A precursor to Publicis' modern day Zenith Optimedia Group once shook up the TV ad business with calculation on the impact a new TV technology - cable television - was having during the mid-1980s. Ted Bates' so-called "5 percent solution" radically changed how TV ad budgets were planned. Last week, Zenith released a new calculation that might well be called the "2 percent dilution" and it is a statistic that could be every bit as transformational as the earlier one. Digital video recorders (DVR) "must have destroyed about 2 percent of the USA's spot audience so far," is the chilling numeric at the heart of the new report, "Television in the Americas," released by the Publicis media shop. While the report focuses mainly on the shifts occurring between ad-supported and subscriber-support TV revenue models - a development that could be equally as significant for Madison Avenue - the agency's 2 percent estimate is the first to quantify the economic impact DVRs have had on the current state of the TV advertising marketplace. Two percent of a roughly $60 billion TV advertising marketplace equates to $1.2 billion in lost advertising exposures. The Zenith calculation is based on April 2004 estimates for DVR penetration in 3.5 million U.S. TV households, which time-shift 68 percent of their TV programming and skip 77 percent of the ads in that time-shifted programming. While others estimate DVR penetration is now higher and is growing fast with the accelerated marketing of satellite and cable TV operators, Zenith nonetheless predicted that the technology is "not likely to present a material threat to ad revenues" during its latest forecast period, which runs through 2012. The bigger factor, according to Zenith, is the shift occurring between advertising and subscription TV models. While Zenith does not forecast that subscription revenues will overtake advertising during the period, it predicts subscriptions will account for 48.5 percent of TV industry revenues in the Americas by 2012. "Programs must ultimately be paid for by advertisers or viewers," notes the report. "If viewers start avoiding ads in large numbers, using [DVRs] or some other form of technology, then at some point the lines... must cross and subscriptions will become the larger source of television funds." TV Ad Expenditures, Subscription Revenues In The Americas Ad Expenditures Subscription Revenues 1990 $33.733 billion $16.700 billion 1991 $33.706 billion $18.185 billion 1992 $35.266 billion $19.517 billion 1993 $37.918 billion $20.806 billion 1994 $40.502 billion $22.486 billion 1995 $44.212 billion $25.269 billion 1996 $48.386 billion $28.422 billion 1997 $51.995 billion $32.029 billion 1998 $55.309 billion $35.445 billion 1999 $58.002 billion $38.658 billion 2000 $63.220 billion $42.027 billion 2001 $60.034 billion $46.509 billion 2002 $60.753 billion $51.789 billion 2003 $60.832 billion $56.690 billion 2004 $64.676 billion $60.172 billion 2005 $66.606 billion $64.756 billion 2006 $69.289 billion $68.798 billion 2007 $73.545 billion $72.959 billion 2008 $78.374 billion $76.999 billion 2009 $83.550 billion $81.445 billion 2010 $89.118 billion $85.644 billion 2011 $94.968 billion $90.392 billion 2012 $101.168 billion $95.416 billion Source: Zenith Optimedia Group, "Television in the Americas.
Some of the nation's biggest TV advertisers - TV programmers themselves - are beginning to look past conventional forms of advertising, which may no longer work as effectively among consumers with digital video recorders. In its place, they are likely to begin embracing ads on interactive TV program guides (IPG) - the DVR world's equivalent of an Internet search engine - or even public relations. At least that's what a new study released Friday during the final day of the TV industry's PROMAX/BDA conference in New York suggested. The study, commissioned by PROMAX/BDA and unveiled at its annual conference Friday in New York City, confirms that viewing habits are changing in the digital age. It's all about control. More viewers are making their viewing choices by consulting the interactive program guides (IPGs), deciding what they want to see instead of just flipping channels and using television and other media to plan viewing. "We need to stop relying on random viewing," says Jodi Gusek, executive director of research at Frank N. Magid Associates. "Channel surfing is a thing of the past." Promotions and advertising professionals packed a room to hear the results of the study. While the study doesn't specifically speak to the 30-second spots that advertise goods and services, it shines a spotlight on the changing viewing habits of television viewers who have so many more choices than ever before. Sixty-nine percent of viewers frequently use an on-screen IPG when they sit down to watch television--up from 63 percent in the 2002 survey. Only 30 percent start watching TV without any planning. "It's becoming easier and easier for viewers to use an IPG to get what they want," Gusek says. The digital video recorder is also changing habits--allowing viewers to skip commercials. Yet despite the common perception, DVR viewers aren't watching less television. They're watching more. The study found that DVR users watch more channels--15 compared to 12--and four in 10 told researchers that they are watching more television than they did before; it's just more of what they want to see. "We're finding, in these highly digitized homes, that people are watching more television than ever and relying on television more than ever to make important viewing decisions," said Brent Magid of Frank N. Magid Associates. That reliance on television means that many viewers still value television as the biggest resource to find out what's on television. "Nine in 10 still say they depend on on-air spots to learn about what's new on TV," says Maryann Baldwin, executive director of Magid Media Futures. Gusek says that today, other sources beyond straight advertising are also important in the media mix of promoting television shows. Publicity and public relations are becoming critically important, she says. The study found that 43 percent of viewers read articles online about television shows and celebrities; 39 percent read magazine articles about the same subjects; and 34 percent read newspaper articles on those topics. Thirty-eight percent had visited a Web site dedicated to the TV show they're interested in. The study also puts another nail in the coffin of printed listings, such as those you'd find in the newspaper. "They're really not relying on print sources for listings information," Gusek says. "They have their IPGs for that."
After years of speculation, one of the largest remaining independent ad agency groups, Grey Global Group, may be putting itself on the block. The New York-based conglomerate, which owns buying shop MediaCom and is the seventh-largest agency holding company in the world, has reportedly hired two investment banks, J.P. Morgan Chase & Co. and Goldman Sachs, to take bids for the sale of the company. Grey is run by 77-year-old Ed Meyer, who not only is chief executive officer (and has been since the late 1960s), but is also the controlling shareholder, with about 18 percent of the company's stock. Grey has been considered a target for takeover for a long time. The company's stock price has risen 19 percent in the past week--and, amid this speculation, increased 5.3 percent to $895 per share. The motive for a sale appears apparent: Meyer's age; and the lack of an apparent succession scenario within the organization. In January, Meyer sold about $20 million worth of Grey shares that he owned. Otherwise, there has been no unusual trading among insiders of the tightly held company. Some major rival holing companies, including Publicis, WPP Group and Japan's Dentsu, are expected to bid. Publicis and Grey are both long-time Procter & Gamble agencies, and the timing of Grey's play comes just as P&G is wrapping up a major review for a new communication planning assignment that includes both Grey's MediaCom unit and Publicis' Starcom MediaVest Group. Speculation on the Yahoo! Finance investor message boards over the weekend suggested that Publicis was the favorite to acquire Grey, and that a deal may already have been struck and was pending key client notification. As for Grey's takeout value, one investor speculated it could be much greater than its current $1.23 billion market capitalization. The investor noted that Grey has been trading at a relatively meager 0.86 market cap to sales ratio. Omnicom and WPP currently trade at a ratio of about 1.6, while Publicis trades at a ratio of 1.2 and Interpublic at 1.0. Also on Friday, there were changes at the top of Interpublic Group of Cos. Interpublic, which owns Universal McCann, Initiative Media, and MAGNA Global, among other agencies, gained a new chairman with the appointment of Michael Roth. Roth, who had been a member of Interpublic's board for two years, will be chairman and chief executive officer of The MONY Group until its sale July 15 to AXA Financial. He'll then take the role of Interpublic chairman. David Bell will remain president and chief executive officer of Interpublic. Christopher Coughlin, who has been chief operating officer and chief financial officer of Interpublic since this time last year, will resign at the end of the year. Interpublic has promoted senior vice president/finance Robert Thompson to the job of chief financial officer and executive vice president at the end of the second quarter, Interpublic said.
Jimmy Jellinek believes that the two-and-a-half-year-old Complex Magazine is riding a wave of change in the magazine world, where product-centric editorial is more the norm. "This is where publishing is going, toward more consumerism," he said. "People are making statements about their inner selves with the products they buy. It's really beyond race, beyond class. It is consumerism as a lifestyle." A lifestyle that the gadget- and shopping-geared title is poised to capitalize on, particularly with an upcoming newsstand-only style-guide. "We see ourselves moving to a new consumer sector," he said. "We give readers a way to navigate this world." Complex might be described as a combination of Maxim, the newly launched Cargo, and the Source. Its target audience and its editorial slant are entirely colored by hip-hop culture, which Jellinek calls a "new-school urbanism" that is race-agnostic. Jellinek, formerly a staffer at FHM, joined the magazine as editor in chief in late May. While inheriting a successful product, he has started an effort to widen the 315,000-circ title's audience, as he acknowledges that Complex is sometimes too hip for its own good. "We reach the very, very cool tastemakers," he said. "My mission is to make it more accessible. We need to increase our newsstand sales." To capture newsstand shoppers, Complex forgoes a back-cover advertisement, instead going with two "front" covers (the magazine is essentially split in half). The first cover is related to the book's lifestyle half, and the back, or the other front, is on shopping (you have to turn the magazine upside down to read the other side.) The current cover of the June/July issue includes a "Hip Hop Dream Team," including rappers Kanye West, the Beastie Boys, and Talib Kweli--all in golfing attire. The second cover features a shot of sportscaster Leeanne Tweeden in a leather jacket and a bikini bottom, while also calling out 395+ products to buy, which make up "The Guide" section of the book. Departments include: "Video Games," "Home theater," "Drinks and Shades," and "Sneakers," among others. As for advertising, that side of the business has gone "phenomenally well," according to Jellinek. Current advertisers include Southpole, Foot Locker, and Echo Unlimited. The content of Complex is definitely irreverent--the current issue gives tips on "Genital Grooming" as well as plenty of sex talk, but it also includes personal profiles of athletes, entertainers, and lots of hip-hop stars.
The typical 12-ounce soft drink contains 150 calories and 10 teaspoons (40 grams) of refined sugars. Americans gulp down more soda pop than anyone else. Consumption has doubled over the past 30 years, with companies now producing an average of almost 600 cans per year for every man, woman, and child. When you spend 35 years at a company (and are dusted off the retirement shelf to become chairman and chief executive as E. Neville Isdell has at Coke), it is understandable that you have not only swallowed the Kool-Aid, but digested it and begun to see visions of Jim Jones smiling at the pearly gates. And so it was understandable that E. Neville, in his first major public appearance, pooh-poohed the notion that soft drinks contribute to the widely acknowledged (well, everywhere but Atlanta) global obesity epidemic. As has become junk food industry standard practice, E. Neville shifted the blame back onto his sedentary customer base, noting that 40% of Americans engage in "absolutely no physical activity at all." Blah, blah, blah. You have to give E. Neville credit for keeping an eye on the Big Picture, implying that the last thing he wants is for consumers to drop dead from clogged arteries and overtaxed hearts. "Healthier consumers are going to be good for us," he said. "They will grow older, healthier, wealthier--and hopefully, therefore able to buy more from us. Which, at the end of the day-- let's face it--is our goal." The problem with E. Neville is that he conveniently forgets to make a distinction between manufacturing junk food ("We have to respond to what consumers want," he says) and marketing it. Look no farther than the tobacco companies to see that America has long embraced the God-given right to make money at the expense of consumer health and well-being. So we can't fault E. Neville for producing a vast product line of sugary water with absolutely no nutritional value, but in most cases, loads of calories. We can, however, look at nearly 90 years of marketing aimed not at consumer awareness, but youthful consumption. I am certain that E. Neville would defend Coke's marketing as aimed only at stealing market share from Pepsi (or milk, or water), but only a child would believe that a soft drink "Revives and Sustains" (1905); is "Iced Cold Sunshine" (1932); "What you Want Is a Coke" (1952); "Makes Good Things Taste Better"(1956); or "Things Go Better with Coke" (1963), or the contemporary urban slangy "Coca Cola.Real." Not convinced? How about associating your product with every child's fantasy image of gratification? Coke's own Web site, with folksy pride, lays claim to the current image of Santa Claus, as Coke refined his likeness in various print ads featuring Santa with Coke that ran from the 1920s to the 1960s. The company also proudly points out that in the Spielberg film, to explain life on earth to E.T., Elliott opens a refrigerator to reveal a Coke. There is even a part of the site set aside for people to recall their childhood memories of Coke. One 70-year-old likens his first taste of Coca-Cola at nine years of age to "the first kiss, the first embrace." In the summer of 2003, Coke reportedly changed its advertising policy to halt commercials before, during, or after child-oriented television shows, and said it would stop running advertisements in publications aimed at the under-12 market. The company has also stopped depicting children under the age of 12 in its ads and marketing materials. Instead, Coke now markets to parents and families, a company spokeswoman said. But what about Coke's presence in movie promotions that urge patrons to hit the snack stand for candy, popcorn, and you know what? Or the symbiotic association with McDonald's? Or the company's effort to have its vending machines placed in schools and other venues where kids congregate, from shopping malls to skating rinks to baseball fields? Or Coke's sponsorship of the National PTA? A professor of medicine and pediatrics at George Washington University Medical Center said: "Consumption of soft drinks has soared over the past two decades, contributing to the doubling in the percentage of obese teenagers. That obesity epidemic is fueling a diabetes epidemic." A study published in The Lancet in Britain concluded that "both body-mass index and frequency of obesity increased for each additional daily serving of sugar- sweetened drink consumed." E. Neville said that the food industry hasn't been given enough credit for steps it has already taken to provide consumers with healthier options. Is he referring to the fact that Coca-Cola also markets non-carbonated drinks that pretend to be rich in fruit juice (and nutrients), but are basically sugar water? Coke's Fruitopia and Hi-C, for example, contain only 5% to 10% fruit juice, but contain about as much (or more) sugar as carbonated soda pop. Come on, E. Neville--if you are going to lead Coca-Cola in the 21st century, you need to shake off that 19th-century heritage and grow up with the times..Real!