New TV Spot Business Model: Get Rid Of The Paperwork And Waste

by Wayne Friedman, Mar 27, 2008, 9:45 AM

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Concerning the TV spot advertising business, Irwin Gotlieb, CEO of WPP's Group M, is spot-on.

For decades, those local TV make-goods, those local pre-emptions - all which have delivered an atrocious 85% discrepancy rate on average for each local TV invoice -- are too much to bear in this digital age, he says.

Fed up with it all, Gotlieb and his senior local TV buying executive, Kathy Crawford, president of local broadcast for Mindshare, just want to pay what's delivered. You want to buy 10 rating points -- but only get nine -- you just pay for nine. Not $1,000, say; just $900. No make-goods required.

This would seem to disrupt any sort of media planning. For example, say a retailer is planning to buy 500 local rating points in Detroit. But after is all said and done, the retailer only gets 400 ratings.

No problem.

Gotlieb's point is that the 500 rating isn't really 500 - since 85% of that buy will under-delivered, or delayed, or just won't run. So there is not that much downside. You might as well just pay for what you get. Period.

No doubt TV station executives will be up in arms. They would rather have the $1,000 - upfront. They don't want to give back money when they fall short. But they don't mind giving up advertising time -- or pre-empting one advertising spot for another.

This is all the TV stations' fault. The business has had these problems for years and did nothing about it. And, yes, there is a voluminous and manual paper work issue. New electronic systems, like ePort, only solve some of these issues. But not core TV spot buying issues.

TV station executives will now worry - especially on a topic that media salespersons are always concerned about: the commoditization of advertising time. That will likely mean one rating point in "Entertainment Tonight" is worth exactly the same rating point as a lower-rated local news program or syndicated show.

In this digital world, there might be some fear when advertising spots are sold like pork bellies -- unless there is a lot of pork. Put it another way: An 85% discrepancy rate per invoice means a lot of fat.

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