Can Cable Or Digital Content Networks Provide Relief For TV's 'Failure Tax'?

Failure tax? Is that what marketers continue to pay to TV broadcasters? Yes, according to Mel Berning, president of advertising sales for A+E Networks. But there are ways to defeat this -- though a tax haven in the Cayman Islands isn't one of them.

It's no mystery what has become of the TV broadcast business in terms of decreased viewers. Yet advertiser costs -- at least in terms of cost-per-thousand viewers [CPMs] -- keep climbing, anywhere from 5-9% last year. And overall out-of-pocket costs have gone down. CPMs aside, if you are a broadcast network, that can be a bigger worry.

During upfront time, you still hear from many national advertisers that there is a scarcity of valuable broadcast inventory

Cable networks complain their CPMs still aren't comparable overall to broadcast networks -- that they need to be higher. Those $30-35 broadcast show CPMs for 18-49 viewers are still a premium over the $20-30 CPMs for cable network scripted programming. Media agencies say CPMs can be comparable for cable -- but only for a select few original scripted shows, like AMC's "Walking Dead," TNT's "Rizzoli & Isles," FX's "Sons of Anarchy" or History's "The Bible."



"In most businesses, you reward success with more investment," Berning said. He noted that marketers continue to reward broadcast networks. But a complete failure? Broadcast networks would tell you that that though there have been tough times, they still move product for marketers.

All this isn't a complete picture. Many of the top ten cable networks have shown audience erosion (though not A+E Networks like A+E, History, and Lifetime this year). The reason: Top cable networks are getting hit with the same viewer fractionalization as the broadcast networks. Much of this results from increased viewing to small to mid-size cable channels. Talk about your TV media cannibalization.

It turns out some key media agency executives aren't happy with TV overall. So much so that many media agency executives have signed a rare, joint letter to big digital content platforms imploring them, in effect, to get their act together. They want them to come up with a way to scale some of their new original content and find some common ground when it comes to measurement.

If they can do that, money will flow to digital. If not, it appears agencies will continue to recommend that their clients make more TV payments for their usual broadcast season tax returns.


2 comments about "Can Cable Or Digital Content Networks Provide Relief For TV's 'Failure Tax'? ".
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  1. Doug Garnett from Protonik, LLC, May 13, 2013 at 2:59 p.m.

    Does this guy from A&E know how small he sounds making this argument? It's not a tax, but the broadcast networks are able to charge a premium he hasn't been able to build. Is it a justified premium? I don't think so. But that doesn't matter. A lot of people don't think Apple pricing is justified, but if they can charge it successfully then that's it. And, as if he isn't really observing that he wishes he got the money. But "Failure Tax"? Really? Bush league - and no wonder he can't negotiate a better deal.

  2. Michael Natale from MCM Media Sales, May 14, 2013 at 4:20 p.m.

    At least 80% of new shows fail every year Doug....i would say failure tax is quite appropriate.

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