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B&C's 2012 Market Movers

B&C's 2012 Market Movers: The Network Sales Chiefs
B&C's 2012 Market Movers: The Top Cable Sales Execs

How high will this year's upfront go? After strong growth the past two years, networks will be rolling out new programming and hosting star-studded parties looking to convince media buyers and clients to open their wallets wide once again.

Media executives are, of course, bullish. Media buyers, on the other hand, are saying, hold on. Even in an increasingly on-demand world, marketers believe that television -- particularly linear television -- is still very effective in moving goods and services. But there's a limit to how much more they are willing to pay for it after last year's upfront, in which more than $18 billion in advertising commitments were made at double-digit price increases. And the gap between how much sales executives expect to charge and what buyers expect to pay has seldom been larger.

Who will decide how much money pours into the television industry next season? B&C has again assembled our annual short list of the upfront's major players: the biggest buyers and sales executives representing the major media companies and their key television networks.

Leading off are eight of the leading buyers, talking about their key concerns going into the upfront, the unknowns as the market comes into focus, the networks they are looking at and the role digital video will play in the media environment.

What is the biggest unknown factor in the upfront market this year?

Ava Jordhamo: The biggest unknown remains how much clients will be able to spend despite the weak recovery.

Todd Gordon: We spend a lot of time and effort forecasting what we think is going to happen and look at supply and come up with where we think the market is going to be. There's always a gap between buyer and seller, but it seems to be a pretty wide gap right now between what the sales community is anticipating and what buyers are predicting and what clients are expecting. I think we've been surprised, even from the Wall Street community. It seems like we're talking about very moderate growth, pretty consistent supply, a fairly balanced marketplace, so we're not anticipating or willing to accept much inflation in this market. And yet you're seeing article after article, every day there's a new one about how both Wall Street and the sales community see this as a pretty inflationary market. We just think that is dramatically out of line with what's actually going to happen, but that's the fun of the market. These things will sort themselves out.

Chris Geraci: As is the case every year, when the upfront marketplace approaches, advertiser demand is the single most important unknown. While a fairly accurate projection can be made of supply [GRPs] from year to year, the demand side of the marketplace dynamic can be perplexing. Getting a firm grasp on National TV budget increases, or decreases, on a macro level in advance of the negotiating window is crucial to marketplace strategy for both the buyer and the seller. In some years, there is a distinct line from the previous cycle's demand levels, through the ensuing short-term/scatter marketplaces and supported by clear economic trends. This year the correlations are not as defined, and we are seeing perhaps a bit more concern on the part of the media owners in relation to this important issue. For our agency, a tremendously broad client base covering every important consumer category combined with our proprietary modeling system will give us firm ground to stand on as we enter the fray.

Mike Rosen: Predicting the demand side of the upfront equation gets more challenging each year. Marketers operating within the pendulum swings of a global economy are forced more than ever to constantly re-evaluate marketing needs, with the benefits of "Big Data" to track KPIs [key performance indicators] on a real-time basis. That makes the longer-term commitments inherent in any futures market like the upfront a bigger leap of faith than in more stable economic times.

Christine Merrifield: Many international and domestic factors, such as the European debt crisis and the U.S. unemployment rate, are all impacting consumer confidence and will ultimately affect ad spend. While the overall anxiety is diminished, it has not gone away, impacting brand marketing budgets and the level in which a tactical upfront investment is relevant to their business objectives.

Danielle Gonzales: The biggest unknown factor for Hispanic video budgets is demand. Many clients have consistently recognized Hispanics as driving volume for their brands and will continue to market to this target audience. Several new advertisers will start their conversations with Hispanics this year. However, several businesses are still seeing the stress of a down economy and are conservatively approaching the Hispanic marketplace. Ultimately no one knows today where budgets will land, but we are optimistic about the next couple of months.

Which network, broadcast or cable, are you paying more attention to now than you did last year?

We pay attention to all of them. NBC continues to command attention on the broadcast side, as their next "big thing" is imminent. Their cable networks are also interesting. It's been over a year since the [Comcast] merger, the dust has settled and we expect to see some innovation. Sports continues to dominate, which creates a powerful combination.

Gordon: I'd say Univision. It's just a real competitor week in and week out in ratings in prime, and there's the continued economic force of their viewership base. They're probably as dynamic a multimedia company as there is out there. To me, if you're not paying more attention to them and to the Hispanic space in general then you were last year and all the years before, then you're doing your clients a disservice. And I think to not look at that audience fluidly with any other broadcaster is a big mistake.

Geraci: There are as many different answers as there are advertisers and brands. As the upfront approaches, it's essential to evaluate existing schedules and agreements and to make past performance [especially any weaknesses] part of the conversation with vendors. Beyond that, we're committed to bringing the best opportunities to our clients each year in the upfront, and 2012-13 is no exception. There is one story each year, usually based on audience growth, that's difficult to ignore. For '12-'13, that would have to be Investigation Discovery.

Rosen: From a programming point of view, we are seeing a noticeable surge overall in the investment in original cable programming [both scripted and unscripted] as networks fight to attract viewers, while movies and most off-net shows demonstrate less resilience in a DVR/OLV/ VOD/Netflix video library world. It will be interesting to see how successfully the networks can monetize those larger originals investments in the upfront marketplace, as well as if it will result in long term changes in cable viewing patterns.

We're paying attention to the entire marketplace -- not only channel support, but also general and multicultural holistic brand needs. Our total market activation strategies are about content, and through tracking consumer behavioral changes, we can best identify the message vehicles to deliver best against brand KPIs.

Gonzales: Telemundo has seen consistent success with its primetime novela lineup. The audience numbers delivered from the hit La Reina Del Sur have continued even as the novela concluded. The fact that Telemundo is producing original content for U.S. Latinos is paying off with consistently strong ratings. There are also two new entrants that will take hold this upfront season: Fox Mundo will have a solid programming lineup and strong promised distribution as well as Univision Deportes, a cable network home of Mexican fútbol.

What are your clients' biggest concerns about television advertising?

The biggest concerns we share with our clients is that television advertising costs continue to rise, audience fragmentation is increasing and our metrics need improvement. We need to develop metrics and corresponding currency that reflect the change in TV consumption behavior. We also need to measure delivery effectiveness and value on a holistic basis rather than by individual platform.

Gordon: I really think that inflation is the No. 1 concern that we get right now. Five, 10 years ago, you were just hearing about the death of the :30, and the consensus seemed to be that the TV advertising ecosystem was in trouble. Now we hear consistently from our clients that TV works and that they have ROI analysis to prove it and it's a critical part of their plan. As they're trying to keep their costs down, the inflation that we saw two years ago and last year in TV advertising isn't sustainable for them. And ultimately inflation at that rate is harmful to clients, advertisers, networks, everyone, because clients very much believe in the value of broadcast TV and cable and the traditional linear TV players. But I know when we go to them, nothing drives money away from that world more than talk of high [price] inflation or the reality of high inflation. That's the catalyst that gets clients to spend money in other places. It's in everybody's interest to find ways to moderate inflation.

Geraci: In the current environment, continued fragmentation of audiences is perhaps the greatest concern. While the diversification of programming genres has led to a television landscape that has something of interest for almost everyone, individual ratings continue to decline as viewers take greater advantage of the options in front of them. The increased channel capacity of most delivery systems has really become a doubleedged sword with the preponderance of choice supporting consistent total TV usage levels, but at the same time making it more difficult for any one program to become a tremendous hit.

Rosen: TV's greatest limitation -- its lack of accountability beyond basic exposure metrics -- can work both for and against it. Clients are now operating in a world in which many digital media options offer real-time data and analytics upon which to measure, compare and optimize performance. TV, for the most part, cannot. On one hand, that frustration can lead to favoring those new media opportunities that can be more accurately measured for KPI's. On the other hand, it is difficult to stop doing something you have been doing forever, even if you don't have absolute proof that it works as well as newer alternatives. It's a form of inverse logic, not dissimilar to my fear of quitting my daily vitamin habit despite lack of definitive evidence that they are keeping me alive.

Merrifield: Measurement tools are still lacking. We need to align on measurement that addresses on-demand consumer behavior, so we can follow the consumer across all platforms. There aren't solid solutions to evaluate and compare the impact of linear TV vs. broadband vs. mobile and how each ultimately drives brand results.

Gonzales: The biggest concern these days is establishing realistic ratings guarantees that hold true through the everchanging viewership patterns. Being able to deliver on expectations in real-time is critical to our clients' success. It seems as if greater technology and better audience delivery tools would enable the networks to better monitor and deliver on weekly goals, but this is not the case. Currently, the Spanish networks are still stuck on delivering yearly or maybe quarterly guarantees, despite the call from agencies and clients on higher accountability during the advertising week, fiight or period.

Web video companies are holding their own upfront events in April. Is money earmarked for TV moving to digital?

Jordhamo: Money will be spent on content depending on client-specific needs. Linear programs are viewed on several different platforms so it's imperative to be flexible in our investment strategy to ensure we deliver the most targeted and comprehensive audience to our clients. On-demand platforms enable consumers to watch what they want, when, where and how they want it, but it's still largely TV content, so dollars should flow the way consumer behavior flows.

Gordon: We believe that it's a one video marketplace, one video world, across screens, demos, language, platforms, regardless. The vast majority of our spend will stay with traditional TV players, but we're also looking at their digital assets. We're looking at digital assets from pure play digital media owners, we're looking at place-based video, we're looking at cinema, and wherever possible we're trying to treat that as one video marketplace with some ability of our buyers to move money fluidly from one to the other.

I don't think right now that it's a zero-sum game where a dollar that goes to the digital guys come out of the traditional TV guys' pocket. Right now we're still seeing reduced spending in print, in radio, in newspaper and the TV and digital share of the overall pie is growing. The allocation of digital spend that goes to digital video is increasing as well. Over time, certainly for some clients, it is a more competitive environment. As far as the upfront events go, I think we really welcome that. I think at a very simple level these are big well-funded media companies that are out there trying to compete with the TV media owners, and I want as many people competing for my money as possible.

Geraci:While there is a trend toward a more platform agnostic approach to the upfront, we are still a long way from having a critical mass of budget fluidity. I see a continuation of the TV-based media owners securing agreements whereby advertisers accept a specific portion of audience guarantee delivery via online players. Web-based companies that are developing their own content for sale in the television upfront marketplace have a lot to prove, but we are happy to make their offerings part of the consideration set as well.

Rosen: Consumers are voting in a big way with their time and attention to video content of all shapes, sizes and platforms -- and it is natural for any marketer to adjust media mixes to adapt to changing consumer behavior. Whether the "challenger" media companies can convince the marketplace that they should be part of the consideration set of the upfront is based on a variety of factors, including uniqueness of offering, quality, pricing, terms, scarcity of inventory, etc. It is no longer a question of whether we are buying online video for our clients, but a matter of when and for how long at a time.

Merrifield: Money is earmarked for content that resonates and engages our consumer. We're having Total Market conversations based on what's best for each brand's communication goals.

Gonzales: Money is earmarked for all video opportunities across traditional broadcast and online video. All media partners will be called to increase their value offering in order to garner greater share. This is a very exciting moment in video history as there are many opportunities to connect with Latinos in environments they are passionate about.

What effect are streamers like Netflix and Hulu having on viewership and advertising effectiveness?

Jordhamo: Netflix does not have advertising and since they don't have current seasons of TV shows, there is no ad effectiveness to speak of, and minimal if any measurable impact on viewership. That said, we know there are only so many hours in the day and Netflix is yet another competitor for leisure time. Hulu can be a great complementary vehicle to a TV schedule. We know that the uncluttered environment leads to a highly engaged viewer experience and often higher awareness/recall. On the flip side, scale is still an issue.

Gordon:We're watching for a long-term impact fairly closely. But right now, there's little to no evidence that online video usage is having a detrimental effect on traditional TV viewership. Netflix and Hulu are interesting examples in that they're a new platform that essentially is built on the traditional professionally produced studio content, so most of their viewership is based on things that were either produced for TV or produced by a studio for theatrical release. They are two very directly related models. I'd say right now it's more symbiotic. We see examples like Mad Men. The drama airs for a long time. They put all the old seasons on Netflix and the show comes back to higher ratings. It's a great promotional tool to help people catch up and catch on to series that they haven't seen before.

Geraci: Despite the increasing availability of professional television content via Internet delivery systems, measured TV usage [offline] has actually grown [11/12 vs. 10/11] in households and among most key demos. The "streamers" in many ways seem to have a supportive effect on traditional television, allowing convenient access to the most popular content and the ability to stay current with series programming.

Rosen: The success of full episode streaming can both support and challenge the linear TV business model. I personally think the jury is still out on whether, in the long run, it will turn out to be symbiotic or competitive. Full episode streaming can at times complement TV viewing audiences and the existence of past season episodes can bring new fans to a show that has been on the air for years [ie. the recent lift in How I Met Your Mother audiences, most likely partly attributable to the library of older episodes on Netflix]. On the other hand, when streaming serves to cannibalize linear viewership, the negative financial impact on the current ad revenue model is a real concern.

Gonzales: We know Latinos are viewing video in alternate environments, however it is unclear if this has increased the amount of time spent viewing video or if there is cannibalization. I actually believe that both have occurred. Many Hispanic consumers are viewing more video than ever before and some traditional broadcast viewership has moved to alternate sources.