| Wednesday, Feb 27, 2008 |
What's inside:
Today's Media News
1. Advertisers To Networks: Drop The Fees! by Wayne Friedman
2. CBS 4Q: Moonves Upbeat, TV Earnings Down by Wayne Friedman
3. 'Project Apollo' Demise Blamed On Lack Of Financial Support: Arbitron by David Goetzl
4. 'SmackDown' Joins MNTV This Fall by David Goetzl
5. New MTVN Exec To Generate Dollars In Digital Platforms by David Goetzl
6. No Sale: Consumer Confidence Hits 15-Year Low by Sarah Mahoney
On Media
7. Digital Or Be Damned: Platforms That Connect Media, Devices Will Lure Ad Dollars by Diane Mermigas
Commentary
8. Media X: Sob for the Future by Jack Feuer
News Briefs
9. HBO Inks YouTube Deal
10. Transworld Media Rolls Out In-Store Net
11. DirecTV To Launch All-Gospel/Christian Music Net
12. John Montgomery Elevated at GroupM
13. Sirius Radio: Revs Up, Losses Less In 2007
Today's News
1. Advertisers To Networks: Drop The Fees!
by Wayne Friedman
The thorns of network integration fees still sting marketers and media agency executives. And the Association of National Advertisers and American Association of Advertising Agencies are looking to do something about it--again.
The two big ad associations are starting up a task force looking into these long-time fees--and they want the networks to join with them. The associations have given networks that levy those fees--ABC, CBS, and NBC--until May 1 to join up and start discussions.
"We're going to make it happen one way or another," said an agency executive. "We've extended an olive branch to the networks for an agreement on how to eliminate them. It's kind of up to them to come back to us now."
According the ANA/AAAA, the fees add up to an annual bill of $125 million in 2007. The groups say they are a burden for agencies to administer.
Network integration fees stem from the early days of television, when TV commercials originally produced on film needed to be transferred physically for video distribution.
For years, media analysts and their respective trade groups have said these fees are a nuisance--especially in comparison to the $120,000-a-spot average price to air a commercial on network television these days. According to analysts, this comes to around $500 to $600 each time any commercial is aired in prime time--lower for non-prime-time dayparts, about 0.5% the cost of buying a broadcast network commercial placement.
ABC and CBS declined comment, while an NBC Universal spokeswoman said: "We prefer to discuss these issues directly with our clients." The newer broadcast network, Fox, which started up in the late 1980s, has never charged network integration fees, nor has the CW or its predecessors, the WB and UPN.
"The networks say it's a union issue," says another veteran media buyer, adding that "there is still a technical staffer that needs to push a specific button."
The media executive says every couple of years the marketers and media executives try to combat this activity--and are unsuccessful. Standing in the way are anti-trust issues: If the industry acts collectively, this will result in the scrutiny of federal agencies for possible unfair business practices.
The ANA and the AAAA say this new push came about after an analysis of the network integration fees was completed by the AAAA Media Policy Committee, AAAA National TV/Radio Committee and the ANA Television Advertising Committee.
Previous studies noted that 87% of ANA members, for example, didn't think it was fair to be charged network integration fees by ABC, CBS and NBC.
One possible deal could include a phase out, according to media executives, where the fees are jettisoned after several years of gradual decreases.
2. CBS 4Q: Moonves Upbeat, TV Earnings Down
by Wayne Friedman
Is the economy in a recession? Not on broadcast TV--and especially not on CBS.
During its fourth-quarter 2007 earnings call on Tuesday, Les Moonves, chief executive of CBS Corp., noted that CBS is "not seeing a recession in our day-to-day operations."
He added: "The scatter market remains very strong, and it's too early in the year to make a determination on the spending on any one category." He noted that two difficult areas of the economy--home building and real estate--had little effect on CBS, since they are not big TV advertisers.
In tough economic times, Moonves said, marketers go to the media leaders--which remain network television and CBS. Moonves also said the three-month-long writers' strike had no impact on CBS' business.
In fact, he added, CBS benefited financially by canceling many TV development deals as a result of the strike. CBS said it probably saved around $60 million to $75 million in working capital. Overall, each broadcast network typically spends $100 million to $150 million a year in programming development costs.
"There are going to be a lot less pilots. We'll not get up the number we had before. There will be a great deal of cost reductions," said Moonves.
For the fourth quarter, CBS' operating income climbed 3% to $705 million, and for the entire year, operating income was up 1% to $2.6 billion. But net earnings from continuing operations were down 10% to $366.7 million because the company moved into a higher-income tax rate of 35.3% for 2007 versus 28.6% for 2006. Also, CBS's earnings from television fell 6% on a 4% decline in revenues.
Quarterly revenues slipped a bit, too: a 3% decline to $3.76 billion in the fourth quarter of 2007, due to sales of television and radio station sales, the non-renewal of several marginally profitable outdoor transit contracts and lower political advertising sales versus the fourth quarter of 2006.
Moonves says Internet advertising sales for its upcoming NCAA basketball tournament in March are projected at $21 million--more than double its revenue take of $10 million a year ago. Since CBS' programming cost remains the same, that $21 million "will drop to the bottom line."
CBS said it made 20 carriage deals with cable operators so far--with more to come. Political ad dollars are also expected to be higher--and this will benefit CBS because of its TV and radio outlets, especially in California.
CBS Radio continues to suffer, losing some 21% of operating income to $159.6 million in the period. Revenues during the fourth quarter were off 10% to $447.1 million. Moonves says a new executive team at the radio division should yield some positive results soon.
CBS said its outdoor media segment continues to grow in 2007, with operating income climbing 29% to $142.8 million during the period.
3. 'Project Apollo' Demise Blamed On Lack Of Financial Support: Arbitron
by David Goetzl
"Project Apollo's" demise came principally from advertisers' unwillingness to continue paying for it rather than any dissatisfaction with its progress, Arbitron's top executive said Tuesday.
The venture's failure this week was a blow to the company, which invested $25 million in it over the last two-and-a-half years. Arbitron was developing the would-be force in ROI measurement--which held the potential to determine how exposure to media influences purchase behavior--along with Nielsen. (Arbitron said the setback will not affect its PPM rollout schedule for radio ratings.)
Seven advertisers served on the venture's steering committee. Arbitron CEO Steve Morris said not enough marketers from the full client base "were willing at this time to make the big, long-term financial commitment that we required to support a national expansion." He declined to comment on specific marketers' feelings. Wal-Mart, Procter & Gamble and Kraft were reported to be among the participants.
"Clearly there were people who were disappointed in our decision to stop this, but they understand that we needed a certain critical mass of support--and that critical mass wasn't there," Morris said.
Speaking to investors the day after "Apollo's" demise was announced, Morris said quality was not an issue, as the venture generated some "extraordinary" preliminary research papers and other insight. Instead, he indicated that some companies did not have all the resources for research they would like.
"Everybody would agree we're on the right track here, it's just that price/value curve--how much information, how usable, how readily monetized would it be. (That was an issue) for a company that would be facing a multimillion-dollar investment in this research," he said. "Could these dollars substitute for some other dollars? I think, generally, the feeling on that was 'no, they couldn't.'
"(It) was going to be incremental on top of other research dollars that (companies) were already spending, so it became this question of price/value. I don't think anybody would say the value was zero. Everybody would say there was value there."
Publicly traded Arbitron, along with Nielsen, had been developing a pilot since 2005. The end-goal was billed as a "single-source media and marketing research service." It was to take advantage of Nielsen technology that measures purchase behavior, and Arbitron's Portable People Meter that gauges electronic media exposure. A January 2006 test included more than 11,000 people and 5,000 homes.
Morris said Arbitron will still pursue the development of measurement systems in the vein of "Apollo." "We intend to continue investing money to further develop our opportunities, although in the near-term at lower levels than what we've been spending on 'Apollo,'" he said.
4. 'SmackDown' Joins MNTV This Fall
by David Goetzl
MyNetworkTV, which recently halted its foray into real hand-to-hand combat, has inked a deal with an ersatz version. World Wrestling Entertainment's "WWE SmackDown," formerly on UPN and soon to be off CW, will become part of MNTV's prime-time lineup this fall.
MNTV recently unpinned the International Fight League mixed-martial arts programming from its lineup. "SmackDown," in its ninth season, is a two-hour show that currently airs on Fridays.
MNTV pays WWE a license fee, and then gains all the ad time.
But affiliate carriage comes at a price. Per TV Newsday, MNTV Executive Vice President Paul Franklin said that affiliates are being asked to give up an extra two minutes of ad inventory each hour during the show. So far, he says, affiliates have been amenable. Those two minutes are on top of the two minutes that MNT wants back on all programming.
MNTV has proposed a new plan to affiliates in which it would retain seven minutes in all programs and nine minutes for costly ones like "SmackDown."
The "SmackDown" acquisition could be a signal of News Corp.'s commitment to increase its investment in MNTV, which struggled in its first season but has improved in its second. The CW chose not to pick up the option after carrying it for two years. Terms of the deal were not disclosed.
WWE chairman Vince McMahon said: "We have an unmatched record of delivering ratings success to each and every network partner we've worked with in our long and storied history. We fully intend to bring that same level of success to MyNetworkTV."
5. New MTVN Exec To Generate Dollars In Digital Platforms
by David Goetzl
MTV Networks is placing an increased emphasis on generating sponsorship dollars linked with its new virtual worlds and video games. To underscore its commitment, the company has hired an executive charged with building those revenues. Christina Glorioso will serve in the new position of vice president of sales and marketing partnerships for the Program Enterprises group.
She will report to Jeff Yapp, executive vice president of the MTV Networks Music & Logo Group Program Enterprises.
Glorioso will work with the ad sales and integrated marketing operations to develop opportunities for marketers that are related to properties developed by the program enterprises group, ranging from the virtual worlds to music consumer products.
"As we continue to identify new platforms for our brands to expand in, Christina and our advertising and marketing teams will work hand in hand to foster new business opportunities," said Yapp.
Glorioso had served in MTVN Brand Solutions, a group specializing in large-scale deals that was previously known as Viacom Plus, where she worked with marketers such as Wal-Mart, AT&T and Chrysler.
6. No Sale: Consumer Confidence Hits 15-Year Low
by Sarah Mahoney
Consumer confidence took a nosedive in February, falling to its lowest level in 15 years, reports the Conference Board. And, as if to underscore just how concerned consumers are, a number of leading retailers posted results dotted with the kinds of adjectives that CEOs dread: Difficult. Disappointing. Challenging.
The Consumer Confidence Index, which had also fallen a bit in January, dropped to 75 from 87.3 last month--its lowest level since November 1993, when it hit 71.9. (One exception, the Conference Board says, is the beginning of the Iraq War in 2003.)
To a degree, boatloads of media headlines predicting recession are a factor in how consumers feel, says Lynn Franco, director of The Conference Board Consumer Research Center. "Certainly," she says, "negative news tends to impact consumers' expectations." But the steady downtrend in the index, she says, "is more than just the impact of news."
When confidence falls, "the first thing that goes is discretionary spending, and that can mean dining out, going to the movies, and it can also mean shopping. Plus, retailers also have more competition for that spending, in the form of higher prices at the pump and for food."
At Home Depot, for example, fourth-quarter sales dropped 4.7%, compared to the fourth quarter of 2006. And comparable-store sales, a measure closely watched by retail observers, sank 8.3%. Net earnings fell 28%.
And like Lowe's, which announced similar results earlier this week, Home Depot's predictions for the year ahead are harsh--a total sales decline of 4 to 5%, with negative comparable-store sales in the "mid- to high single-digit range."
At Macy's, fourth-quarter sales rang in at $8.6 billion, a fall of 6.2%. On a same-store basis, sales slipped 2%. For the full year, total sales are $26.3 billion--a dip of 2.4% from the prior fiscal year--while same-store sales were down 1.3% for the year.
Even stronger retail performers are struggling a bit. Target says its sales gained for the quarter--up 0.4% to $19.3 billion--but net earnings fell 8.2%, as the economy slowed in the second half of the year. For the fourth quarter, comparable-store sales gained 0.2%, compared to 4.8% in the prior year. And for the full fiscal year, comparable-store sales gained 3%, compared with 4.8% in the previous fiscal years.
And at Nordstrom, an upscale retailer that has been doing quite well, total sales in the fourth quarter fell to $2.5 billion--a decrease of 4.4%--while same-store sales fell 0.7%. And for the year ahead, it is predicting not gains, but decreases: It says it expects comparable-store sales in the year ahead to come in "flat to down 2%."
On Media
7. Digital Or Be Damned: Platforms That Connect Media, Devices Will Lure Ad Dollars
by Diane Mermigas
The most notable change in this year's upfront will be widespread resignation that the status quo cannot survive next year's mandated digital conversion.
When more homes have the means to make their television experience interactive, there will be no stopping the transformation of the staid 30-second commercial into engaged exchanges and transactions. Dramatic changes in pricing, creativity and marketing expectations will make the spot market passé.
The adoption of new media formats for advertising (morphing into something more like synched marketing and e-commerce) will evolve quickly, given the record time in which consumers have come to embrace iPods, iPhones and other connected devices. Consumers are willing and ready--even if Madison Avenue is not.
For the last time in an analog television's upfront season, everyone on the advertising and network sides is resigned to imminent change. If the free-fall of broadcast TV ratings and the blows of a recessionary economy weren't enough, the writers' strike put a fine point on old media's inevitable demise. At the same time, slowing growth trends, increased click fraud and rampant consolidation are hammering the new media market. All media continues to be disadvantaged by the absence of accountable real-time universal measurement to fully monetize connections. That, too, will become a function of the entire media universe going digital.
In the interim, the broadcast and cable networks' upfront advertising ritual may prove more troublesome than Hollywood and Madison Avenue expect. The Big 4 broadcast networks will attempt to elicit their $9 billion in upfront ad commitments on shaky metrics amid formidable shifts away from their static core business. Declining ratings and recession fatigue already are obvious at CBS--which reported lower-than-expected 2008 guidance as well as operating income in the fourth quarter when it should have benefited from a tight, pricey scatter market and lower strike-related program costs. Conversely, News Corp. insists it sees no weakness ahead for its Fox broadcast and cable networks.
Even Google is showing its vulnerability to a soft economy and fluctuating ad metrics. The king of search advertising is in the middle of a measurement faux pas that regularly plagues Nielsen Media. Google's stock fell another 7% Tuesday (down more than 40% from its highs) on the difference between reported domestic revenue growth performance of Web sites, and comScore's estimated declines in U.S. Web site paid click growth.
Merrill Lynch analyst Justin Post concludes that the "data adds risk to Google's 2008 growth outlook highlighting that a decline in consumer spending could be causing reduced commercial search activity." The leveling off of the Net's meteoric growth is elsewhere, such as domestic visitors for Facebook and MySpace. Although online advertising revenues topped $21 billion in 2007, and now outdistance radio, its growth rate will continue to slow below 25% as it siphons more from other media.
Even as the rebalance of ad dollars continues, the process of pricing, evaluation and measurement effectiveness requires refinement that can only come from an underlying digital infrastructure that connects all media platforms and devices. Even as that gradually falls into place, Yahoo promises to "revolutionize" advertising with its new Apex platform, allowing marketers to build and track unified campaigns across search, display, mobile, television and other formats. Such cross-platform integration will depend upon widespread structural change that will bring pervasive interactivity to the entire media spectrum.
Microsoft says it will test engagement mapping that takes into account all Internet interactions that result in consumer transactions and feedback to advertisers. It's a step toward achieving more integrated return on specific niche or consumer investment measurement. With an eye toward online becoming the dominant medium by 2013, Yahoo CEO Jerry Yang and Microsoft SVP Brian McAndrews told an annual meeting of IAB this week about their plans to improve the mechanics of interactive advertising. Others--like Nielsen Media, TRA and Google--have similar initiatives.
They all are on the right track, according to Group M ad scion Irwin Gotlieb, a media buyer who controls $59 billion in advertising, or 16% of the global spend. Gotlieb said he sees himself becoming an arbiter of bulk ads to match and resell to niche interactive audiences at a premium. He favors the creation of an electronic data-based exchange of ad measurement and placement for all media, but opposes Google's involvement in the process.
For now, television's upfront and spot advertising markets will hobble along on deficient metrics, fighting to keep any of its billions from being siphoned by alternative media. But when the underlying mechanics allow for every consumer click and movement to be measured everywhere along media's interactive landscape, the game changes. When that happens beginning next year, media buying, audience estimates, unit pricing, upfront buys and economic sensitivity will fall away. Mass advertising as we know it will give way to more disciplined, effective matching of particulars--individual consumers, products, services, and content--in a viral interactive loop that flows from the pitch to the transaction and feedback in one swoop.
That's when advertising really gets exciting.
Commentary
8. Media X: Sob for the Future
by Jack Feuer
I couldn't get to sleep Sunday night, so I took an Oscar telecast and was out before my head hit the pillow. And as I surrendered consciousness to Morpheus, my last thought was that we live in a culture whose intellect is so technologically disabled that its donkey-dumb citizens probably don't know who Morpheus is. At best, they'd probably mistake the Greek god of dreams for the P2P file-sharing program that jacked his name. If not that, then Laurence Fishburne's character in "The Matrix."
The dirty little secret of why digitization is such a challenge for business communicators is not channel proliferation, ad avoidance, inability to pay attention or the rise of interactivity. It's the sheer stupidity of the target demo. Any target demo.
Technology turns your mind to mush. All that watching and no comprehending. All those images and no context. The only ability required is putting your finger to a keyboard.
You know those cell phone ads where the mom gets frustrated because her daughter and even the mom's mom refuse to talk in anything but textspeak? That's your brain on technology.
Digital devices think for us. We say it's liberating, but it's really enslaving. This is not a new idea. But it's terrifying to watch it play out in our lives. And it's hell on marketing plans based on the assumption that the people being marketed to do not have the intelligence quotient of a canary.
"I sob for the future," wrote blogger wizardguy this week, in response to Salon.com's King Kaufman doing a video in lieu of his usual written online sports column. I share his pain, and you should, too.
Don't fail to feel me here, people. I'm an aging grouch, but I'm not a Luddite. I don't pine for the days when the apex of high technology was a printing press. I'm grateful that I live in a time where computers, email and cell phones are commonplace. I'll be ecstatic if I survive long enough to live in a society where I can clone a starlet, learn Mandarin through a nano virus, vacation on Mars and live with a robot that cleans the cat's litterbox, fetches me beer and calls me "Daddy."
But the cost of all that glittery future-tech will be that I become a blithering dipstick.
This is why--as I've written repeatedly but no one listens--user-generated content should never be encouraged, let alone enabled, by media and advertising stalwarts. What it ought to be is shot in its concrete head, but it's clearly too late for that.
So I say the Vast American Messaging Machine should face reality. No more platitudes about how wonderful it is that your customers are in control of your entire marketing budget. It's not wonderful; it's a nightmare. And you know it.
It doesn't matter if your target is an 18-year-old gamer, a soccer mom, a fantasy baseball nut or a white-collar professional with questions about his portfolio. You're talking to idiots. Ideate and activate accordingly.
And then you'll sleep like a baby, even without a montage to binoculars in film.
News Briefs
9. HBO Inks YouTube Deal
HBO has inked a deal with YouTube to create a channel on the video-sharing site, reports E! The site will air highlights from some of the premium cable net's popular shows, such as "Entourage," "The Wire" and "Extras." It will also include full-length episodes of "In Treatment." No terms were disclosed, but HBO said it gives viewers a legal way to see clips online.
10. Transworld Media Rolls Out In-Store Net
Transworld Media, a digital advertising company, selected Real Digital Media's digital signage to manage point-of-purchase programming and advertising for their nationwide convenience store network. Rollout for the Transworld Media network is underway; more than 1,200 stores will be part of the network by the end of 2008. Initially targeted metropolitan areas include Dallas, Houston, Atlanta, Los Angeles and Chicago. Transworld Media programming includes 15-, 30- and 60-second slots for ads and informational use. Programming is updated monthly, and is expected to reach nearly 430 million consumers on an annual basis.
11. DirecTV To Launch All-Gospel/Christian Music Net
Gospel Music Channel, the 24/7 all-Gospel/Christian music television network, and DirecTV have joined forces. Starting March 19, GMC will be available to DirecTV customers--nearly 40 million subscribers. Music encompasses many genres: rock, rap, country, soul, gospel. The net's lineup also features artists' biographies, music specials and live concerts.
12. John Montgomery Elevated at GroupM
John Montgomery was promoted to chief operating officer of GroupM Interaction North America, a new position. Since 2005, Montgomery has served as worldwide CEO of GroupM's MindShare Interaction.
13. Sirius Radio: Revs Up, Losses Less In 2007
Sirius Satellite Radio ended 2007 with 8,321,785 subscribers, up 38% from 2006. Total revenue for 2007 increased to $922.1 million, up 45% from 2006 total revenue of $637.2 million. Fourth-quarter 2007 total revenue increased 29% to $249.8 million from the same period the previous year. The radio company also reported a net loss of $565.3 million, or $0.39 per share, for 2007--an improvement of 49% over 2006. or $0.79 per share. For the fourth quarter 2007, the net loss was $166.2 million, or $0.11 per share, as compared to the 4Q 2006 net loss of $245.6 million, or $0.17 per share.
Wednesday, Feb 27, 2008
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