When was the last time you heard a buyer complain that any medium was priced too low? It just ain’t going to happen. It would be like drivers saying the price of gas should go up.

In fact, the sort of answer you’d expect to get when you asked a buyer whether the specialty channels are undervalued might be something along the lines of: ‘You’re talking to a buyer – it’s hard for me to think of anything being undervalued.’ And that’s just what Sherry O’Neil, managing director at Toronto’s OMD Canada, said when asked the question.

But ask buyers how the specialties stack up to conventional broadcasters such as CTV and Global, and you start to hear some hemming and hawing. Certainly there’s general agreement that the conventionals are priced very high right now, especially if you’re looking at top-10 programming like Friends and ER. And the rates the conventionals are charging for each 1,000 viewers reached have been going up by 5% or so per year, even while the share of tuning enjoyed by the conventionals as a whole has dropped.

Meanwhile, the specialties as a group have been gaining, to the point where they now account for about a 26% share of hours tuned by adults 25-54 – compared to 18.8% just five years ago.

Despite this steady growth, Canada’s specialty channels are, on average, getting only about half the rate the conventionals are getting on a cost-per-thousand (CPM) basis.

Now, if the CPMs for the specialties are around $8 or $9 and the CPMs for the conventionals are around $20 or $25, the answer must be that the 1,000 people you reach on a conventional are worth twice as much to advertisers as the 1,000 people you reach on a specialty. But most buyers agree that’s not the case.

Sheri Cooper, VP, group media director at Toronto’s MaxxMedia, readily concurs that for many of her clients, the quality of a specialty audience is higher, because ‘there’s less wastage.’

The whole concept behind the specialties was that they could deliver more targeted audiences attracted through more targeted programming, and it works. If you want to reach men, she says, you just can’t ignore TSN, because of the 1,000 people you pay to reach, a much higher percentage is male.

So if lower audience value isn’t the reason for the price disparity, how about the quality of the programming? Here we’re getting warm: O’Neil makes the point that the conventionals need U.S.-sourced programming to pull in mass audiences, and that kind of programming doesn’t come cheap.

‘I’m not naive enough to believe that the cost of the programming won’t impact the price [of an ad],’ she says. ‘If I want to be associated with Friends or ER or one of the top-rated shows, then I accept that there’s a certain cost to that.’

But while Cooper agrees that top-10 programming is expensive, she doesn’t think conventional programming is actually any better than specialty programming, at least not anymore.

‘I’m shocked to hear someone say that the quality of conventional shows is higher,’ she says. ‘For example, TSN picks up ESPN sports so it’s got this incredibly high-quality sports delivery, which to me is on par with conventional nets such as CBC. Then you go to stations such as Bravo! or Showcase, which air such internationally acclaimed shows as Sex and the City or Oz. At the same time, a lot of the conventional broadcasters are picking up on a trend coming out of the U.S., which is to air lots of cheap reality shows.’

So if the specialties offer quality programming, quality audiences and cost half as much as conventional, are they undervalued?

The answer is yes, says David Cairns, partner at Toronto media planning consultancy Asylum thinkgroup. And the reason? ‘Advertisers and agencies continue to pay those levels simply because they feel they can,’ he says. ‘There’s a supply-and-demand situation going on here, and people are saying, ‘well if I can pay less, I will.”

Cairns is not alone is his assessment: off the record, several other senior executives in the media buying community agree. Not only that, but they agree that the specialties are their own worst enemy. In other words, what did the specialty owners expect when they flooded the market with heaps of channels and proceeded to kick off each new entry at bargain-basement rates?

David Kirkwood, VP sales and marketing for CHUM Television, says he hates to admit it, but the buyers are right.

‘We’ve been told by media buyers that ‘We didn’t start demanding that you have your prices so low, you guys offered it.’ And I think what happens when you have a large influx of new specialty networks, and those networks are anxious to please their bosses, the easiest way to land advertising is to lower your rates, to garner as much share as you can. But the only way we could counter that is to collude – and that’s not legal.’

Wayne Sterloff, VP, specialty networks at Craig Broadcast Systems in Calgary, is currently struggling with that very issue. Craig nets such as MTV, TV Land and Stampede fall in the latest batch of digital specialties and, as the last to join the dance, the 40-odd digitals fell right into the low-price trap.

‘The whole issue of rate integrity means that some broadcasters are having a hard time getting their rates into a reasonable field,’ he says. Even though channels such as MTV are starting to gain more respect among buyers – who are at least starting to subscribe to digital at home – ‘there’s this carry-over from last year when the spots were going for only five bucks, for goodness sake, and it’s hard to go back in this year and double the rate.’

But it’s not all bad news for the specialty nets. Brad Alles, SVP of sales at Alliance Atlantis Broadcasting, Toronto, says the gap between conventional and specialty is starting to close, a trend that’s reflected in not only a higher share of hours tuned, but a higher share of TV ad dollars, higher-profile programming, and yes, higher rates.

He notes that a wide spread has developed within the specialty field, with the newest digitals at the bottom, rate-wise, and more established channels like TSN, MuchMusic, YTV and Showcase at the top.

MaxxMedia’s Cooper says she doesn’t even regard the top channels as specialty anymore. ‘The [tier-one channels] are regular stations as far as we’re concerned. They’ve been part of basic cable forever now. They’ve got 88% penetration, so that’s not really a specialty channel.’

And Alles says that the recent addition of HBO’s Curb Your Enthusiasm (featuring Seinfeld’s Larry David) to the Showcase sked was a gambit to see if it could get conventional rates for a specialty show, and it seems to be working. ‘Why sell it for less?’ he says. ‘We’ve marketed it at conventional rates.’

Asylum’s Cairns says he’s seeing other specialty nets reel in big-name shows, such as The Sopranos and Sex and the City, in an attempt to garner conventional rates, and he doesn’t see any reason why they shouldn’t.

‘These are big shows. If a show like Curb Your Enthusiasm were on a traditional conventional network, I don’t think anyone would balk at a higher price. So when you put it onto a specialty channel – same show, same audience – why not pay the same rate?’

(A version of this story appeared in the March 10 issue of Strategy Media magazine.)