SOURCE: Pike & Fischer

Pike & Fischer

September 18, 2009 10:43 ET

Cable to Fall Short on Advertising Revenue Goals, Report Predicts

SILVER SPRING, MD--(Marketwire - September 18, 2009) - The cable industry is seeing a decline in advertising revenue, and emerging technologies designed to make ads more targeted and effective will not generate the near-term growth the companies hope for, Pike & Fischer concludes in a new report.

Cable operators want to target advertising more effectively by sending personalized ads to individual subscribers based on such measures as demographic characteristics and household viewing patterns. This capability will attract both local and national advertisers who want to make their promotional campaigns more effective. Eventually, users will be able to engage with television advertising much like they do on the Internet, clicking on ads to obtain additional information or make a purchase.

With early interactive advertising applications approaching launch, cable executives are counting on these advanced functions to help advertising revenue. But P&F notes that cable ad revenue dropped 8% in 2008 and will likely fall by more than 22% in 2009. P&F chief analyst Tim McElgunn projects that the industry's annual ad revenue will only hit an annual $5.3 billion within five years, far below the $15 billion the industry hopes to generate by that time.

McElgunn cites several reasons for his forecast, including reduced spending by advertisers (based largely on the recession), the lack of agreed upon value for the new ads, price pressure, and the intensive privacy protections that will have to be deployed.

"If cable operators, programming networks, and advertisers are able to agree on new business models that take advantage of the new technologies and processes the cable industry is putting in place, however, that growth rate could accelerate and result in significantly higher revenue," McElgunn said. "But even in an optimistic scenario, we believe it will be at least 2016 before U.S. cable MSOs surpass $10 billion in annual advertising revenues."

Pike & Fischer, a BNA company, offers a host of legal and business products covering the telecommunications industry. The report, "Cable Advanced Advertising Market Update and Forecast" is priced at $699 and is available for purchase at www.broadbandadvisoryservices.com. For analyst commentary or to request a briefing, contact Tim McElgunn at 856-751-6723 / tmcelgunn@pf.com.

For information about Pike & Fischer's Broadband Advisory Services, visit www.broadbandadvisoryservices.com or contact Jonathan Wentworth Ping at 973-718-4703 / jping@pf.com.

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