TV networks promise agencies ‘a royal doing over’ for forcing price cuts

What a wonderful way to herald the beginning of the end for TV advertising.

Forget economic downturn. We all know that consumers have been responding less and less to TV and budgets reflect that.
If they want a fight, then they may not find anyone actually cares as their stations become constant talent(less) searches and reality dross, or mere preview channels for online series downloads.

Mind you, as a piece of journalism, the article is no Pulitzer piece, being high on drama and low on attributable fact. More of a filler for Media Salesman Weekly than an SMH article.

I agree with AdGrunt, the article was very unsubstantial. In general, advertisers are cutting budgets as consumers are spending less causing media agencies to negotiate harder while media is forced to offer bigger carrots. It’s life – not news.

Is there any comment on this piece Mumbrella, or just linking to the article?

Hey Ben,

Nice try on the strawman of viewing. And what measure or data of viewing are you using?

I’m talking about *response* and the value of TV as an effective, timely and engaging communication medium. A galaxy of difference.

All data I have seen (and sadly cannot link to) from Europe, US and ANZ indicates a pretty continuous trend down for TV’s per capita viewing, effectiveness and efficiency. Do feel free to link to data to refute this.

All this doesn’t mean it’s not part of the mix or people aren’t watching it, but there are increasingly better / efficient ways to achieve the same result. Of course all this depends on what you’re flogging anyway, but that would never help a TV sales rep, would it.

Hey Ben,

I had a look and it doesn’t really support your argument very well. It’s a graph with no background, methodolgy or data to review. But it’s all you’ve got, so let’s carry on.

Let’s kick off with the sample – 1,194 “Internet users over the age of 16” which is research-speak for an online survey. Not the greatest. I’d rely on Oztam or ABS myself for instead of someone tapping answers for the hope of $100 of Coles vouchers.

Now to timeline – it only shows from 2003. We’ll live with that. I’d rather this over 10 years, but thems the breaks.

Now to the pretty coloured lines. Whilst the number in the 2008 column is bigger than the 2003 column, you don’t have to be an economist to notice the distinct downward trend in the TV line from 2005. If in doubt, put a piece of paper over 2003-5 and it doesn’t look pretty.

Not only does it not look pretty, it is about viewing hours per week. Not viewers, not what they watched, not if it’s FTA or Pay, not if they think youtube is TV. In fact as a piece of data to abstract from it’s very, very thin.

So why the surge from 2004-5? I’ve no idea, but without the full report and other usual research info – we can only guess – Olympics maybe?

Pleased that you’re in digital and got a link-back from here to your blog. However as I said in the beginning – none of what you have presented gives me any indication of TV (or digital) improving in its effectiveness or efficiency. Just some pretty lines, really.

Me? I’m media-neutral so have no drum to bang at all.

ps – Do tidy up the typos on your blog bio page 😉

Sorry, you may have missed my point.

Even if poor, the graph doesn’t support your claim (TV viewing is on the rise), or refute my assertion (TV is providing diminishing value).

Ah, another day in paradise! Meanwhile, two years ago media buyers were plotting against their network sales reps who were withholding access to the 3 or 4 network shows that had any significant or consistent ratings and were coming to market at 4 times the cost YOY. “One day, demand will turn our way and then we’ll have them!” they cried..their fists shaking at the sky. That was about the same time a senior TV sales exec said to me of my major TV client. “You’re money for jam. We always forget about you…”.

A handful of observations.

From a planner’s perspective, the networks are losing media dollars not just because of rate, but lack of vision, especially regarding the opportunity around multi-media integration and how their silo’ed management structures inhibit creativity and co-operation. This then leads to a conversation about how sales people get paid and what they will / won’t do, to make the sale. Most of them right now work essentially on volume sales commissions which is not a structure designed to solve this problem.

If you’re not comfortable with the rates that the market is prepared to pay for your product, there are a few considerations as I see it.

1) The Field of Dreams approach. Get better product that will generate a consistent, quality audience.

2) Smarten the F*ck Up. Find lateral solutions whereby deals can be constructed that potentially include premiums offset via other business silos (see point above re lack of creativity and co-operation)

3) Harden the F”ck Up. Do CPM and/or tracking (e.g. Millward Brown or whoever) guarantee based deals whereby the onus is on the networks to truly compete with the other mediums who provide similar accountability. You know, share the risk with the advertisers you’ve convinced to part with their millions.

Anyway, hey I’m just a planner so when it all goes pear shaped I’ll just recommend more giant inflatables and street mimes.

Rachael,
I like your style!

Isn’t it funny how when times get tough the tough get bitchy…..

I’ve had a bit of time on my hands recently, my role at Fairfax having been made redundant in the latest management restructure, and I’ve enjoyed reading all the comments made on the various stories and opinion pieces.I wouldn’t normally have the time! Despite the pressures forced upon the current unsuspecting generation by this economic downturn, I’m encouraged by the passion shown by the contributors to the debates, albeit some of them may be a little misguided. For what it’s worth here are my thoughts on a couple of the recent topics:

1. Innovation in newspapers – there has been a lot in the last 5 years, and there will continue to be more in the future – having set up and led the Business Development Unit at Fairfax for three years, I’ve seen plenty of less than inspiring briefs from agencies wanting innovation, integration, media firsts, added value etc, etc. Despite this I know that the sales teams at Fairfax, and I suspect News Limited, PBL, Seven Media Group et al, all work extremely hard to pull together new solutions & presentations that would not look out of place in media account pitches. Some of them you win, some of them you lose – that’s business. It also means that some of the innovative ideas created specifically to meet a certain client’s brief never see the light of day. Those that do are generally very challenging to pull together, and require a significant amount of internal persuasion to ensure that they are executed to the original vision. Some of those that do may, with the client’s consent, win awards – Fairfax won the first three MFA Best media owner proposal awards, and were runner up last year. and guess what, the teams involved are just as proud and celebrate just as hard as any creative team that has won a Cannes Lions. Trust me, I know this having managed the Fairfax sponsorship of Cannes for two years, and been on the Caxton,s Committee for three years. What disappoints me most is the cynical sniping that attempts to demean the efforts of others – see the chain of comments on the ING Direct Savings Week activity in Fairfax and the BMW 7 Series launches in the AFR and The Australian.

2. TV negotiations – how i miss the good old days! Having sold and then bought TV airtime in London in the late 80s and early 90s I was fortunate to have seen both sides of a genuine demand driven market in boom & bust. Selling a pre-empt ratecard up to 3pm on the day of transmission in a high demand market was fun, and I made a lot of money for Thames TV. I also pissed off a lot of much more aggressive TV Buyers than exist in the Australian market today, buy hey it was business. We threatened, we postured, we bullied, we lied, we moved spots around,, but hey it was business. We still had a few beers in the pub together at the end of the week – we were buying most of the rounds. When the market turned around and we couldn’t give airtime away, the boot was on the other foot – what came around went around. Buyers demanded unreasonable discounts, make-goods, still dealt 110% of budgets, but hey, it was business. We still had beers on Friday night, and the sales guys still bought their fair share of rounds! Perhaps things aren’t so different 20-odd years later…..

But enough of my sentimental waffling….I look forward to reading a lot more heated debate over the next few weeks, until I secure my next role in the business and find myself with less time again.

This is great stuff all around. At least we can look to trading out of this period with a few hardy souls left who know what a tough market looks like. i suspect that there are many TV sales departments out there right now who’s core constituents may have been primary schoolers last time we had a decent sized market correction. Same with the buyers. This will all be over soon enough people. Lets play the ball not the man.

This seems to be the age old argument of TV buyer vs TV seller. The buyers are always the good guys and the sellers evil controllers of inventory that get what they deserve, isn’ t this what we have all heard for years? TV buyers who constantly complain about how much harder they work than the sales guys, who then spend every second day at lunch paid for by the sales reps, or on 2 week trips to the cricket, olympics or rugby, need to put their positions in context.

The real problem is that both sides seem to have an inability to work together to create solutions and value for the clients communication goals. Is it that the agencies feel threatened by trends towards direct client -media owner discussions?

I agree that there are is a lot of media that is “getting what they deserve” but to what purpose does it serve the client in the longer term for media buyers to drive the owners to the wall with unsustainable rate positions? Ultimatley, media owners will be driven down so low in rate that they will be unable to trade with certain clients – I wouldnt want to be the media buyer who has to explain to big FMCG client X that they cant buy a TV campaign for them because no one will trade.

TV will bounce back , and the buyers who are mature enough to use long term strategic thinking to strengthen their relationships with them during this period will be those that rise successfully.

Regardless of structural and economic trends, a very high profile (and wise) media buyer once said, use both the carrot and stick in long term relationships.

Think that pretty much sums it up

Ultimately the smarter Clients and their agencies will move to an effectiveness planning model rather than efficiency based. This will result in a much closer understanding of the contribution each media owner makes, some will be more some will be less, the point is their true worth will be known eventually. The TV contractors can choose to accept the money offered or not of course but if the cost asked doesn’t make the cut then they lose.
Funny how history repeats itself though, ITV in the UK took exactly the same stance 10 years ago and look at it now! They are right in that the market is unforgiving but that door swings both ways

OK. Let’s add some rigour to the discussion. Let’s look at Australian OzTAM data for the combined metro markets for All People for each calendar year 2001-2008. We can’t include 2009 as we don’t have a full years data yet. This is off a sample of over 7,000 people each and every day, so over we’ve got over 20 million ‘viewer days’ here. Below is the average daily audience for All TV (FTA, Subscription TV, community TV etc). This data is for 2am-2am so it is the ‘average hour of the day’ – obviously prime-time would be much higher and midnight-to-dawn would be much lower. This data is around two-thirds of what National TV viewing would be as it doesn’t include regional TV viewing.

2001 = 1,801,000
2002 = 1,821,000
2003 = 1,792,000
2004 = 1,774,000
2005 = 1,823,000
2006 = 1,872,000
2007 = 1,861,000
2008 = 1,859,000

This corroborates Ben’s statement that TV viewing is up over five years ago – albeit marginally, but that is what you would expect in a mature market. This has to be counter-balanced against the population growth, so if we look at the ratings we see:

2001 = 13.7
2002 = 13.7
2003 = 13.3
2004 = 13.0
2005 = 13.2
2006 = 13.4
2007 = 13.2
2008 = 13.1

We see a marginal decline in the PROPORTION of viewing – but hardly the “sky is falling” that we read about in the trade press all the time!

What HAS happened is the FTA has been losing share in a fairly static pie. In 2001 the average FTA audience was 1,596,000 (12.2 Rtg) while in 2008 it was 1,438,000 (10.1 Rtg). Conversely, Subscription TV has grown from 205,000 (1.6 Rtg) to 421,000 (3.0 Rtg).

I commend Ben for being media neutral and telling it “how it is”.

To pre-empt all the comments that will flow saying “what about all the growth online – surely that is where the game is at?!?!”. When you have an audience measurement system (as opposed to traffic counting systems – pretty useless data) that DOESN’T try to tell me that 45+ million Australians are on-line every month (yep, there is only 21.5m of us) then I will put some credence behind your claims.

As someone who worked both sides of the fence (at a tv network and agency) that article is pure fiction.

In a competitive TV landscape – which it always is – you can leverage both you $ and Share to drive discounts. At the end of the day a Network is not going to say No to $ and they will not restrict your programming options if they want the $$.

Doesnt take a genius to work it out. Same principal applies to all media. Money is Money, so long as your getting it all is good… miss out, what a crappy monday morning Sales meeting you’re going to have.

AdGrunt, not that I’m weighing in on either side of your debate with Ben Shepherd but if you’re going to complain about poor graphs and research then the least you could do is provide some yourself. Sharing is caring 🙂

Agree with most of what has been said – that, you would expect of a sales guys!!

In these so called tough times mutual respect by all will see everyone gets through this in great shape.

No matter how tough things get, do not trade your personal and professional integrity – this is what will ensure that you are around to enjoy the good times.

William – I think the other part to the numbers game is by what percentage have the networks (and here I refer to 7,9,10) increased their rates versus audience growth / decline? That would be interesting to see correlated.

I’m guessing we would find their rate increases are disproportionate over time, and in a time where we have emerging options to gain reach (if thats your fancy), they are not behaving competitively. The classic client question is something like this..”How come the CPI is less than 2%, my target audience viewing is down 0.5%, and I have to pay 5-11%+ YOY to get the same TV airtime?” Even some media auditors are actively telling big clients to avoid TV for certain demos because they cannot get their numbers for the price. As a planner I don’t necessarily subscribe to CPM based TV planning but I do understand how it relates to board reports etc, at the big end of town. Steve T is right…effectiveness planning is absolutely the way to be heading s long as we have the systems in place to validate achievement of goals.

Padster- I also think media buyers / planners have to tighten up their briefs and take responsibility for managing their client’s expectations. And to not lazily get the media sales people to do the strategy for them. How many times have we seen that?! And feedback to your reps whats good / not so good so they’re not throwing darts into a black hole hoping to hit something.

Which segues nicely to my last comment (Hi Brian) which is that there are lot of newbies out there being given (or just damn taking) responsibility way over their shoe size. Perhaps with the market correction we can also take the opportunity to correct some of the more antagonistic business practices coming into the market. Whether we like it or not, it always has been and always will be a relationships game first and foremost.

I am glad to see that many of you are still passionate about it all.

The bottom line of all of this just has to be the commercial reality that faces the advertisers here and else where.

They all need to gain the most efficiency /effectiveness they can for there ever decreasing budgets. The networks need to accept this. You can’t sell yesterday’s unsold airtime today and they are the ones that can say no, I don’t accept. Are they suggesting really that buyers should be prepared to pay over the odds today so that they will be favoured tomorrow?

Rachel – I 100% agree about the FTA rate increases outstripping CPI with declining delivery. (Mind you, it is a neat trick to pull off!) What I was pointing out is that TV as a medium in all its guises is in the mildest of audience declines and not spiralling Icarus-like to its death. Yes it is fragmenting. No it is not dying.

I recall a comment that I believe was made by CBS’ David Poltrack (though my recollection is poor and could be wrong) when asked exactly the same question when cable started to fragment the US broadcast audience. He replied something along the lines of …. sure TV is fragmenting, everything is going niche – but we’ve got the biggest niche in town and that’s how we’re going to charge for it.

The thing is that unlike the online and print worlds TV has limited supply due to an act of legislation. When supply outstrips demand the price goes up. The “law” of supply and demand was popularised in 1776 by Adam Smith, and lo and behold it has proved immutable and still applies today.

Legislation to allow more advertising minutes (fourth FTA network anyone?) would shift this paradigm as would an exodus (not a trickle – an exodus) of money from FTA TV. Until either of these happen, and while demand outstrips supply, then rate increases will exceed both inflation and audience delivery.

William, do we know demand is exceeding supply? Why would the networks wear rate cuts if this is the case? Unless I’m missing something I thought we all knew this was a part of the equation. Networks giving cut rate discounts when they are in overdemand situation makes no sense.