From Pricing To Process: The TV Debate Continues

A year ago there was so much advertiser and ad agency discontent with the process for buying and selling television ads that the Association of National Advertisers (ANA) coordinated a series of industry meetings to discuss potential changes to improve the process. Ultimately, those sessions concluded without changing a thing.Still, dissatisfaction with the TV ad buying process continues among agencies and advertisers, as evidenced by the discussions that took place last week at the ANA's annual Television Advertising Forum, held at the Grand Hyatt in New York. The most radical proposal for changing the way TV is bought and sold came from Julie Roehm, director, marketing and communications for the Jeep, Dodge and Chrysler division of DaimlerChrysler. Roehm suggested that the current process be scrapped in favor of a system where individual spots are bought and sold on a commodity basis, similar to the way the stock market works, thereby linking valuation to the supply and demand for any given spot on any given day. ANA president Bob Liodice said that while last year's industry meetings on the upfront did not result in substantive changes to the process, there is still room for improvement. His biggest gripe: the industry still does not buy, sell and measure time based on the audience that matters most—viewers tuned in to commercials, not the programming."It continues to amaze me that with all the technology we have available, we are not yet getting and using affordable, regularly used commercial ratings," Liodice said. "If the industry has heard one thing loud and clear over the past few years, it's that marketers are being held accountable for performance." And in the TV world, he noted, the real litmus test is TV commercial performance. In her presentation, Roehm argued that an overhaul in the annual upfront buying process is needed because, among other things, "it's not driven by client needs," as evidenced by annual price increases charged by the networks for advertisers to reach increasingly smaller audiences. "Advertisers pay a premium to hedge their bets," she said. And with increasing rates and smaller audiences each year, "a new approach is necessary or the system will collapse." As it now stands, upfront pricing is artificial, based more on what the networks feel they need to earn to satisfy investors than on the true value of the spots, said Roehm. Thus, her idea to electronically trade all spots on a Nasdaq- or even an eBay-type model. Reaction to Roehm's proposal was mixed. Viacom co-president Leslie Moonves made it clear that CBS would not participate. Asked for his reaction, Moonves replied, "I would like to see who's going to figure out the logistics for that," meaning that it would be very difficult, if not impossible.At a separate ANA session, Moonves' comments about pricing for the new season reinforced the worst fears of every advertiser at the conference. He said CBS will impose price increases again this year, adding that they will be "very significant price increases." Advertisers, however, said they were uncertain whether Roehm's scheme was the antidote to higher rates, but credited her with giving the industry something to think about. "I appreciate her intentions," said Jon Stimmel, director of broadcast buying, Unilever U.S. "Beyond that I wouldn't want to comment."Lisa Kowitt, senior vice president, media and agency management at Wachovia, credited Roehm with going beyond the usual rant from advertisers that the process is broken and actually coming up with a proposed solution. "It's intriguing and out of the box," said Kowitt. But the head of advertising for a well-known health products company said of Roehm, "based on that, she knows nothing about buying commercial time." There's wide support among advertisers for commercial ratings, however. And come this fall, the industry will be in a better position to get them. Nielsen Media Research CEO Susan Whiting confirmed that this October the company will begin releasing household-level data on a daily basis that shows how many viewers in the Nielsen sample are watching specific ads. In the world of TiVo and channel surfing, viewing to commercials is substantially less than viewing to programs, but there's disagreement on how big that gap actually is. Liodice said he's seen studies suggesting ranges between 20 and 60 percent less viewing to spots than shows.But David Poltrack, executive vice president, planning and research at CBS, disputed that wide of a disparity. Poltrack noted that CBS is already accessing the commercial ratings data that Nielsen will make more widely available in October. The network has analyzed the ratings for more than 2,000 pods worth of spots running both within programs and between programs, he said. On average, the commercial ratings for in-program spots for broadcast network were 4 percent smaller than the program ratings. For spots running in cable programs, the ratings, on average, were 9 percent smaller, he said. However, the commercial ratings for ads running between shows averaged 15 to 20 percent less, he acknowledged. "I don't see commercial ratings as something that is going to change the way the industry buys and sells advertising," Poltrack said.But that remains to be seen—advertisers say the time is way overdue to shift the currency to one that is based on ratings for commercials, not shows. "We need the data" that details viewing to the ads," said Andrew Jung, senior director, advertising marketing services at Kellogg's. Brad Simmons, vice president, media services for Unilever U.S., agreed. "It really is time for a recalibration of the currency" based on commercial ratings, he said.Only when the industry embraces commercial ratings as the currency will the guesswork be taken out of determining just how much of a gap exists between programming and commercial viewership, said Liodice. But as Roehm said at one point in her presentation, "in God we trust. But everyone else, bring data."

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From Pricing To Process: The TV Debate Continues

Steve Mcclellan

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