advertising have typically been relegated to non-prime time segments or to restricted special use campaigns.

Businesses located outside the trade areas served by network and independent channels have been especially hampered in their attempts to utilize television advertising. Those organizations serving limited trade areas or marketing highly specialized products have the additional problem of reaching target audiences on a cost basis that is competitive with other media.

Today, small advertisers or organizations attempting to reach specific target audiences may pursue the potential opportunities provided by television advertising (Broadcasting, 1984). Cable television penetration has now grown to the point where it can be found in 93 percent of all counties in the country and new cable homes are being added at the rate of 400,000 per month (Cable Television Advertising Bureau, Inc., 1984). This fact, coupled with the fact that advertising time can now be accessed on cable television has created a situation where small advertisers can no longer afford to ignore the marketing potential that is available through the use of television advertising. The two major reasons for avoiding this media, high costs and non-specific targeting, can no longer be viewed as barriers.

Prime time costs of $1,200 for 30 seconds of air time on major networks pales into insignificance when compared to a range of $20 to $80 for a similar time slot on local cable television (Inc., 1983). In many markets, the cost for air time on cable is competitive with the cost for radio air time.

AVAILABILITY OF CABLE TELEVISION ADVERTISING TIME
The problems of nonspecific targeting have been alleviated by the growth in the number of cable offerings and the geographic dispersion of cable across the country. Cable television viewers can now be found in 35 percent of the homes that have television sets. This percentage calculates into 29 million households in the United States (Inc., 1983).

The increased number of cable offerings has created a situation where viewing audiences can be identified on the basis of specific demographic characteristics. Examples of major cable programs that are currently providing advertising time and their respective audiences are as follows:

1. The Entertainment and Sports Program Network, or ESPN is a 24-hour a day sports channel featuring the U.S. Football League, Canadian Football, as well as a wide variety of other amateur and professional sports. Other features included on ESPN are: a Wall Street Journal video program called Morning Business week and Sports Center which is the only news devoted strictly to sports news.
2. Cable News Network, or CNN offers a 24-hour news format allowing more time to be devoted to the adequate coverage of important news events. Major features on CNN are moneyline, covering world economic happenings; financial news; and financial analysis.
3. Music Television, or MTV is a music video channel geared toward younger television viewers.
4. USA Cable Network caters to the "upscale woman of today" with features such as Alive and Well, a fitness and exercise program; Sonya, with psychologist Sonya Friedman; Woman's with shopping, cooking and menu guides; and You magazine, a video magazine devoted to women's needs, interests and opinions.

It should be noted that these channels are only provided as examples.

The limited number of articles that have been written on the subject of local cable television advertising serve to demonstrate the infancy of the concept. There is little agreement regarding the major components of cost or formatting that are necessary in preparing for and utilizing cable advertising.

COOPERATIVE ADVERTISING AGREEMENTS
One alternative that should be investigated by small businesses desiring to incorporate television into their advertising media mix is the use of a cooperative advertising agreement that can be formalized by the act of incorporation. The organized power realized by banding together allows small businesses to contract for major blocks of air time and utilize a central source and/or sources for creative and production work. By utilizing the local advertising corporation for purchasing air time and single sourcing other necessary requirements, overall costs can be reduced while at the same time reducing the exposure of individual financial risk.

One person should initially be in charge Of Betting up the corporation and hiring the coordinator. This person should be derived from the corporation. It should be a person who realizes the benefits of the type of program being planned so that he or she would be willing to devote the time necessary to the development of the project.

A formal working agreement should be developed to alleviate operating problems. Shares of stock should be sold at an agreed upon price with the proceeds being used for the initial startup costs of the corporation. These costs may include, but are not limited to, a coordinator's salary, research, legal fees, materials, and supply expenses. A board of directors should be elected to serve as a key decision and policy making body. Voting would be based on ownership (one vote for each share of stock) with the selling price and number of shares issued to be stated in the articles of incorporation.

OPERATIONAL CONSIDERATIONS IN AN ADVERTISING COOPERATIVE
In order to establish an organization to achieve effectively the desired results, an individual is needed to coordinate administrative activities. The person serving as the coordinator would act as a liaison between the members of the corporation and be responsible for scheduling both production efforts and actual advertising details. By having one person to serve as a focal point, communications in the areas of program development, problem resolution, and basic policy issues can be maintained. Additional responsibilities of the coordinator would include member billing, verifying the production and airing of spots against specified schedules, and maintaining communications between the corporation and the local TV media as well as the national cable channels.

One of the more important aspects of the coordinator's responsibilities is to actively solicit members for the formation and maintenance of the corporation. The benefits provided to the members include access to national cable systems for advertising thus allowing them to segment and pinpoint their markets with greater precision. Members will also have the opportunity to ask for specific time slots when planning their advertising programs. contracted air time that is not utilized by members of the corporation could be sold to non-member buyers at a premium providing additional cost reductions for the corporation.

The next area of concern of the organization would be the production of the advertising spots. The main element of production include filming of the spots (remote or in studio), editing of the tape, dubbing of announcements, creative work, copy, voice over, talent, and post-production work. The total cost of production varies with the quality and extent to which each of the elements of production is used. Spots that are professionally produced can cost over $5,000 per 30 second spot and may take as long as an entire day to produce. This cost can be reduced by the advertiser performing the creative function and writing their own spots as well as furnishing talent for the ads. It may also be possible for the advertiser to utilize in-house filming capabilities or access local educational and private sources. It is possible to hold production costs to as little as $200 per 30-second spot by joining together and assuring a production company of a minimum number of spots in order to negotiate quantity discounts. By utilizing a cooperative effort and available community resources, production costs can be effectively controlled and minimized.

ACCESSING ADVERTISING TIME ON CABLE TELEVISION
The final areas of concern for groups attempting to access cable television advertising time is to develop a working agreement with the local cable operating group. Access to national cable channels through local cable systems is currently available in selected market areas. A well organized and financially strong corporation could achieve significant control of the available advertising time. Control would be accomplished by negotiating an agreement with the local cable company for a major block of advertising time over an extended time frame.

In an area that does not currently have the existing technological capabilities to insert local advertising, the local cable companies must first be provided with the data to show the economic viability of providing air time for advertisements to their viewing audiences. Several alternatives are available for local cable companies to enter the advertising business. Insertion equipment must be made available at the local level. The equipment could be purchased by the advertising corporation or by the local cable company. The initial cost for automatic insertion equipment would be approximately $30,000* with the cost for manual insertion equipment being less. If a decision is made to use manual insertion equipment, a full-time employee is needed 24 hours a day. The advertising corporation could convince the local cable company to purchase its own insertion equipment by pointing out the benefits of controlling the advertising time while selling excess time to non-member organizations. The cost of-the equipment could then be amortized over a period of time through the sale of air time.

*Based on actual estimate

CONCLUSION
Small businesses desiring to gain affordable access to cable television advertising while minimizing cumbersome production and administrative details should seriously investigate the opportunities provided by formally banding together. It is hoped that the information provided in this article will serve as a starting point for reaching the ultimate goal of improving upon the marketing capabilities of all progressive small businesses.

REFERENCES
Bloch, H. I. (Sonny). "Affordable TV Marketing Through Cable Narrow-casting." BROADCASTING. February 6, 1984, p. 42.

1984 CABLE TV FACT BOOK A Guide to CABLE AMERICA. Cable Television Advertising Bureau, Inc.

Delano, Sara. "Why Bargain Prices Lure Cable Advertisers." INC. May, 1983, p. 177.

Smith, Ilene V. "Local Research for Advertisers." CABLE TELEVISION BUSINESS. April 1, 1984, p. 30.