C3 Vs. C7 Offers Room For Compromise

by , Apr 29, 2013, 4:58 PM
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Is the C3 vs. C7 debate worthy of the attention it will continue to receive until a settlement is reached? Yes. Anytime, the national TV market could undergo a currency switch, it merits vast interest. Not just in the financial impact, but in the philosophical underpinning (i.e. what does it say about consumer behavior?).

The currency overhaul several years ago that ushered in an element of commercial ratings and tracking of DVR-enabled viewing was monumental. Movement to C7 would be far less transformative, but still a statement that networks are concerned time-shifted viewing could markedly eat into profits over the next decade.

Truth is, networks would gain relatively little with a shift today. One analysis shows the Big Four networks would each gain only 3% in salable prime-time inventory with a C7 currency.

For other dayparts, there would be a (collective) 1% gain in daytime and late night. And, no gain for the morning and evening news.

For cable networks, the collective prime-time bump would be 1% (obviously, particular shows would have higher levels).

(Quick background for those who associate C3 with a “Star Wars” robot. The dominant currency -- C3-- in the national TV market comes from average commercial ratings covering a live broadcast and time-shifted viewing over the ensuing three days. But sellers want to be paid for four more days via a C7 currency.)

Broadcast networks are massive businesses, so a 3% gain in inventory shouldn’t be dismissed. But, for now, anyone thinking a C7 introduction will translate into a big revenue jump might be off-base.

By the same token, a 3% figure wouldn't seem to buttress network arguments that C3 gives buyers all kinds of free exposure.

One worthwhile argument holds C3 vs. C7 is a distraction. More important is buyers and sellers agreeing on a currency that takes into account viewing on all platforms. Capturing it in a way that yields an aggregate rating -- one that networks feel gives them proper credit and buyers agree merits the same pricing no matter the platform -- might be more urgent.

Nonetheless, anytime buyers and sellers go head-to-head in unison -- or something close -- it’s fun to watch and great to analyze.

In this case, there’s actually a compromise -- albeit a lumpy one -- waiting to be reached with a hybrid model (assuming back offices can handle it). The concept was telegraphed by one of the smartest, most accomplished sales executives around a few weeks back. But before unveiling the Grand Bargain, it’s important to point out a somewhat flimsy argument buyers make in their opposition to C7.

Call it the sell-by date claim. It holds that ads for movie studios, retailers and some other businesses can quickly become obsolete:

Studios flood the airwaves before the crucial opening weekend. After that, how valuable are the ads? Target or Macy's plugs a weekend sale on Thursday. So, the ads are inconsequential by Monday morning.

Yes, the impact can be diminished outside a three-day window. But, there is still value.

If a film has generated buzz – even if it hasn’t – an ad can still drive people to the theater. The film is still playing.

If the Target sale is finished, the spots still have plenty of brand-building potential in reinforcing the available merchandise or sparking interest in the next deal.

Nevertheless, what if sellers concede the sell-by point. What if they agree to stick with a C3 currency for a handful of categories that carry a certain urgency?

But in return, buyers pay based on the C7 figure for others, where brand advertising dominates and spots are mostly evergreen.

An Apple or Unilever, which would both mostly fall in the latter group, may find it unfair at first. But, that hardly means they'd lose over the long run.

Buyers and sellers could put aside negotiations on the currency. Then do what they do: look for ways to win with it.     

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