NEW YORK (AdAge.com) -- Now that the merger of Comcast and NBC Universal is official, the ad community is clamoring for the world's largest TV content company to change the way $60.5 billion in TV ads have been bought and sold for decades.
Media-buying executives are hoping Comcast-NBCU can finally make some progress on addressable and interactive advertising, technologies that have been tested for years but have yet to scale beyond a small household footprint. "The issue is where is media going, and it's clearly going to an on-demand platform," said Steve Farella, CEO of TargetCast, an independent media agency that buys ads for clients like Expedia.com, Hotels.com and 1-800-Flowers.com. "What I'm dying to be able to do and do it in a short period of time is advertise my clients' products, build that brand and at the same time tell that consumer where to get it. ... We need to quickly move out of the test phase. Comcast, with the largest MSO platform, cannot keep testing these things."
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"The issue is not, 'Is mass dead?' It's, 'Can broadcasters program quality entertainment that's relevant to a far more fragmented audience than ever before?'" said Laura Desmond, CEO of Starcom MediaVest Group. "At the end of the day, what advertisers want and what agencies want is to be able to serve and segment advertising messages to the right audiences."
Many media execs have been eager for a cable company to take a leadership role in delivering relevant TV ad opportunities with a local affiliate footprint, much like the web already offers through paid search and interactive banners. And the expectation is that Comcast can fill that role.
"If they can get as sophisticated about selling local as well as nationalized ad packages that are contextually relevant, utilizing all the latest metrics and ad-tracking packages that are already available on all the web portals these days, that would be the end goal," said Lori H. Schwartz, managing director of Interpublic Group of Cos.' Emerging Media Lab.
Brian Terkelsen, managing director of Connectivetissue, the branded entertainment unit of Publicis' Mediavest that buys integrated programs for clients such as P&G, Walmart and Coca-Cola, said marketers will be looking to Comcast and NBCU's collective database of set-top box, online and live viewing data for a more analytics-based solution to the research they're currently getting from ad buys. "It's imperative for the metric models to move beyond what we're used to. I think the media companies have been doing that with training wheels, but this is potentially the fast lane."
Although Comcast and NBCU's properties have lots of obvious synergies -- merging NBC Sports with Comcast's growing local sports network, marrying the young female viewers of Comcast's E! and Style with the Women@NBCU portfolio of brands, etc. -- most media buyers aren't too wowed by media companies aggregating a buy on their behalf.
"We don't need a media owner to create bundles -- we can do that ourselves. We don't want to see this become a 1990s merger, we've seen that and it didn't work. We want to make this a 2010 merger, which is about customization of the messaging and maybe even customization of the programming," said TargetCast's Mr. Farella.
Zooming in on the ad pictureWhen it comes to ad dollars, NBC Universal is far more dependent on advertising than Comcast. Ad Age estimates of the company's 2008 earnings peg NBCU's revenue split at 48% advertising vs. 52% carriage fees and studio revenues, compared to Comcast's 7% advertising revenues vs. 93% carriage and subscription fees. Whereas as recently as five years ago, the broadcast piece of NBCU was still doing the heavy lifting on the ad sales side as its growing slate of cable networks fought to carve out their programming niches, the growth pattern has now reversed.
During the first nine months of 2009, NBC's network ad revenues declined 19.1% from the same period in 2008 to $3.8 billion, while local spot TV revenue declined 33.7% to $700.6 million. Cable, meanwhile, increased its year-over-year ad revenues by 3.7% in the first nine months of 2009, to $2.08 billion on the strength of growth at networks such as USA and Bravo. Add that to the $585.7 million in ad revenue logged by Comcast Entertainment's portfolio during the same nine-month period, and Comcast's collective cable ad revenue could eclipse the broadcast piece in less than five years.
To protect the former crown jewel in the Peacock's crown, Comcast is likely to pursue a cable-network revenue model for NBC that would prop up the flagging broadcast ad dollars with carriage fees from cable subscribers and, eventually, Hulu viewers.
General Electric could be saying final goodbye to TV in less than 10 yearsNow that General Electric has decreased its stake in NBC Universal from 80% to 49%, how much longer before the company exits the TV business altogether? According to a U.S. Securities and Exchange Commission filing issued last week, it could be as soon as 2017.
In the filing, General Electric and Comcast Corp, NBCU's new majority owner, laid out terms during which GE could elect to redeem its current stake in NBC. In the third year after the joint venture's closing, GE will be entitled to renew its one-half interest in NBCU, as well as opt in or out of its remaining interest after seven years. During specified times, Comcast could also purchase GE's stake, albeit at a 20% premium of the public market value.
The deal actually does a lot for GE in terms of fending off pressure from Wall Street, which has made much noise about the fact that the TV and movie unit does not fit comfortably with GE's other businesses. "We're a 130-year-old company, and we've always been about evolving change. We see so much great growth in the global infrastructure business, we just think it's great to have capital to invest in those businesses," General Electric Chairman-CEO Jeffrey Immelt told CNBC after the merger's announcement. "If this deal closes by the end of this year, GE's going to have about $25 billion in cash we can create lots of shareholder value with."
Mr. Immelt was quick to praise Comcast's ability to run the new entity: "We wanted to pick the management team, and the group of people we thought our interests would be aligned with, so we could create value for GE investors over time," he said.
The structure of that management team at the new Comcast-NBCU, or Newco as its referred to in the SEC filing, will be the subject of some of the most rampant debate in the coming months. Although NBCU CEO Jeff Zucker was named to lead the new joint venture, the similarities across each company's cable network portfolio could ultimately cancel out the leaders of some of each company's respective units.