The Wall Street Journal reported that certain U.S. TV channels have started speeding up the replay of some TV shows like "Seinfeld" or "Friends" in order to free up more minutes they can sell. According to Nielsen, Discovery Communications, Viacom Networks, A&E, and Hearst have all added about two minutes of commercial airtime to every hour of TV broadcast. This means that for each hour of TV, a whopping 20 minutes is often devoted to commercials.
The flawed and eventually deadly-tailspin reasoning that these TV networks apply goes as follows: Ratings are down and we now have to sell our airtime for less; let’s add more spots so our net total income remains more or less the same.
By doing so, these networks are of course adding to the commercial clutter that is chasing viewers into the arms of alternatives like Hulu, Netflix, Amazon, etc. Last week it was reported that cord-cutting among Millennials is growing faster than at any time previously. One investment firm downgraded its assessment of the three main cable distributors significantly. And Discovery Communications reported poor Q4 numbers and gave an unfavorable guidance for the year 2015, driven by an especially weak U.S. market. Do I need to go on?
Luckily, marketers have their media agencies to help them guide decisions on where to invest their media dollars, right? Wrong.
There was some seriously bad news from down under. Turns out that both Dentsu Aegis and Group M in Australia have admitted to negotiating “value banks” using their respective combined client billings with Australian media owners. “Value banks” is apparently the new name for what is widely known as sur-commissions or volume bonuses. The problem is that Group M was found to charge clients for media space that the company itself had gotten for free as a result of its negotiated value bank.
The Australian media agency scene is scrambling to tell clients that all is fine. Said one media agency director: “We have a partnership model with the media, and we are all about mutual value creation.” Apparently mutual value creation omits those pesky clients whose money it ultimately is.
Also last week, Starcom announced it’s moving its programmatic buyers away from a centralized office into the brand teams within the media agency -- because of the flack clients were giving agencies about the “independence” of their advice on programmatic ad placement. (With programmatic as a separate profit center, agencies were accused of caring more about their P&L than allocating their clients’ money to the best place. Imagine that!). Starcom’s move is actually positive, although it remains to be seen if the move is smoke and mirrors or a true unbundling of its programmatic P&L.
One thing is certain: if media agencies continue to corrode their business practices through questionable tactics, they will find themselves replaced more often by alternatives. Just as the TV networks are finding with the cord-cutters.
What a remarkable and insightful piece, Maarten. Congratulations and thanks.
Hey Maarten – You have done a great job of identifying two major problems with our industry. Situations where companies do a disservice to their real customers (viewers / clients) in pursuit of short term financial gains. Those corporations need to realize that those customers will find alternative ways to spend their time and money. They should realize that their current strategy is not working.
nailed it once again Maarten
Important that you bring this to light, but it is no surprise or practice is not new. Since all parties are now dead, many many years ago I worked at an agency for a while that used to white out rates of broadcast spots and times, rewrite them in with additions, higher prices and better times and re xerox them and then send them to the client. The buyer was out of NYC and the client was RCA. They paid. The bar hasn't beed raised, just changed colors.