Special Report: The Power of Niche

After a brief stumble during the advertising market meltdown in 2001, a recent study from Kagan Research indicates that cable networks are back in black and on the fast track to earning double-digit growth, becoming a $29.7 billion business in the United States this year and a $47.1 billion business by 2009. This explosive growth in ad revenue indicates today's marketers, especially in the consumer goods industry, are becoming less enamored with wide reach that broadcast TV offers by tuning in to the niche programming cable TV provides.

"We expect broadcast networks will continue to suffer from the explosion of new channels available on cable and double digit-growth in cable network program spending," says Derek Baine, senior analyst at Kagan Research. "The breadth and depth of both original content and hit movies on cable is truly impressive."

Channel coverage varies, but leaders like Discovery, ESPN, TNT, CNN and USA are seen in about 81 percent of all U.S. TV households and in 96.4 percent or more of multi-channel households (cable, satellite and other subscription TV platforms).

The Power of Niche Marketing

Lynn Fantom, chairman and CEO of ID Media, a direct response media service provider, is not surprised by the shift in marketing spend, especially as it relates to the consumer goods industry. "Cable household penetration and viewing continue to increase so it's natural that's where the ad dollars are flowing," says Fantom. "A proliferation of new networks, with tremendous content diversity, also offers advertisers appealing options for targeting. Consumer goods companies are smart. They know consumers want 'programming that's relevant to me'".

The Role of Diverse Programming

The programming diversity and relevance of smaller, relatively new networks like LOGO, TV Azteca, Lifetime Real Women and Current TV, signifies the targeting appeal cable offers to advertisers. As new networks launch and try to establish themselves, attractive pricing can produce a very good return for direct response advertisers. Basic cable networks in aggregate drive 52 percent of their revenue from carriage fees paid by cable, satellite and other multi-channel platforms, and 44 percent from advertising, according to the Kagan report titled "Economics of Basic Cable Networks 2006."

Evaluating ROI

But it isn't only about the niche networks. Large, mass networks, such as the news networks, also offer certain advertisers tremendous value. ID Media's clients -- like Johnson & Johnson, L'Oreal and SC Johnson -- employ a variety of rigorous metrics to evaluate the ROI of their cable buys. Today's top marketers are incorporating into TV ads a call-to-action and a response mechanism, often both a toll-free number and a URL, says Fantom. "Depending on the advertiser's marketing objectives, they may be offering more information, a coupon or a free sample. They also take advantage of the special rates available only to Direct Response TV (DRTV) advertisers, which cut pricing 40 percent to 60 percent." Fantom says another key component of the marketing return in cable is the surge in search queries many of her advertisers see after they air a DRTV spot.

Stay tuned to this section as this major industry trend continues to unfold. - Tim Clark