• by April 30, 2004

MAYBE SIX SIGMA IS A GOOD THING, AFTER ALL? - The only one to come out of Thursday's NUDG meeting looking really smart was NBC, which took a pass on the whole affair. Officially, NBC said it was because of the timing of the meeting, coming just on the cusp of 2004-05 upfront sales negotiations, but we think the peacock network may simply have known how things were going to turn out and decided it was better not to be involved in the first place. But what has the Riff really confused is that if, as NUDG concluded, the network upfront works perfectly well in its current incarnation, then what's all the kvetching been about? Were some of the biggest national advertisers simply being a bunch of NUDGnicks all the times they complained of being screwed by the upfront? Why did 39% of them say they felt like they were being "ripped off" by the networks in a recent ANA survey?

"What's really going on," groused one top marketer in an email sent to the Riff this morning, to which we could only reply, "The real story is why it goes on." We're not sure, but we think it actually has little to do with the way the upfront works, or even how buyers and sellers conduct business during the upfront. We think it's far more deep-rooted than that. In the spirit of this week's ARF conference, we think it's about emotions. Specifically, how emotions impact advertising. Even more specifically, how emotions impact upfront advertising sales. And the inverse, how upfront advertising sales momentum impacts the emotions of national advertisers.

We don't know which base emotion Harvard Business School professor and the ad industry's new emotional guru Gerry Zaltman would ascribe to this industrial situation, but we suspect it would be "disgust." It's the disgust national advertisers feel by being trapped in a process that they helped create, which ironically works for them, but which makes them feel embarrassed. Okay, so maybe it's shame, or outrage or indignation. Whatever it is, we suspect they'll be feeling more of it some time later this spring or in early summer, after they once again end up paying "too much," even though nobody will actually know what the upfront market really was. Sure, an official tally will somehow get leaked out and a consensus will be published among the trades and leading daily ad columns and Wall Street analyst reports. But if history is any rule, that number will bear little resemblance to what actually happened.

An analysis coming out in the soon-to-be-published May issue of MEDIA magazine shows that over a 16-year period between the 1987-88 and the 2002-03 ufpronts, prime-time network sales grew an average of 10.7 percent. Actual network ad revenues, during each of the full calendar years following those upfronts, grew only 4.2 percent. During last year's 2003-04 upfront, network prime-time sales reportedly grew 9%, but according to the Broadcast Cable Financial Management Association, actual prime-time revenues rose less than 2 percent during the fourth quarter of 2003, the first fiscal quarter of that upfront.

What does this mean? It means the upfront - at least estimates of upfront market growth - are not real. They are concoctions that are spun by a handful of sources that are almost always spinning off-the-record and without any real accountability. They get spun to the media and to Wall Street analysts, which pick those numbers up and give them a life of their own. And the whole thing just ends up making network advertisers feeling, well, more disgusted.

The Riff even has a theory about this. We think that in the good old days of the network upfront, when it truly operated as a "gentleman's business," the networks would throw advertisers and media buyers a bone every few years and allow the upfront market to at least look like they got a good deal, whether they really did or did not. But we think something happened in recent years that has fundamentally changed that process. That instead of spinning upfront market estimates to placate Madison Avenue, the networks shifted their focus to a different set of stakeholders: shareholders. It's likely become more important for the big publicly traded media companies that own the networks to send a strong signal to Wall Street than it is for them to send a mollifying signal to the ad industry. And if that's true, then we may never see another "soft" network upfront again.

Since the whole thing is made up and unaccounted for, wouldn't you make it up in a way that gooses shareholder confidence, even if it weakens your relationships with national advertisers? I mean, where are they going to go anyway? And it's not like that strategy would hurt relationships with major national advertisers anymore than they are. According to the ANA survey, only 7 percent of national advertisers believe the networks are "truly interested in my business needs."