Although TV stations continue to report hefty financial gains in recent periods, broadcasters are still trading below the stock market as a whole. "The sector appears undervalued by around 15%," says Michael Alcamo, president of New York-based media investment company M.C. Alcamo & Company. In fact, Alcamo was a bit shocked looking at the results versus a year ago. "The results surprised us -- trading multiples were significantly lower than the year previously, possibly reflecting investor caution or uncertainty," he notes. Looking at six pure-play publicly traded broadcast TV station companies, Alcamo says selling cash-flow multiples (earnings before interest, depreciation, taxes and amortization} are down 20% from a year ago at the end of 2010 -- currently at an 8.7 times rate, versus 10.7. Cash flow multiples are down 10% from a 9.6 number three months ago. The six companies include Belo Corp., Gray Television, Nexstar Broadcasting, Sinclair Broadcast Group, LIN Television and Fisher Communications Group. Analyzing an index of these companies shows stock prices at a 53% index to the S&P 500 Index of 98%. This group posted $113.6 million in incremental revenue in third-quarter 2010 -- 19% over third-quarter 2009, and $81.8 million in incremental EBITDA. At the broader integrated media companies -- those with other assets, such as magazines and newspapers -- it's the same story. Those stocks are down 25% to a 6.1 cash flow multiple from an 8.0 number -- although Alcamo says things improved for these companies a bit at the end of the third quarter. Overall, he says, "investors remain cautious -- despite improved rising profitability, improved credit profiles, a good outlook for 2011, an exceptional outlook for 2012, and audience trends all pointed in the right direction."
As far as important industry milestones go, the one announced late Tuesday by Interpublic's Magna Global unit, that DVRs are finally poised to reach the 50% mark - a level often thought of as critical mass for a mass medium like television - may seem a bit anticlimactic, and just goes to show that big industrial shifts sometimes are more evolutionary than they are revolutionary. In fact, Magna estimates that milestone will not be crossed for another five years, but its year-end 2016 forecast is the first time the ad industry has had an official halfway mark for the dreaded devices, which have been Madison Avenue's main nemisis for nearly a decade. DVRs, Magna's Brian Wieser said in his understated fashion, will officially cross the 50% penetration level at year-end 2016, up from his previous estimate of 49%. But the significance of that milestone now seems more of a whimper than a bang, and certainly not the sonic "boom" many on Madison Avenue had feared a decade ago when Michael Lewis' cover story on the New York Times Magazine announced that the end of TV advertising was near. Not nearly, as it turns out. Ten years after Lewis' "Boom Box" article captured Madison Avenue's attention that DVRs - and especially their ability to fast-forward through TV commercials - were about to change everything, some things have certainly changed. Others have not. Advertisers, for example, still spend more on the medium than ever before, and its share of total ad spending continues to climb, both in the U.S. and worldwide. If anything, the recent global economic recession - and Madison Avenue's own economic rollback - have proven the vitality of television, which increased share as marketers cutback on total advertising and consolidated spending on media they believed would generate immediate returns: TV and digital media, including the next generation of TV, online video. "The worst news is that no one watches commercials anymore," Lewis proclaimed in "Boom Box," citing early research that "eighty-eight percent -- 88 percent! -- of the advertisements in the programs seen by viewers on their black boxes went unwatched, and issuing an understatement that became a new rallying cry for Madison Avenue, and the television networks for the next decade: "If no one watches commercials, then there is no commercial television." The Lewis piece was important, and most likely prophetic for a number of reasons beyond this prediction, which certainly has not come true. In it, he accurately predicted the shift toward more consumer control, as well as better ad targeting, but also discussed the "black box," as he called DVRs in the context of an ongoing progression of technologies (including the Internet, and more powerful computing), that were shifting electronic media from linear to non-linear experiences, including things like time-shifting, augmented memory, and the ability to access content on-demand, anytime, anywhere. Lewis did not address the stickier business issues like copyrights or payment models, and he probably underestimated some important cultural factors -- especially how Madison Avenue makes and controls media markets, and how and whether those markets are economically sound for advertising agencies, advertisers and media suppliers who can influence their outcomes. But the reality is that things have changed. DVRs will soon be in half of television homes, but by the time that finally occurs, other equally significant shifts will have already happened in the media industry's ecosystem that may make Lewis' "Boom Box" seem like a bust by comparison. But for now, the bottom line is that TV advertising still works, and TV advertising spending continues to grow. It is growing because consumers are watching more TV than ever before, despite all the time they're spending doing everything else, according to Nielsen, anyway. That's probably for a number of reasons. One is that a significant number of people didn't watch TV commercials before the advent of DVRs. They did it the old-fashioned way, of course, and simply ignored them, got up and walked out of the room, or turned the channel. It's hard to know what the actual percentage was in the pre-DVR days, but it could well have been 88% back then too. The real culprit to TV's declining economies of scale is not DVRs, or more consumer control. It is more consumer options. People simply have more options to turn their attention to than TV programming and advertising, and that is most likely impacting. It's also a significant factor within television itself, where the number of channel options has exploded, fragmenting consumer choice and viewing. Yes, TV usage levels may be as high as ever, according to Nielsen, but the average usage of any particular TV program - what people in the business call ratings and shares - has gone down dramatically, changing the economics of buying TV, and making it a less efficient medium than it was in its most golden days. TV still works, of course. And there is an ample body of marketing mix modeling research to prove it. It may not work as well as it used to, and it may be more expensive to do things like build reach or influence consumers, but no other medium has come up with anything that approaches its unique scalability. Online search is great, but it cannot scale like TV. Social media? Well, that's another story that's still playing out. For now, TV is still king, even in a land where one out of every two serfs are surfing past the commercials. But let's revisit this story in another ten years, and see where we are at.
Allstate and American Family Insurance are taking different approaches to their marketing targeting Hispanic consumers. A spinoff of its national general market advertising campaign, "Mayhem," Allstate is introducing an effort with the antagonist "Mala Suerte," who represents unfortunate circumstances. The word "mayhem" has no literal translation in the Spanish language, which led Allstate to create "Mala Suerte" to resonate more directly with Hispanics. Meanwhile, a new 30-second spot from American Family Insurance, "Three Kids," is aimed at reaching both the Hispanic and general market. Part of the insurer's "Unique Families" campaign, the new TV executions find "global truths" among Hispanic and general market audiences, says Telisa Yancy, advertising director at American Family Insurance. "The concept tested very well in focus groups across the Hispanic and general markets and both audiences quickly identified with the message," Yancy says in a release. "It effectively communicates that American Family Insurance understands the insurance needs of individuals and/or families." Allstate's 30-second TV spot, created by Lapiz, aims to show the protection, value and peace of mind that Allstate provides when bad things happen. Consumer research showed that many Hispanic consumers blame fate or bad luck for an accident and are more likely to find fault with circumstances rather than a person who may have done something "wrong," says Georgina Flores, senior marketing manager for Allstate Insurance Company. "Mala Suerte" is introduced as a polished and confident-looking man. However, his mere presence creates a series of misfortunes that are intended to remind people of what can go wrong and the protection Allstate can provide when it does. He startles a window-washer, which causes a bucket to fall several stories and land on the hood of a car. The ad closes with the voiceover, "Dollar for dollar, nobody protects you like Allstate." Northbrook, Ill.-based Allstate's TV spots will be supported with print, radio, online and social media. People can visit MiAllstate. com/MalaSuerte to play a card-reading game. "Mala Suerte" is also present on Facebook and Twitter -- fans can "like" Soy La Mala Suerte on Facebook and have messages in their newsfeed for ways he can mischievously cross your path. The American Family Insurance spot, created by The San Jose Group, focuses on the unique insurance needs of each family. The "Three Kids" television spots are about the busy life of the "total market" mom, featuring scenes of her driving her kids around town to take them to and from different activities. The universal sentiment in the spots is that every mom's life is hectic and a little chaotic, and each family has different needs. Along with Spanish and English television spots, the campaign also includes radio, print and online banner ads for the Hispanic market to complement the overall unique family branding message. "Three Kids" is the second spot for the Madison, Wis.-based insurer that transcends ethnicity. In 2010, after the creative concept for the Spanish spot, "Batazo," tested well in both Hispanic and general market focus groups, an English-language spot "Baseball" was developed for the general market.
Time Warner Cable registered big profit gains for its fourth quarter -- but continued fewer video subscribers. The second-biggest cable TV operator in the country improved its net profit 22.2% to $392 million in the fourth quarter of 2010, with revenues gaining 5.9% to $4.8 billion. But as has been the trend for many cable system operators, Time Warner lost basic video subscribers -- 141,000. Still, Time Warner continued to show strength in its newer products -- Internet and phone business, adding 94,000 data subscribers and 72,000 phone subscribers, respectively. Triple-play business -- packages containing video, data and phone -- improved 72,000. Multiple product sales to consumers totaled 8.5 million, which represents almost 60% of all Time Warner's customer relationships. Riding on the back of a resurgent local TV ad market, Time Warner said local ad sales increased 34% to $269 million -- much of this coming from improved political advertising dollars. This year looks good as well. Time Warner expects double-digit percentage gains in operating income. Concerning the prospect of "cord-cutting" -- continued defection by consumers to other newer digital technologies to get their TV programming -- many companies, including Time Warner, say there is little sign of wholesale, major transitions by consumers. Glenn Britt, chairman/president/CEO of Time Warner Cable, said on Thursday that although online video subscription services may have better user interfaces than traditional pay-TV services, these businesses depend on cable's broadband business to work well. In the future, he said, cable set-top boxes could be replaced by emerging technologies like Web-connected TVs and mobile devices. Britt stated: "We made great strides financially and operationally in 2010. We achieved record free cash flow and continued to deliver on our shareholder-oriented capital allocation strategy. At the same time, we enhanced our products and services, increased the sophistication of our marketing and accelerated the growth of our commercial business."
While the obvious Super Bowl ingredients are beer, chips, football action, parties and conversation, one study says not to forget another growing multitasking activity: smartphones. Young Super Bowl TV watchers 18-34 who have smartphones will be using them heavily during the big game on February 6. According to Lightspeed Research, 59% intend to send emails and text messages about the game during play. But almost as many viewers will be emailing and texting on non-Super Bowl-related matters -- 54%. Among the other activities about the game while using smartphones: 24% will be searching Super Bowl-related stories and content; 18% will be watching Super Bowl video clips or Super Bowl commercials; 17% will be going to Super Bowl advertiser digital areas; 12% will be researching past games; and 8% will be buying Super Bowl merchandise. Looking at the broader picture, the study says while 55% of those will be keenly interested in the game, 15% will be there primarily to watch commercials. Females have a 21% interest in the messages; males have a 9% interest. But given the number of Super Bowl parties, 27% said they are primarily interested in the social interaction of family and friends. Women are especially there for the social elements, with the study putting their interest at 37%, while men's social interest rates 19%. The study predicts that young Super Bowl viewers will continue to watch less actual Super Bowl football action than older demographic groups. Seventy-one percent say they plan to watch the game -- the majority from their homes. Viewers anticipate commercial spots from Anheuser-Busch more than any other advertisers.
Healthier messaging from big fast-food and confection companies is getting women to talk to each other. A six-month analysis from the Women at NBCU Brand Power Index shows that brands such as McDonald's, Nestle, and Frito-Lay are generating bigger online and offline buzz. McDonald's moved up 10 places on the NBC index to 15th place, stemming from a partnership with social game "FarmVille," which aligned the brand with fresh farm produce. A focus on four new salad options and "natural-cut" fries seasoned with sea salt moved Wendy's higher into 96th place. Domino's Pizza gained a large number of places -- 140 spots -- to 218th, from its advertising push that touted California farm-grown tomatoes and 100% real cheese. Commercials from Nestlé, which included products designed to prevent disease and improve health, help it gain 120 places to 153rd position. Frito-Lay made its first appearance on the list -- 361st place -- from two efforts, introducing its Artisan Recipes tortilla chips made with all-natural ingredients, then announcing that 50% of its products will be made with all-natural ingredients. The Women at NBC Index, which started up last year, says after six months, the brands women continue to talk about include: 1) Walmart 2) Target 3) Verizon 4) eBay 5) Ford 6) Coca-Cola 7) AT&T 8) iPhone 9) iPod 10) Pepsi 11) Honda 12) Amazon.com 13) Sears 14) McDonald's 15) Samsung 16) Toyota 17) Bank of America 18) Netflix 19) Kohl's 20) Sony 21) Sprint 22) Microsoft 23) Tylenol 24) Xbox and 25) Comcast. The Women at NBCU Brand Power Index is an analysis of 500 brands most talked about by women. It is based on online search data from Compete and social media buzz data from New Media Strategies, as well as person-to-person conversations tracked by Keller Fay Group.
A deal where Time Warner Cable serves as a sales rep for Verizon's FiOS service played at least a minor role in boosting the cable operator's ad sales near the end of 2010. TWC said its sales rose 18% in the fourth quarter, stripping out political revenues. Total dollars with political money included came in at $269 million, the most ever for a fourth quarter. About 35% ($95 million) of that came from just the auto and media categories. Political accounted for about 16%. TWC has been selling regional spots on behalf of Verizon in the New York, Los Angeles and Dallas markets. The cabler receives a percentage of the revenues under the recent deal. TWC could also benefit this year as NCC Media, a cable rep firm that it partly owns, begins selling DirecTV inventory in several markets. "We expect the FiOS deal and others like it will increasingly contribute to ad revenues in 2011," said TWC COO Robert Marcus on an earnings call. Marcus said the company anticipates that despite a lack of heavy political advertising this year, ad dollars will go up. For the full year 2010, the company posted a 26% increase in ad sales to $881 million. Dropping political dollars, the increase was 18%. Ad dollars account for about 5% of TWC total revenues, which were $18.9 billion in 2010. In the fourth quarter, TWC lost 141,000 video subscribers and now has 12.3 million. The bulk of the company's revenues come from its traditional TV supplier business -- which generated $11 billion in 2010, up 2%. Total company revenues increased 6%, helped by a 10% increase in broadband-subscriber dollars.
Canoe Ventures CEO David Verklin said Wednesday that seven networks will offer advertisers an opportunity to run interactive ads in 20 million-plus cable homes in about 90 days. Comcast's E! and Style networks, along with Cablevision's AMC, are already selling a Canoe-developed platform allowing for request-for-information spots. Bravo, Discovery Channel, History and USA will be open for business by early summer, Verklin said. Separately, Verklin said Canoe aims to add households served by satellite operators DirecTV and Dish Network to its footprint of cable homes able to accept the ads. That would be in line with a new initiative led by NCC Media that has cable operators and DirecTV working together to offer inventory across homes served by both. Canoe has spent some time getting to the 20-million-home footprint that Verklin cited. It has had to figure out how to enable set-top-boxes with a common technology to send the ads into homes served by the six cable operators that own Canoe. Of the seven networks set to offer the RFI ads, four will be run by Comcast, which will also have a stake in a fifth (History). The networks license the ad-serving technology from Canoe. Comcast and Cablevision are co-owners of Canoe, along with the four other largest cable operators in the country. The RFI ads include a banner prompting a viewer to order a coupon or product sample via a remote control. The process is double opt-in, so a viewer has to order and then confirm. Verklin said at the NATPE event that by the end of the summer, an iTV polling application will also be in place, which would open the opportunity for sponsorships. A viewer could vote for the player of the game "instead of having the announcers tell you" who it is, he said.
Regis Philbin said he made a mistake when he announced that he would depart the daytime talk show he co-hosts with Kelly Ripa this year. He should have made it clear that he is leaving, but not fading into the sunset. "I'm not retiring from the business," the 79-year-old said at the NATPE convention. Making the announcement on "Live with Regis and Kelly" was obviously trying. So were the hours leading up to it. He was told not to tell anyone until the morning of his departure, including Ripa and executive producer Michael Gelman. Ripa was incredulous, and Philbin said she offered up a version of: "What is this about?" "It was kind of awkward -- it was not easy," he added. Philbin said his contract is expiring, and he felt that "it's just been so long and you reach a point in your life where maybe you'd like to do something else." He said he didn't know what he would do next, or who would replace him. One possibility for him: the Notre Dame grad said he shared a joke with NBC Universal sports chief Dick Ebersol Tuesday about doing sideline reporting for his alma mater's games.
Television stations and the syndication industry continue to be a steady business partnership. But could it be better? Take Hearst Broadcasting's David Barrett. He says Hearst stations grab 40% of ad revenues from local news, 24-30% from network programming, and the rest from syndicated shows. Of course, each TV station situation varies. But I would guess that some stations might consider it lucky to have a steady 30%-30%-30% revenue breakdown (including associated digital content), providing a hedge when one or more of the revenue pieces fail to perform. The question becomes how this formula is changing. Many stations want to gain more control, by airing additional local programming -- news/magazine shows, multi-cast digital channels and micro-niche Internet news sites. One thing is for sure: the network part of this three-legged stool seems to be getting shorter. Forget about network compensation. Network executives are angling for a bigger piece of all those retransmission dollars. That leaves syndicated programming -- still a vibrant part of a TV station's revenue plans. The good news: first run shows seem to be getting cheaper to take on board. The bad news: prices for proven off-network sitcoms continue to climb. Many executives continue to believe in the long-term prospects of taking on syndicated programming. That's the good news -- but you wonder whether syndication has really missed the big media boat. Could executives be whispering this at the just-concluded NATPE meeting in Miami? With so many new TV/video platforms, you would think the traditional syndication formulas would have easily extended into other areas -- local multi-cast signals, Internet video sites, and mobile platforms. While content owners do "syndicate" content digitally, there is still little or no connection with the traditional and still-effective syndication business on TV stations. This could have put stations and those in the syndication business in a good place. Syndication might still be a steady part of the 30-30-30 formula for stations. But it seemingly could have been a lot more.
Is the hit MTV series "Jersey Shore" experiencing the same breakaway success online it enjoys on cable? Fuggedaboutit! MTV reports that after dropping two new episodes of the reality TV series on-air last week, the online video views went ballistic. More than 1.6 million unique visitors hit Snooki and friends in a single week, the best results ever for an MTV series. The viewers gobbled down streams like they were free canole, 15 million streams in a week. The next best week of streaming tied to an MTV show had been 12.3 million views off of the 2010 Video Music Awards. Just as "Jersey Shore" on TV is defying the usual reality show dynamics and growing rather than losing audience season-to-season, the Web performance is growing this year. MTV tells us that the streaming begins the next day after the premiere run and as soon as the episode is made available. They are seeing a 32% increase in streaming this year over the typical day-after metrics in the last season. Overall on a weekly average, the new Jersey Shore season is attracting 39% more unique users than last season and 52% more streams. MTV says it is leveraging that cross-platform success to extend not just repeat the on-air experience online. "Jersey Shore begins first on television and then moves to digital where we extend the experience well beyond full episode streaming to include co-viewing experiences, after shows, information on the music showcased in each episode and more. It's this symbiotic relationship between the content offerings that is driving such strong growth." But are advertisers coming along with Snooki, Jwoww and the whole drunken crew as they careen across platforms? Most of the clips we saw at the site were fronted by the recent Honda parade of pre-rolls they seem to be buying everywhere at a massive rate. For the full episodes, however, we spied a custom intro involving the" Jersey Shore" brand and the new "No Strings Attached" film from Paramount. According to Kristin Frank, General Manager, MTV/VH1 Digital, the ad clients are coming into the Jersey Shore phenom from a number of directions. Paramount's new film was the sponsor of a special 10 Minute New Year's Eve Sneak Peak. Sony's release of "The Roommate" sponsors the online poll. Are the bronzer manufacturers not interested in a piece of this?
With all the sports on television, you would think TV critics, viewers and journalists would have their fill. But we all bore easily. Worse still, familiarity breeds contempt. Apparently, there are aspects of TV sports that might be called dull. Examples include the current number-one player in women's tennis and the length of NASCAR races. Seems Caroline Wozniacki -- the top-ranked tennis pro -- has been a bit boring lately, especially in press conferences. So, following a recent erroneous report about Wozniacki being hit by a kangaroo at a public park during the Australian Open, she appeared at her next press conference wearing boxing gloves and accompanied by a large plastic kangaroo. In another press conference, looking to overturn her ho-hum perception, she playfully turned the tables by blaming reporters for asking dull questions. To help the reporters out a bit, she brought up some lighthearted subjects -- her taste in men, her family, her piano skills and how to stop global warming. Still, I'm not sure this is enough for scandal-craving, on- and off-the-court needy journalists. On the other side of the sports spectrum, Fox Sports Chairman David Hill believes three-hour-plus NASCAR races go on too long and need to be cut back. He didn't say it, but you could imagine him using the word "boring" at some point in his thinking about the subject. This comes to light in the wake of NASCAR's lower TV ratings over the last several years. (Mind you, other sports have seen ratings drops as well). One remedy: Fox could just air the last three-quarters of a NASCAR race. Typically, when TV airs road bicycling live, it airs only the last two or three hours or so of a four to six-hour bike race. With 24-hour sports on cable, radio, and now, growing digital networks, the drive for content -- hopefully original -- is in high demand. TV executives and journalists fear the "dull" patina that may be grabbing some sports -- on and off the court, field and racetrack. Today's sports viewers want athletes and/or cars in conflict, as well as the usual marital scandals and name-calling. The end result is just that -- how the event ends. If we have to cut one area, it would probably be the beginning of any sports event. We want to know who wins. Still, we also want to see crashes, even those during a press conference.