Commentary

What Goes Up Must Go Up

If one were in the doom-and-gloom business, you know, hypothetically, one would be hard-pressed to explain the surge in the TV upfront market, in which the broadcast networks apparently now fetch CPMs of up to $24.40 for 18+-year-old viewers in prime time.

ABC, CBS, and NBC are commanding the highest price gains -- around 9% to 12%, according to media-buying and selling executives, in early deal-making, reports MediaPost’s very own Wayne Friedman. 

Surely this must be good news. The slow-simmering economy since the Great Recession has finally come to a near boil, and demand is beginning to bubble to the surface. And TV, the most powerful medium in the history of humanity, is demonstrating with Twainian satisfaction that reports of its demise were premature.

Wait….what?

Latest ratings show that there are now, like, 11 people watching network TV in real-time, 1 of whom is Les Moonves and 8 of whom are shut-ins. Economy or no economy, considering TV’s increasing irrelevance, why the irrational exuberance? Is this really good news?

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 No, it is not good news. It is horrible news. Horrible, horrible, horrible.

The rise of TV CPMs over the past 20 years, from the standpoint of marketing and economics, can be attributed to only one factor: fragmentation. Although first cable and then the Internet vastly shrank network viewership, what the nets were left with was -– and remains -- much, much bigger than the other fragments. As we Chicken Littles have been crying for more than a decade, price increases are exactly like what you face at airport sandwich kiosks or the last gas station before Death Valley.  

It's called “gouging.” 

The thing is, online marketers have the capacity with automated simplicity to aggregate vastly larger audiences than even, say, The Big Bang Theory’s 18 million. And because the supply/demand curve has so devastated online pricing, that audience of 18 million can be had vanishingly cheap. At this point in the Digital Revolution, technology and the price differential should have long since made it impossible for the gougers to gouge and consigned the bloated aristocrats of TV to the guillotine.

But nope, they’re dining on cake. Why?

Because the revolutionaries can’t govern. They can’t defeat bots and other fraud. They can’t force users to look at their ads, because users have no wish to, ever. They lard their pages with trackers and cookies and other code that slows page loading to a crawl.  They have simply failed to deliver on the promise of the Internet.  

If you will permit a metaphor shift from A Tale of Two Cities to Goodfellas, they have jailed the mafia, but the mafioso are still living high on the hog and running their rackets from jail. 

If TV prospers in a mobile world, we should pay homage to its power and resilience. But we should also take a cold hard look at the New World Order. The future of the content we actually consume hinges on the ability to somehow underwrite it. If leading national advertisers are placing their bets not on the future but on the past, the revolutionaries have truly botched the job.

7 comments about "What Goes Up Must Go Up".
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  1. Jeff Sawyer from GH, June 20, 2016 at 12:42 p.m.

    Similarly, soda sales down, soda prices up. 

  2. Myron Rosmarin from Rosmarin Search Marketing, Inc., June 20, 2016 at 1:17 p.m.

    The first rule of Tautology Club is the first rule of Tautology Club.

  3. Dean Fox from ScreenTwo LLC, June 20, 2016 at 1:48 p.m.

    Exactly, Bob.  As I frequently remind my cord-cutters, the current tidal wave of expensive, big-name TV content cannot be sustained unless someone, or a lot of someones, is willing to pay for it. Also, with so many content outlets vying for eyeballs with top quality content, marketing costs of that new content will be much higher, viewer loyalty much less.  Since so many series, regardless of quality/word-of-mouth/marketing spend, fail to attract enough viewers, the 90-10 rule or worse applies once again. Whatever the eventual outcome, the decision makers in the television industry haven't a clue how or if they will survive an OTT future.

  4. Philip Moore from Philip Moore, June 20, 2016 at 2:17 p.m.

    Bob,
    First, happy Father's Day.  I hope you kids appreciate your insight and wit as much as your readers.
    I totally agree...but might add that there may be a generational effect at play.  Many of the decision-makers for big TV spenders will continue their habitual strategies as long as they can get away with it.  How many CMOs trod the beaten path because they just don't have the long view necessary to figure out how to succeed in a new paradigm.  If this is the case, then declining ROI will eventually free up this money to find the highest and best use.  Of course, the entrenched measurement bureaucracy and the legacy buying infrastructure has a lot to do with it as well.  As long as Neilsen is allowed to buy out their competition, it will be business as usual with more and more ad money wasted on shows fewer and fewer people are watching, in real time or otherwise.

  5. Peter Herring from TTW Systems, June 20, 2016 at 7:35 p.m.

    I start by pointing out that it is darkly funny to me that your article is flanked by ads, none of which I noticed. I do detect some colors over there, and some movement, or wait, maybe that's the view out my window... Quite simply, it has been easier to train my brain to avoide the right side of the site than to train my dog to walk on the left... Here, I think, is your cogent line: "They have simply failed to deliver on the promise of the Internet." The promise of the Internet was/is the ability of people to tell companies (and other people) what they want and then have that stuff magically appear. The paradigm that the Advertizians can't give up is coercion, the old idea (that worked in print and TV before channel changes and mutes) that you could make people buy your stuff. And so we have the war of those who track and jab theoretically pertinent ads in front of people, and those who create clever technical ways (or non-techy ways, such as eye aversion) to avoid those - they are usually a step ahead. We haven't really realized yet that we have a new medium that has changed everything, because the old paradigm's too deep. Even deeper than TV.

  6. Darrin Stephens from McMann & Tate, June 21, 2016 at 10:30 a.m.

    "This whole paying higher CPMs for lower ratings can't go on much longer," said guys like you for the past 40 years.

  7. Ed Papazian from Media Dynamics Inc, June 21, 2016 at 11:21 a.m.

    What amazes me is the failure to appreciate that just about everything we as consumers buy costs more and more and we get the same or less in return. This has become an accepted way of conducting business---it's called inflation---and everybody, except the digital critics of TV get it. Why should the TV networks and cable channels operate differently? Their costs are rising--for program content, research, transmission, etc. Is it realistic for them to charge less per viewer because there are somewhat less viewers per minute each season due to rating fragmentation? Isn't digital highly fragmented? Do digital ad venues charge less per user when their numbers of users---or user visits---decline?

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