CBS Cuts Deal with Affiliates

CBS recognizes that it has to leverage digital distribution. As usual, the local broadcasters have to fight to keep a piece of the pie. And in the TV Week piece, they did.

This case shows that unique content is critical in devising a convergence strategy. CBS has it and is keeping peace with the natives while they make the transition. The big question .. Will it last long?

On Demand Quarterly Report Posted

Brian Wieser of Magna Global has agreed to allow me to post their latest report that I mentioned on June 14. He suggests the shift is not colossal, but modest.

Read on here.

Local TV Responses to Sliding Revenues

The New York Times reports today that some internet ad rates are up 33%!!

Online Spending, according to Media Post, will reach $20B this year! (with $9B from Google, as I reported last week), exceeding that of all local television!

While on-line soars, television is lucky to grow revenue, and is finding it very difficult to raise prices. Advertisers like the customer connections they can create in an on-line experience. The decline of television ad spending is expected to continue, according to Booz-Allen's exceptional report. Most frightening to TV executives, has to be the conclusion that auto advertisers overspend on TV by as much as 44%!! See "Waste in the Auto Advertising Media Mix.", page 43

Auto represents a whopping 22.6% of local TV ad dollars. A 44% reduction would have a monumental financial impact on local TV as we know it.

So what can TV do?

I know that many top TV ad sales executives in local TV are digging deeper into their local markets. Smaller advertisers who traditionally only advertised in door-to-door coupon rags such as PennySaver, are being offered low cost ad packages on local cable and broadcast TV. But the "stick rate", the likelihood they are customers in a year, is abysmally low, less than 20% versus the 70%-90% local TV has learned to enjoy. (Why? -- later.) The impact is that the costs of sales rise as revenues slide!! (Gosh! the idea must have been created by the sales team!)

What can they do? I'll look at a few other approaches they are taking in later blogs, and will make some suggestions. In the meantime, TV ad execs should look at the resurgence of "newspapers".

Growing TV Ad Sales Means You Have to Add Digital

The results for TV's up-front season are showing what we have been forecasting.

• Few are getting rate increases. Fox claims the highest increase, 2-3%, while NBC is "holding out" for more.
• Overall dollar commitment to broadcast networks is down, while cable (who has been historically under-committed) will get a slight increase.

But a trend that is emerging is that many many of the traditional TV ad buys include an on-line component. On-line continues to grab share --- 12%, from 10% last year.

Advertisers realize that on-line advertising can be more targeted. Will we arrive at a point where TV advertising is nothing but a means to drive people to a web site? My good friend Buford Smith says that this is the only way a small advertiser should use TV ads.

With the latest Harris poll showing that 77% of adults are on-line for an average of 9 hours per week, this trend should continue. Smart TV ad sales will continue to combine their offers. Proving that the ads work is much more tangible!

And that's good for a media company's stock. Media General expects revenues to rise 14% to 16% this year, as their internet division is growing.

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Influence 2.0

Great Wiki that captures a lot of the transition going on in advertising. More from the Web 2.0 perspective, but a great resource.

Google is Larger Than Any TV Network

The buzz this week is all about the annual up-front orgy of ad spending commitments on networks, especially the traditional broadcast networks.

Will the networks get an increase? (Very difficult) Will they sell a substantial part of their inventory up-front? (Tough, too)

Time to pause and look at the real trends. According to the TVB (see chart left), the broadcast industry's trade association, network TV prime time viewing minutes have decreased 60% since 1980, while their average CPM has increased 466%!! (Nice job if you can get it!!)

As the same time, DVR's and on-demand programming are growing. Advertisers can get interactive display ads on the internet for $1 - $5 CPM or 30% to 40% more if they are targeted.

Impact? They're moving their ad dollars. Google, despite click fraud concerns, will end up with $6.1 Billion in revenues, mainly from click-ads. (Sources: TVB and Google annual reports). In 5 short years, Google is larger than any TV network. And you can see why! Lower costs, more feedback and more eyeballs!

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Magna Global Data Confirms Major Shift

The people over at Magna Global updated their "on demand" forecasts. (You'll have to email them for the full report.)

They expect almost 30% of households will have DVR's by 2010 and "on demand" technology will reach almost 100% of wired households. The continuing shift of viewing away from the the traditional "on schedule" routine is placing colossal pressure on TV ad sales. Eyeballs are now only sellable when they watch a program on schedule.

Unless you own the on demand technology (like the local cable provider does), you haven't got any other options. Local broadcasters are in the least enviable position. Their larger national advertisers read this sort of research and cut their purchases on local television.

This trend is leading a flight of quality advertisers and it is changing the landscape.

Commentary on the Changing Landscape of TV Ad Sales

For the last 4 years, I have been the CEO of a software startup aimed at TV advertising sales. Our plan was to provide pricing and inventory management intelligence, much like the airline and hotel industry had adopted decades ago. (See Sabre Systems).

We were encouraged by many top executives in television, who admitted that TV ad sales was, with some exceptions, "pretty fluid" and not easily controlled by management. We built technologies just like those used in the airline industry, the hotel industry, or for that matter, the on-line advertising industry. But we have had great difficulty getting adoption in traditional television. We're regarded as very knowledgeable about the sales process, and have provided millions of dollars of software and services to ad sales groups. We have managed the details of literally $100's of millions of ad deals. We've been told "You're ahead of your time!"

Despite the revenue pressure on television ad sales teams (whether they sell local broadcast, local cable or national broadcast or cable), none have embraced revenue management technologies in any big way. Competition (and the amount of places you can place a video ad on television) has soared! It seems odd that many sellers in a $67.9 Billion market still employ a chalkboard to set and track pricing. The fact of the matter is that most front line sales reps and the advertiser's buyer set individual prices. Let me repeat: the sales rep from the local TV station can change the price of the ad space. So if you are told $300, you could offer $200.

There is simply more inventory than they can sell, and the sales manager will take anything they can get. Why? As one manager said to me, "I don't need revenue management, I need revenue."

The purposes of this blog are:

• to monitor and track trends in television advertising sales
• to observe and predict how traditional players will cope with the trends
• to monitor the tactics of the challengers

From time to time, I will relate some lesser-known facts from our experience (protecting the confidentiality of past customers), and forecast the likelihood of success of various tactics.

As one VC said to me, "You can usually forecast the future. The question is When?"