TV explodes

TV explodes

: The other day, I said that the reduced take in TV’s upfront ad selling season was the tipping point — tipping the wrong way indeed — for broadcast TV. Here’s the next evidence making the case: An ad agency exec smells weakness and demands lower rates:

Advertising spending growth may slow from next year as TV networks in the U.S. are forced to cut rates as audience levels fall, Saatchi & Saatchi Chief Executive Kevin Roberts said at an industry conference.

Ad spending worldwide should increase 5 percent or 6 percent this year, Roberts, 55, said in an interview at the International Advertising Festival in Cannes, France. Annual growth will slow to an average of about 4 percent after 2005 as TV prices “come down,” he said late yesterday. “They will have to. Otherwise advertisers are going to leave the medium.” …

In the U.S., television networks “seem to be gouging advertisers,” Roberts said. “Their rates are going up and the return on investment is coming down.” …

Television will remain the largest advertising medium, Roberts said. “How it will be used will be very different. It will become more interactive.” Advertising will also change to be more “emotive” rather than “yelling at you,” he said.

New Media

The current year of TV programming, which runs into 2006, will be the “biggest ever year in history on television advertising,” Roberts said. “While the return on investment in television is deteriorating, because rates are going up, clients are still flocking to the medium.”

That will change over the next few years as techniques are developed to measure the effectiveness of ads in new media such as mobile phones and the Internet, he said.

“We don’t have enough pre-testing and measurement of emerging media. What we need is a bit of time behind us so that we get some empirical data” and advertisers will become more confident with such media.

And I will argue that advertisers are fools waiting for the perfect data when they could be using new media aggressively and still quite inexpensively and learning along the way. But, hell, they’re the fools with the money and so we need to build that data for them. And now is our opportunity, as TV explodes. [via Lost Remote]

And it’s not just TV. See also newspapers here and here and here and follow the links therein.

  • Duneview

    The advertising marketplace has undervalued network television for years. How else to explain the increased revenues despite declining audiences? Demand is created by advertisers not the other way around.
    A buyer’s negotiating tactic – in this case a threat to leave the medium unless rates are lowered – hardly qualifies as “evidence” of any tipping point. The 1-2% reduction in Upfront spending reflects advertisers’ guess of the total marketplace as much as the viability of network. It’s merely a guess as to how strong the scatter (or after-) market will be. Nothing more, nothing less.
    Jeff is right that there is an amazing opportunity to create a new network of advertising opportunities along the “long tail” of local coverage, blogs, etc. but all this colorful “explosion” and “tipping point” language seems a bit premature.

  • Yes but… I’d argue that advertising has been overvaluing broadcast… especially in the age of vcrs and tivo

  • dfrisme

    As the user has more and more control, a “pure” ad _will_ become worth less and less. Trying to force the users to watch the ad will only piss them off and drive them away.
    The advantage of new adveritsing models based on the long tail is that if things are working correctly, then the user is probably interested in the subject of the ad. That kind of ad should be worth more per impression, but there will probably be fewer impressions per ad.
    This is good news for the buyers as they aren’t buying more than they need. Its good news for the user as they aren’t being subjected to ads that they have no interest in. Last, its good for producers as they can find a source of reveune proportional to their audience. It reduces the quantization of ads from big/medium/little, and replaces it with a continuous range of value.
    Its also good for the market in general, because experimentation can be cheap and targeted.

  • Duneview asks: “How else to explain the increased revenues despite declining audiences?”
    There are a lot of possible reasons besides the wisdom of the marketplace.
    How about an overall marketing and advertising spend that’s growing faster than TV’s share? (a rising tide lifts all boats)
    How about a cadre of very persuasive people who’s ROI depends on convincing clients to use TV? (Madison Avenue)
    How about old habits dying hard? Or new companies with more money than experience replacing those who’ve been sorely disappointed? (The dot coms delivered a pretty big bump to TV before the bubble burst)
    Yes TV has been awesome, but it’s also been complacent. When you look at TVs share of the marketing dollar every decade since 1970 the trend is (as Jeff says)”tipping the wrong way.”

  • Duneview

    Just because habits are old doesn’t mean they donít work. It’s pretty easy to be persuaded if you have a history of success; products launched, movies opened and brand awareness established. It may be that some clients can be bulldozed by a cadre of slick Madison Avenue people — for only so long. Sooner or later you have to deliver the goods and network has done that for 50 years, investing hundreds of millions of dollars building the most powerful marketing conduit ever known. I just donít think that can be so easily dismissed.
    The notion that that network televisionís success is owed to inexperienced, cash rich hayseeds replacing the ìsorely disappointedî is quite a stretch, particularly since this bit of cyclical theater has been going on for decades. I donít know what otherís lists are like, but the marketing people Iíve dealt with over the years have been pretty smart.
    I agree that TV has been somewhat complacent. I wish they were more responsive to the new interactive world. Tweaks in technology could remake the TV set (in all its forms) into the true 21st Century killer app allowing content providers and advertisers unprecedented access to customers.
    But meantime, if it’s only a rising tide that’s kept TV afloat –while losing around 40 per cent of its audience– they must have exceptional bailers.

  • In the meantime other advertising vehicles have lapped TV. Direct mail (a mere $7 billion dollar medium in 1980) went from $40 billion in 2001 to $52 billion in 2004. Meanwhile TV went from $45 billion to $46. Is that potency?
    I’m not dismissing it so easily. Nobody said TV never delivers, that’s a straw man. But clients are defecting. In 1994 American Express used 80% of their budget on TV. Now it is 35%. “Somewhat” complacent seems to be an understatement to such client moves.
    Senge said if you stick a frog in a pot of lukewarm water and add heat the frog will acclimate until it becomes frog soup.
    You’re right … the water’s fine in TV land.