The Spread: Drowning In A Three-Inch-Deep Pond

The TV upfront is virtually over and done with for another year. The process worked again. The tried-and-tested approach delivered for all. Money got traded. The anticipated death of the 30-second spot was again disproved. Everyone seems at worst very happy and at best absolutely delighted.

The truth is, the TV emperor has walked around with no clothes on. Yet his fan club -- media buyers -- compliment him on his stylish clothes of many colors.And for many they are like the disaffected statistician: drowning in a pond, three-inches deep -- on average.

If you are attracted by the emperor's new suit, consider the lack of objective validated data and the absence of a market -- in any recognizable sense of the word -- for TV advertising time.

Imagine financial markets without a Dow Jones, a Bloomberg and no FTSE. An impossible nonsense for sure. Yet that is precisely what the U.S. network traders have conjured up for the buying, selling and trading of airtime.



The sellers know all the prices, but buyers rely on often error-filled statutes of experience and make do without empirical evidence from the market.

And the market accepts as valid, unsubstantiated claims from the sellers about the rate of change in the market.

In an earlier column, Joe Mandese assembled a data set comparing eventual results versus claims. "Over an 18-year period, the networks claimed average upfront advertising sales gains of more than 11%, but actual network advertising revenue rose only slightly better than 4%," he wrote.

Quentin Crisp's "Naked Civil Servant" has been replaced by the U.S.' "Naked TV Buyer".

But even this valuable analysis has severe limitations. It uses averages and not the spread around the average.

Not everyone is paying the same CPM, nor experiencing the same rate of change. At my previous company, MPMA, we assembled a battery of actual prices. We proved that the spread between the highest and lowest prices paid for like-for-like TV advertising time was a massive +/- 30%. Some paid $70 for the same inventory that others paid $130 for. Around the average rate of increase -- let's use the Ad Age figure for 2007 of, say, +5% -- there will be some paying 10% more and others experiencing no change.

Apply that assessment of absolute costs, the spread of prices and various rates of change, and you reach an inevitable conclusion. Some paying higher percentage increases are widening the gap in actual CPMs versus competitors paying a lower percentage increases.

In the absence of validated data and using invalid methods of handling the available but imperfect data, some buyers ignorantly believe they are swimming in the Olympic final -- but in reality they are drowning in a pond, three-inches-deep on average.

Network trading is a wholly imperfect market where the buyers deliver on a plate the demand coefficients to the seller -- without which the seller could not manage the inventory --and get nothing back in return.

This calls to mind the unacceptable antics of the legal -- (you can't call them a profession) -- eagles. Laws are made by lawyers who make them complicated to understand so we have to use lawyers to sort things out.

Joe reports that the media industry "either likes the games it plays with itself, is in major self-denial, or simply doesn't want to fess up to what's really going on."

It strikes me that buyers and sellers of airtime, just like legal defense and prosecution, are too often on the same side.

The TV emperor has no clothes and his supporters are drowning in a nearby pond. Can I hear the bugle call and see the dust of the 7th Cavalry riding over the hill to the oasis, or is that also a mirage?

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