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Ad-Supported Cable (2003): Year End Report

December 17, 2003

2003 was a year of heightened audience and advertising revenue growth for ad-supported cable, which further solidified its position as the nation’s leading source of television. A review of calendar year 2003 data by the Cabletelevision Advertising Bureau shows that ad-supported cable experienced significant gains in viewership across all key dayparts and demos, as well as major increases in ad spending by key product/service categories.

PRIMETIME VIEWERSHIP

Ad-supported cable outdistanced the seven broadcast networks combined in primetime by 3.5 million homes, 3.2 rating points and 5.5 share points in calendar year 2003. For the 12-month period, cable was up 7.0 percent in delivery, 5.7 percent in rating and 4.8 percent in share; compared to declines of 1.7 percent, 2.9 percent and 3.9 percent for the broadcast networks.

	U.S.HH Delivery		U.S.HH Rating		U.S.HH Share
	(Millions)
	2003	2002	2003	2002	2003	2002
Ad-Supported Cable	32.1	30.0	29.9	28.3	50.3	48.0
7 Broadcast Networks	28.6	29.1	26.7	27.5	44.8	46.6
(ABC,CBS,NBC,FOX,
UPN,WB ,PAX)

TOTAL DAY VIEWERSHIP

On a total day (24 hours) basis for calendar year 2003, ad-supported cable surpassed the affiliates of ABC, CBS, NBC and FOX together by an average 5.3 million homes, 4.9 rating points and 14.8 share points. Compared to the year before, cable was up 1.6 million homes (+9.4 percent), 1.3 rating points (+8.2 percent) and 2.2 share points (+4.4 percent).

	U.S.HH Delivery		U.S.HH Rating		U.S.HH Share
	(Millions)
	2003	2002	2003	2002	2003	2002
Ad-Supported Cable	18.4	16.8	17.2	15.9	51.8	49.6
4 Bdcst Network Affil	13.1	13.0	12.3	12.2	37.0	38.2
(ABC/CBS/NBC/FOX)

PRIMETIME VIEWERSHIP CHANGES BY DEMOGRAPHICS

Primetime viewership of ad-supported cable among key age/gender demographics grew substantially in calendar year 2003. The largest percentage gains (versus 2002) came from the 12-17, 18-24 and 50+ age groups.The broadcast networks, on the other hand,were collectively down in all demo categories, with their largest percentage declines coming from the 2-11 and 35-49 age groups.

	% CHANGE:2003 vs.2002
	Ad-Supported Cable	Broadcast Networks
Persons 2-11	- 0.8	- 7.0
Female 2-11	- 2.5	- 3.6
Male 2-11	+ 0.5	-10.2
Persons 12-17	+ 2.7	+ 1.0
Female 12-17	- 9.4	+ 3.2
Male 12-17	+13.3	- 1.3
Persons 18-24	+ 8.6	- 1.9
Female18-24	+10.6	+ 0.3
Male 18-24	+ 6.8	- 4.6
Persons 25-34	+ 1.9	- 0.8
Female 25-34	+ 2.2	+ 3.0
Male 25-34	+ 1.6	- 5.2
Persons 35-49	+ 2.7	- 4.8
Female 35-49	+ 3.4	- 3.6
Male 35-49	+ 2.1	- 6.3
Persons 50+	+ 5.3	- 2.0
Female 50+	+ 6.2	- 1.8
Male 50+	+ 4.4	- 2.3

TIME SPENT VIEWING TV

The average number of hours per week that U.S. households spent watching ad-supported cable on a total day (24 hours) basis in calendar year 2003 rose almost 8 percent compared to the year before. The time spent viewing broadcast TV, on the other hand,was relatively flat.

	AVERAGE HOURS/WEEK (Total U.S.HHs;Total Day)
	2003	2002	% Change
4-Net Affiliates	20.7	20.9	- 1.0
Indies (UPN,WB,PAX)	6.0	5.9	+ 1.7
Ad-Supported Cable	28.8	26.7	+ 7.9

TOTAL CABLE ADVERTISING REVENUES

Ad-supported cable recorded its largest annual increase in advertising revenues since 2000, with total cable ad spending (local, regional and national) rising more than $1.5 billion in calendar year 2003. Substantial increases were generated in all geographic sectors, with double-digit percentage gains chalked-up by national and regional networks.

	$ Billions
	2003	2002	% Change
Local Cable/Spot	3.60	3.33	+ 7.8
Regional Cable Sports	.51	.46	+10.9
Network Cable	12.09	10.88	+11.1
TOTAL	16.20	14.67	+10.4

TOP 10 NATIONAL CABLE ADVERTISING CATEGORIES

Eight of the Top 10 national cable advertising categories in calendar 2003 recorded double-digit percentage increases in their cable spending.The largest absolute increase in spending came from automotiverelated marketers (+$207 million); and the largest percentage gain came from public transportation/hotels/resorts (+33.8 percent).

	National Cable Ad Spending In $000
	2003	2002	% Change
Auto, Auto Access.& Equip.	1,096,519	889,187	+23.3
Financial	781,246	744,194	+ 5.0
Medicines & Proprietary Remedies	743,655	626,837	+18.6
Media & Advertising	576,399	521,596	+10.5
Retail	551,751	487,022	+13.3
Telecommunications	510,226	425,005	+20.1
Restaurants	460,491	374,456	+23.0
Public Trans, Hotels & Resorts	428,737	320,318	+33.8
Computers, Software Internet	408,243	342,127	+19.3
Games, Toys, Hobbycraft	403,499	368,145	+ 9.6

THE STATE OF CABLE ADVERTISING & OUTLOOK FOR 2004: CAB PRESIDENT & CEO SEAN CUNNINGHAM COMMENTS

"In many ways, 2003 was one of television’s finest years because a very old TV advertising model finally, irrevocably, began to break. And make no mistake that--at TV’s 2003/04 "breaking point" --cable is clearly emerging as the best delivery mechanism for selling advertiser goods and services.That holds true any way you examine cable versus the old model: nationally, regionally or locally.

"Advertiser investments in 2003 cable paid off in record ratings, record reach and visibility on the TV content that grabbed the viewing nation’s attention as the year progressed.The prevailing story on 2003 content, seemingly in every corner of TV programming,was one of new highs for cable. No consumer group went "missing" on cable, because cable had and has the content to grab them, engage them and keep them coming back.These audience growth and content appeal dynamics were in stark contrast to the performance of broadcast during 2003 and, as November closed, the advertising industry could almost hear the "snap" of the old delivery model breaking as cable diverged from it. When agencies sent out search parties for broadcast’s "missing men", they quickly discovered that a host of other audiences (young women, older men, kids and various upscale audiences) were also part of the continued migration to cable.

Projections for cable advertising in 2004 has the pundits and prognosticators aligned fairly tightly in the low double-digits for ad spending growth, but it’s the accelerating media dynamics and marketing dynamics of cable that have 2004 looking like the strongest year yet for cable advertisers. A few of the accelerating dynamics to look for in 2004:

• Look for agency planners to take a fresh look at the "Cable as Broadcast Primetime Replacement" dynamics--long before the national upfront.The case for broad-based, fully-distributed cable as critical reach builder is stronger than ever, pick any audience.

• Look for more of TV’s best content to come from TV’s best brands. The programming success cycle is getting entrenched across cable and we’ll see more of the best original content and viewer-proven content on cable in 2004.

• Look for the eradication of any of the stale barriers from "old model thinking" about cable TV’s hold on its viewers or prominence as an advertising vehicle as a number of sophisticated research initiatives clear a broader path for results-driven advertisers.

• Look for spot cable to become an increasingly automatic, increasingly permanent fixture in the agency’s expanded set of TV choices.The ability to plan and buy spot cable has been completely overhauled. Over 115 DMAs are now interconnected, including 72 of the top 100 markets today and 90 of the top 100 by 4Q 2004. Interconnects now give agencies and advertisers single-call/single operations/singleinvoice ease, including EDI, for 35-40 ad-insertable Cable networks.

• Look for cable to do well under increased scrutiny. The scrutiny of Advertiser CFOs, Procurement Officers and Purchasing Departments, as well as the scrutiny of media auditing firms. As TV’s more-for-more investment option, cable and its superior advertiser ROI will fare well vs. broadcast’s more-for-less dynamics.

• Look for a very strong national upfront for cable.

• Look for the next phase of Local Peoplemeter rollout (New York and Los Angeles) to confirm, yet again, that cable audiences have been dramatically undercounted by the current methodology.Watch the migration to spot cable and local cable pick up even more momentum with a more accurate count in place.

• Look for "television" to more often mean "cable." Look for cable to deliver a very strong 2004 to television.

As we cross into 2004, the best thing we can do for U.S. advertisers is embrace the lessons learned from the 2003 "breaking point" where push came to shove between the old and new TV models. Cable won."

Sources: Nielsen, Kagan, Cabletelevision Advertising Bureau, StrADegy