Cable advertising and the future of basic cable networking

Using a pooled cross section/time series data base for 18 basic cable networks over a seven‐year period, we show that limited national household reach is a major reason that cost‐per‐thousand (CPM) advertising rates for cable have remained consistently below broadcast rates. Our models thus imply that limited reach disproportionately restricts the economic potential of advertiser‐supported cable networks. The models also predict, however, that reach expansion, via DBS and other multichannel media and via digital compression technology, will disproportionately improve their viability: average cable CPMs would be well above broadcast network CPMs if household reaches were comparable. Our results also support the view that larger MSOs are able to adversely affect entry and survival of advertiser‐supported cable networks by threatening to refuse carriage.