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The Market Movers: Media Buyers Who Will Shape the Upfront Address Key Issues Facing TV Advertising

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.

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

Here, they address their key concerns going into the

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

Ava Jordhamo: The
biggest unknown at this point 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 as 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 [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.

Merrifield: 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 futbol..

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.