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Diced and sliced like shrimp under a Ginsu knife, television, the most important medium of all, is arguably the most profoundly affected by fragmentation. The explosion of small-screen options has transformed the ways in which creators, buyers, sellers and consumers think about—and interact with television—and thoroughly frustrated everybody.

Like beauty, the impact of fragmentation on television is in the eyes of its beholders. It can be a blessing or a curse, and sometimes both simultaneously. But there's one thing everyone agrees on—much more needs to be done by agencies and media companies to plan, buy and evaluate TV advertising effectively in a fragmented world.

What fragmentation has wrought and what ought to be done about it was the subject of a lively and often contentious panel of media- industry players at the American Association of Advertising Agencies' annual Media Conference, held last week at the Hilton New Orleans Riverside in New Orleans.

Hosted by Bill Gloede, editor of Mediaweek, the quartet of experts included Steve Grubbs, CEO of OMD USA; Jon Mandel, chief negotiating officer of MediaCom; Joe Ostrow, president and CEO of the Cable Television Advertising Bureau; and Chris Rohrs, president of the Television Bureau of Advertising.

Labor Pains

The first topic tackled by the panel was how the splintering of TV options has slashed program ratings. It's compelling buyers to aggregate ratings levels by buying dozens of cable networks and other broadcasted fare rather than limit their plans to a few selected, highly rated shows.

"I deal in concepts and not in numbers at this point because the ratings are so low," said MediaCom's Mandel. "One of the [media] organizations I work with wanted to send something over. I said, 'Well, you've got to send 300 pamphlets.' We are getting absolutely killed on the labor side. You can do all the [electronic invoicing] in the world, but all those little ratings are absolutely smacking us on labor. We're not getting paid for it by the clients worth a damn."

More Is More

OMD's Grubbs, however, saw a silver cloud in fragmentation's effect on the day-to-day work of buying television. "People have finally realized that because of the complexity of our business, you need to have strong media professionals running it," he said. "In fact, most people in this room, except for the press, wouldn't have a job today if it weren't for fragmentation. ... We forget that 15 years ago, we were huge supporters of the cable business because it was going to help us control network costs. Now we're complaining about it."

Rohrs, whose organization represents the nation's local broadcast TV stations, agreed that increased competition was, at least in theory, good for buyers. "You can buy around anybody these days," he said. "You can buy a .8 rating, or you can buy an 8 rating. It depends on what your strategy is, and what you want to do."

Besides, Rohrs added, "It is important to put [fragmentation] in context. ... TV still represents basically 50 percent of time spent with media, and even though there has been an explosion in the number of sellers, it still strikes me that 50 percent is still large enough to support the number of television offerings and keep us less fragmented than other media choices. Most towns have one newspaper, so there is not a lot of fragmentation, [but] there are now probably 2,000 magazine titles, there are millions of Web sites, there's e-mail, there's junk mail. There is so much media coming at us, but TV still represents 50 percent of all time spent. TV tends to get the focus as a fragmented medium. But I think in relationship to others, it's still not as bad."

Ostrow, the cable-TV advocate on the panel, also argued that fragmentation produces selectivity, which is a positive consequence. "It's the elimination of waste and the branding of cable networks that make it an optimum situation. ... You know exactly the kind of audience you're going to get when you tune in to ESPN or Lifetime or CNN."

More Is Less

One response to fragmentation, the theory of building reach through dispersion, or lower-rated spots, also came under fire. In order to do that, the number of actual airings has to be ratcheted up, which results in the same commercial being shown over and over again. To Mandel, this response to fragmentation was "counterintuitive."

It's not just about reach, he said. "When you have four pods in a row of the same commercial, somebody in the traffic department at the agency wasn't doing their job. Somebody at the client wasn't doing their job. Somebody in the account group wasn't doing their job, and the creative guy never watched television to know what it would look like. ... We need more of an interaction. You see it in [CAB and TvB] members; you see it over the air. You see the same damn commercials. It's ridiculous. The commercial wear- out has got to be crazy."

"I couldn't agree with you more," Ostrow said. "I think it is time for us to take a better look at the allocation of commercial pools and how they are rotated, both from the buy side and the sell side."

Fragmentation also makes it far less efficient to launch new products—a key job for television, according to Grubbs.

"In the early part of all of our careers, you could put it on television and boom, it moves off the shelf," he noted. "Because of fragmentation, it becomes very difficult for a buyer or planner to introduce a new product—and that's only going to get worse. If we target more to having sales forces from clients go in geographically and then roll through with spot buys, we may be able to get there. But it's going to be a problem."

Quality Time

Fragmentation has had as much impact in front of the curtain as behind it, the panelists agreed, and the effects of splintering choices on the type and quality of programming has created its own set of thorny challenges for agencies. Grubbs said, "The financial model upon which Hollywood was created is now sadly broken. It's one thing when you're selling 12-15 ratings to produce your show that costs $1.8 million [an episode]. It's another thing when you're producing shows that deliver a 5, 4 or 3 rating that cost $1.8 million. That's one of the reasons why we're seeing a shift in the kind of programming that's being created across the television spectrum."

Mandel demurred: "I think it takes longer for America to discover the good programming that's out there. There really is a lot out there. What happens is because of fragmentation, there's so much television out there, you notice all the crap. But there is still the same percentage of good programs out there."

Family Talk

But the panelists did focus on what to do to improve programming—the industry initiative, backed by major advertisers and agencies, to develop "family-friendly programming." Gloede asked, "Is it real?"

A sampling of responses:

Grubbs: "I applaud it, but I just don't see how that succeeds long term. I hope it does, but I think there's largely other motivations behind [it that will] take some pressure off the ad community from people in D.C. I guess maybe for that reason alone it's worth a lot, if we continue to pursue it."

Mandel: "We can't in our industry be parents to the country. ... You start looking at how many kids are watching late-night television on school nights. You sit there and go, 'Where are the parents?' Why is it my problem or some writer's problem that shows at 10:00 or 9:00 are off-color or whatever you want to call it? If parents are going to let their kids watch this stuff, then they're not being good parents anyway. Family-friendly [shows are] going to fall flat in that case. But I do think they make a good point."

Ostrow: "I don't see how anybody can be against family-friendly programming. Cable networks in particular. We have a network that's called The Family Channel."

Grubbs: "The Sopranos is about a family."

Ostrow: "It doesn't take advertising, if you noticed. But the reality is that there's a change in the way people view. They don't congregate around the television set very often. So if the people who are pushing family-friendly programming are prepared to take low numbers, family-friendly programming will succeed. But if they're looking to get significant numbers with groups of people gathered around the television set, those days are gone forever."

As for the TvB, Rohrs added, "Nobody ever goes after the news because after all, we live in a free country. You should never go after the news. The biggest problem I have is on my local stations, where it's blood-and-guts news hour—and that's when the kids are home. I've got to tell you, my kids are like, 'When I grow up, I'm going to live in suburbia because there's no crime there, and there's all this stuff happening in Manhattan.' ''

Choice Cuts

Outside of morose speculation about the state of the economy, interactivity was probably the biggest theme of this year's conference. The fragmentation panel also tackled the issue, mostly by using themselves as test subjects for the poster child for two-way TV: the TiVo interactive TV system.

"They sold 80,000 TiVos in the fourth quarter [of 2000] despite a fairly national advertising campaign," said Grubbs, "and I think there are 132,000 of them in the country. We had one in the office, and almost everybody I've spoken to likes it. I believe Jon has one. I think the big question is: Are the early adapters of this product going to prove to be typical or not? There are some things we know about the behavior of viewers now, through [studying their use of] VCRs. One of which is they don't watch what they record. Will that change with TiVo? ... There are an awful lot of questions about whether the public will embrace this product. I think so far you have to be a bit skeptical."

As for himself, Grubbs noted that with TiVo, "I'm watching The West Wing every week where I would normally see it maybe one in four times. It is very easy to fast forward through those commercials. But I would have missed them anyway because I wouldn't have watched the show."

"Mine happens to be in a DirecTV box, and I have to bribe my kid to watch the commercials," agreed Mandel. "More importantly, I had a TiVo box, and I never hooked it up. But when I got one that was in the set-top box, I use it. It's not about selling individual boxes. When it's in the TV, when it's in the set-top box from a cable company, that is going to be a humongous problem for this industry."

The CAB's Ostrow offered some solutions to the technology threat: "We have to look at product placement in programs. We have to look at cast commercials. We have to look at integrating the commercial in a way that's different from the way a commercial is currently integrated. It may be that there is a re-examination of standards and practices at the networks and at the local stations and systems. I think things will have to be done differently in order to retain viewership of the commercial."

Ostrow also addressed efforts to develop technology that would provide the ability to prevent the TiVo systems from blocking advertising—a process called digital blocking. He said that even if the technology were developed, it might not be legal. But he predicts, "A whole bunch of conversation and argument as to whether that is something people are going to be allowed to do. I suspect there's going to be some litigation on the subject."

Bottoming Out

The panel speculated on how low fragmentation will drive ratings. As Gloede framed the question, "Do you see a day [coming] when NBC's ratings are the same as Lifetime's? When?"

OMD's Grubbs said that networks' ratings will never be as low as the niche players. "The more you increase general capacity, the more fragmentation will affect not only NBC, but [also] Lifetime and everybody else out there. It's just driven strictly by general capacity."

Mandel offered a novel solution: "At some point, the cost becomes such that you wonder if you should have the CEO of the client call up customers, just random phone calls, saying, 'Please try my product, and here's my number; tell me what you think of it.' People would be so blown away, they'll go out and try the product and become like evangelists selling a product. It may be a cheaper way to do it."