The Media Debate: THE FUTURE OF TRADITIONAL MEDIA: Riding Out the Recession, and Facing the Challenges Beyond.
Steve Greenberger, executive vice president, media convergence and print media, Initiative Media: From the print community, it looks like there might be more room for negotiating on an ongoing basis. As advertisers hedge their print budgets and roll out on an as-needed basis, there’s probably going to be discounting and negotiation continuously for all accounts, rather than one negotiation that everybody will live with for the entire year. And publishers are going to be flexible for adjustments along the way.
Carol Karpa, CEO, Karpa Diem: As budgets have shrunk from year to year, and the rates have increased from year to year, people will be looking for greater value on behalf of their clients. So I also think that cross-media promotions will continue to be important. The larger companies, the top-tier media, will stand to benefit from that for the most part. But we’ve also been seeing a lot of the independent media trying to form more strategic alliances.
Howard Nass, principal, HN Media Services: First and foremost, I am concerned that advertisers are not sold on the value of advertising, because they feel we’re doing it the same old way today that we were doing it 20 years ago. So they’re putting pressure on the agencies and media service companies not only to be more accountable but to find ways to make their dollars work harder and smarter. Andrea Macdonald, president, Macdonald Media: I agree, but I will also say that in the out-of-home, the nontraditional media category, in our agency we’ve had only one client reduce their budget. Every other client has increased their spending or become a new spender in the medium. And they are putting requirements on the planning groups to really suss out those creative ideas and help them to do something differently and more efficiently by targeting and by justifying those media recommendations. We’re working with the media companies now also. Out-of-home has always been the great unwashed, you know, and through the various industry organizations, we’re putting pressure on those consolidated media operators to get behind producing more research and more qualitative information that can then take a creative idea and justify it, quantitatively as well.
Drexler: Isn’t it also a matter of the media needing to present new, fresh, exciting ideas to advertisers?
Jason Kanefsky, vice president, MPG Media: One of the creative ideas that has really come out in the last year has been the reality genre. Take Survivor: 50 years ago, shows had that kind of product placement and cross-promotion—but now they’ve posited it with the Internet and everything else. Cross-platforming didn’t exist three years ago, and now it’s a buzzword. So the media are doing things differently. The question is: Are they more successful?
Macdonald: With some of these new media, the challenge comes in managing client expectations. A lot of agencies who pursue those really creative, crazy new media ideas are not managing the clients effectively, and they’re getting a bad taste in their mouths. Drexler: Jason, the network television upfront for 2001-2002 was clearly a buyers’ market for a change. What changes in strategy do you think occurred between buyers and sellers?
Kanefsky: No one was really prepared for how steep a buyers’ market it became. Going in, people were thinking low single digits, maybe a minus 4 or 5 percent. But once it became a flow of a marketplace, where people are starting to buy GRPs, the sellers figured out quickly that if they didn’t get their act together to get to a number, they would get left out. The smaller guys got left out dramatically, and so did the syndicators. As a result, what I think you’re going to see this year is fewer programming hours available in syndication: A lot of shows that would’ve made it in 2000, when you had this abundance of dollars, won’t be there.
Drexler: The Super Bowl on Fox was as much as 35 percent unsold with only a couple of weeks to go. Does that suggest a problem in sports, or events in general?
Kanefsky: It isn’t just the Super Bowl. It’s also the NCAA and Major League Baseball. Last year NASCAR couldn’t even sell out, and their ratings were up 30 percent. But it’s not just a sports issue. It’s too much supply.
Drexler: While we’re on the subject of programming, haven’t the reality shows just about had it?
Kanefsky: I think you have to freshen these shows up every three months. Weakest Link went two and a half months then fell into the toilet. So maybe that’s the play: Three months, brand new show, or take it off the air.
Drexler: It’s been argued for a couple of years now whether the upfront system—buying in June and starting to air in September—makes any sense when in fact advertising is on a calendar year. With program changes occurring now almost throughout the year, do you think the upfront system really makes sense; would you like to see it change; do you think it’s possible that it will be changes?
Kanefsky: I think the upfront system will change a little bit because of the multiplatform cross-promotional deals. The networks, I think, would love to start siphoning money away from the upfronts, and put it into these bigger deals, because that locks in money that’s firm as opposed to this 60 percent optional business, where you just rent inventory. The bigger agencies need the upfront, because that’s the only way they have the clout in the marketplace. If advertisers start willy-nillying it here and there, scatter, not scatter, the bigger agencies lose that numbers clout that they’ve developed. You know, “We’re gonna bring a billion dollars to the table with Magna, and if you don’t play with us, you’re gonna get screwed.” If a major agency walks away from that, they’ve lost their clout. Which is another reason why the networks would not want to do the upfronts. Also from the big agencies side, they’re not staffed to do a billion dollars in scatter. Unless they want their assistant buyers running $50 billion in scatter. So what’s going to happen, I think, in the next five years, is you’re going to see the boutiques coming back—the smaller agencies that have $400 million in billings, five key accounts—and they’re going to focus in on those accounts, and they’re going about it the way it should be bought.
Drexler: We all know that cable shares have grown over the years to the point where they’re probably at a 50 percent level now in terms of overall viewership. Networks have continued to decline, but they’ve taken interests in cable companies. As regards the relationship between cable and broadcast network from a buyer standpoint today, is cable still an afterthought, or is cable just as much of an integral part of an upfront consideration as network broadcast is?
Kanefsky: Cable in many ways has actually become the first call. The first place a client who is spending $10 million goes is cable, because they know they can get more weeks on air, they can get more units, they can get all the things that they can’t get buying prime time. For package goods companies, the first call is also cable. When you think about a $150 million package for a company—what it really is is 25 different brands with $4 or $5 million budgets each. You’re not seeing a company spend $75 million behind one brand the way a pharmaceutical company will. So cable is the great equalizer of costs. If you find that you’re not making your number, you take a little money out of prime, you put it into cable, and you’re home. Even this year, when broadcast was so cheap, broadcast was down 10 percent, cable was down 20 percent. So even in the worst of times, cable is still going to be cheaper than prime, and money will still flow there. It’s not a second thought, it’s a first thought. Drexler: Howard, in the area of local spot TV and radio, do you think the spot sellers are selling the virtues of spot well enough? What do you think stations or reps should be doing now that they haven’t done before, or doing what they’re doing now a little better?
Nass: They have to do it better! But in local broadcasting, radio is being heard even more than television. They had a banner year in 2000, an unbelievable year, driven mostly by the Internets, and to a certain degree by retail, and by the entertainment companies. But once that Internet dollars dried up—it accounted for nearly 18, 19 percent is the number I’ve heard bandied around, of their dollars—they lost that. That’s gone in radio, now. They’ve got to find avenues to fill that void. Now they’re faced with the problem that all media is soft, so national drops their rates, and radio frankly, is at the bottom end of the rung for most advertisers. If you’ve got money sitting down there allocated to radio, and all of a sudden a good network opportunity arises because of a scatter situation, the money…where do you get it? You take it out of local radio. After you use that money up you take it out of local television. So yes, they each have to figure out a way to convince people there’s value there. People forget that the television show that’s watched consistently every month of the year, every day of the week, is late-night news. And what local television stations have done, unfortunately, is sold it all out to the automobile clients, instead of going to other people and saying, “Hey, this is a great area.” The late news does well, always does well. And if you turn your set on, I don’t care what city you’re in today, you’re going to see that seven out of ten commercials are automobile commercials. And nobody is saying “Hey, what about product protection?”
Drexler: Andrea, there are more options than ever in the out-of-home world. Are advertisers harking to these new opportunities? Are they part of an integrated media marketing plan, and if so what new categories of advertising are coming into out-of-home?
Macdonald: They are always incorporated as an integrated part of the media plan. Our philosophy has always been that any opportunity to connect the brand to the consumer should fall within the same objectives and strategies and the same structure as the rest of the communications plan—it makes everything work harder. And we don’t look at out-of-home or nontraditional media as being sort of stuck off on the end, or something that you buy when you’ve got money left over from the broadcast upfront. It’s an integrated, important part of the program that contributes the unique benefits that this media can contribute. All categories, we have found, are using the medium, and that happened probably five or six years ago with a major change in the industry when they eliminated tobacco advertising from out-of-home. For a long time advertisers viewed out-of-home media as being the liquor and tobacco or directional opportunity. A lot of fashion categories began coming into the medium, which gave a lot of traditional advertisers the comfort level that out-of-home could be used to build brand image in a big or creative way. And really across the board, all categories have increased in the medium. The other good thing about the elimination of tobacco was that it opened up a lot of high-profile, valuable locations that had been locked up for the long term. And we’re finding that a similar phenomenon is occurring right now, because since the dot-coms came in over the last couple of years and drove the prices up and bought into these huge, spectacular long-term opportunities, those are now becoming available again. So the market is not totally loose and open; it’s more stabilized now, but a lot of those really high profile opportunities are once again available to everyone.
Drexler: Carol, for years newspapers seemed to be faced with the issue of national versus local rates and relying, for the most part I think, on local retail ads. I don’t think they’ve ever been really able to break the national mold and start to get more and more national advertising. With an economy like we have with these swinging cycles, it can be very dangerous when you rely so heavily on local retail business. Are there new categories now coming into the medium, and is the newspaper doing much to more fully develop national advertising at this point?
Karpa: They’re trying to. Obviously they think that they have more margins with national advertisers. But I also think that national advertisers are waking up to the fact that they’re the ones getting killed on these rates. There are alternative media buying companies and others who specialize in buying newspapers, and they can cut great deals with the newspapers. So national advertisers, as long as they’re willing to have a little bit of flexibility, are seeing that they can still get a lot of mileage for their dollar by cutting either great deals of their own and not having to pay full freight as they used to, or working out some deals with some of these other media buying companies that specialize in newspaper buying.
Now as far as retailers are concerned, obviously they have to make or break their business based on what they do on a day-by day-basis. And there are so many other alternatives in the marketplace for their dollar. The media is getting very, very aggressive for everyone, not just national advertisers or local advertisers. So I don’t think that there are necessarily new categories that newspapers are trying to capitalize on—they’re just getting more aggressive for their premier positioning. They’re saying, “I’m not going to negotiate this as much, because it is my glory spot,” or they’re finding new ways to charge you for advertising that you used to receive as promotional benefits and things of that nature.
Greenberger: We’re pursuing the direction of corporate negotiations with newspapers. The Tribune company, for example, is coming up with a multimedia group that will come out and talk about their alternatives that they have within the newspapers and the newspapers relationships with local media, with the Internet, with any special newsletters or packaging that they have that they can in fact attach to the newspapers. But they’re starting to look across all of their newspapers, and the assets and relationships that they have in all of their markets to put together what they call their convergence deal. I think that we’re going to see more of that.
On the other side, what we’re seeing is that large retailers can get increased discounting from large newspaper companies simply by making sure that you find the right person who can talk across all the newspapers to come up with corporate deals that in fact are borderline convergence as well. So where it doesn’t exist, you create it. But it’s a lot more work than it’s been putting together convergence packages across even the Viacoms and the AOL/Time Warners.
Drexler: Given the state the economy, are magazines becoming perhaps a little more liberal between editorial and advertising, and is that hard line between church and state starting to fade a little bit?
Greenberger: I’m seeing that line start to chip away a little bit. It’s not the rock that it used to be. You’re starting to see more editors come out to agency meetings and talk about what they do and how they read the market and things that they have done to make your advertising more attractive in the publication.
Karpa: It’s still church and state. There’s some chipping away, yes, but also the sales side are seeing that there are opportunities where they can come in and use sort of a bridge staff: They’ll hire an independent bridge staff that is quasi-editorial to do more promotional advertising for advertisers. They’ll slant it under the auspices of having that little mouse point type saying advertorial, but not necessarily with the same kind of old traditional, mainstay advertorial. They’ll really pick the brains of the editors these days and find out what’s vital, what’s important, and see if the promotional materials are right in line with what the readers want. Because ultimately it’s about the readers, for them.
Drexler: Newspapers are facing the Internet as a challenge, because of its instant news and statistics and hard information and immediacy. It seems that newspapers are probably going to feel the impact of that to a great extent. Newspaper circulation has not been particularly robust for a long period of time. And they don’t seem to be picking up a whole lot of younger readers, either, which obviously is a big Internet audience. What do you think that bodes for the newspaper business?
Karpa: I think they’re going to have to find other revenue streams to protect themselves. I think that they’ll start to look at their world in terms of who they have in other companies to form alliances with. I think that the Internet world is ultimately going to revolutionize every business, any media type of business that we’re in. It’s just a question of how fast we can get up to speed and our clients can get comfortable, and more importantly, whether our agencies can create good enough creative that will break through all the other messages that are thrown at these people while they’re looking at an Internet page.
Drexler: Steve, I’ve heard that magazines that don’t have any other assets other than their individual publication say that they’re at a real disadvantage if they can’t do cross-platform deals. Does this mean that many of the second- or third-tier titles won’t be able to hold on in the long run unless they affiliate with other media companies?
Greenberger: What a lot of advertising agencies are doing is encouraging the B- and C-tiered publications to find an affiliation. You might call this an unwired network of publications. The standalone weeklies are looking to do that on a more regular basis, in an attempt to come up with packaging that could approach the level of sophistication and discounts that their larger competitive conglomerates have placed on the table.
Drexler: Are multimedia packaging and cross-platform deals still just pretty much limited to the big advertisers, who seem to be the ones who can afford to do it and go to the big consolidated multimedia companies to do these deals?
Kanefsky: We’ve done a multimedia platform deal for the client for less than $5 million; we did one for $50 million. They’ll talk to anybody; what they don’t want to hear is discounting. What they want to hear is marketing and promotions objectives.
Nass: The biggest problem, on our side, has been getting personnel to oversee it from beginning to end—but even more difficult dealing with the various media types within the same company’s umbrella.
Karpa: On the smaller, $3 to $10 million deals, there’s a lot of inbred fighting between the troops. The media companies have to figure it out between themselves in terms of how they’re going to close the deal and incentivize each of their sales people to get value so that the deal can get done.
Greenberger: We work to come up with organizing ideas based on our clients’ needs, so that we could best utilize the asset pool of the companies that we’re talking to. The media companies come back with practical applications that are much more relevant. Otherwise it will fall into those silos and you’ll never see anything happen.
Macdonald: Because so many of those cross-platform deals are presented by these media companies without that critical input from the media department, or from any department for that matter, and all they’re worried about is unloading their inventory. It serves those media companies well to consider bringing on marketing people or media experts in planning who can design those programs for the needs of the client specifically instead of the needs of the holding company.