This year, large purchasers of network time such as New York-based agencies Grey Advertising, MacManus Group's TeleVest and Zenith Media, as well as Chicago-based Leo Burnett USA, are calculating the ability of specific TV schedules to deliver reach.
This is a departure from previous TV upfront seasons, when agencies simply projected audience share estimates and allocated their clients' media budgets to the outlets likely to deliver the greatest reach against their planning targets.
The heart of optimization theory suggests a media budget can work harder by accumulating reach through lower-rated and presumably less expensive programming options than by buying high-rated, expensive network prime-time units.
Changes in the way buyers do business could dramatically alter the way the upfront marketplace works.
PRIME TIME ENHANCED
For example, networks have been able to influence the upfront by dividing it into segments of demand based on prime time, daytime, late night and news dayparts.
The strategy enables the networks to isolate their most valuable inventory -- network prime time -- as an exclusive marketplace. This reinforces the perception of the time-slots as a rare, perishable commodity, despite the inroads of other options, such as syndication, cable and even other network day- parts.
Although the networks continue to sell on the basis of dayparts, media buyers have begun evaluating TV schedules on the basis of the audience reach achieved by a media schedule.
No one is certain at this point how much the change will affect demand for traditional dayparts, and there is reason to believe that, even under optimized media planning and buying, network prime time often will look like the best option for certain brands and strategies.
The networks traditionally created pricing strategies by "counting the house" via a survey of agencies' and advertisers' spending plans. Networks can convince agencies and advertisers to reveal this information by explaining that it's necessary to reserve proper inventory to meet buyers' needs.
The networks have been amazingly successful at gathering this information in the past, partly because of this insistance that it was necessary for them to know what an advertiser's needs were in order to make sure they reserved enough inventory for them to meet upfront planning goals.
Without traditional dayparts, much of that marketplace leverage could be compromised.
Still, broadcast network executives said they were conducting business as usual, estimating category and individual client demand for prime time and other dayparts.
"I don't think that things are going to change that much this year," says Joe Abruzzese, president of CBS Sales. "It's not as if optimizers are going to take $1 billion out of network prime time and move it into cable."
Mr. Abruzzese agrees with his colleagues at other major broadcast networks when he says he considers optimizers "a negotiating tool" being used by buyers to drive the cost of prime time down relative to other TV options.
"Frankly, I don't think I need an optimizer to tell me that my high-demand shows in the upfront are going to be `Ally McBeal,' `The X-Files,' `The Simpsons,' `King of the Hill' and `Melrose Place,' " insists Jon Nesvig, president of Fox Sales. "The impact of optimizers is not going to be anywhere near what people have been talking about."
Media buyers say the networks may be in for a rude awakening.
"They really haven't grasped the meaning of it yet," says John Muszynski, senior VP-executive media director of Chicago-based Leo Burnett Co.'s Starcom Media Services. "They think this is a negotiating ploy. What they don't realize is that it's really a new marketplace, and the sooner they adjust to that, the better off they'll be."
The networks' resistance to change may be so strong, say media buyers, they may fail to account for it accurately in their upfront revenue planning.
That could cause them to dramatically overestimate their revenue goals and could lead to some hardships for the networks during the 1998-99 season.
At least one network has begun acknowledging the shift enough to begin speaking the new language of TV planning: reach delivery.
In its prime-time-development presentation to ad agencies and marketers, ABC has begun using the shift to leverage its position vs. market leader NBC.
While NBC does command a significant advantage in ratings delivery for young adult viewers, ABC's research contends it essentially is at parity with NBC in terms of weekly reach among adults 18-49.
ABC claims NBC generates most of its higher ratings from a few highly successful Thursday-night shows. ABC's average ratings are lower than NBC's, but ABC claims it offers a diverse array of programming that is more likely to reach a broader range of viewers throughout the week.
NBC executives declined to comment for this story.
REACH VS. RATINGS
That message echoes the cable networks' explanation as to why they can deliver significant reach with average ratings that are lower than the Big 4 networks.
"Reach is a function of dispersion," says Erwin Ephron, a partner at media consultant Ephron, Papazian & Ephron. By dispersion, Mr. Ephron means TV schedules are comprised of many low-rated shows and can accumulate a multitude of different viewers in various places to aggregate significant reach.
SETTING THE CURVE
According to Mr. Ephron, excluding any qualitative factors, such reach optimizers would allocate media budgets first to the lowest-priced option and last to the most expensive one.
"The curve would look like this: First cable, then daytime, then syndication and prime time last," says Mr. Ephron, who at the same time is a leading proponent of adding qualitative values back into optimizer programs to avoid "treating all reach points" as equal.
Such qualitative criteria, he recommends, can be used to weight the value of one daypart or outlet over another to avoid "commoditizing" all TV options as equal.
"On paper at least, it should move more money into cable," says Mr. Ephron.
He is predicting the networks will be flat -- though Fox and NBC will see some gains and ABC and CBS will decline -- and cable will be up.
Burnett's Starcom recently announced plans for a major "TV environment" study to develop its own proprietary weights for valuing one TV option over another.
Among the criteria used to weight the value of a TV option are the amount of commercial clutter, the type of programming genre and the likelihood it will attract and hold a loyal and attentive viewer.
Mr. Ephron also recommends looking at certain ratings data, such as the number of viewers present, the presence of small children and the room of the house where viewing is taking place. He says a woman who watches a daytime soap in her kitchen while feeding her infant child should be valued less than an adult male watching "Seinfeld" by himself in his living room.
TOUGH TO SET VALUE
As agencies begin adopting more qualitative criteria for optimizing TV buys, the networks will be less certain of how advertisers value inventory, says Steve Sternberg, a senior partner and head of broadcast research at TN Media, New York.
"The most amazing thing about this upfront is the networks won't know how we are valuing their programming," says Mr. Sternberg. "For the first, we are looking at their inventory and putting values on it that is different from the way they benchmark it. What's really scary is that not only will we being using different values than the networks do, but each agency will be using values that are different from other agencies."
Overall, Mr. Sternberg says qualitative optimizers will restore the perception of value for highly prized TV options such as network prime time. As such, he says, they will reaffirm much of what advertisers and media buyers have intuitively assumed about the quality of advertising in one TV option over another.
However, he says the rules will not be uniform and will vary significantly by the agency doing the evaluation. In some cases, he says, this will lead to a perception of enhanced value for certain prime-time shows, while others may suffer.
"In some cases, other network dayparts look qualitatively better than prime time for certain demographic groups," he says.
To illustrate how a qualitative optimizer might rank values of various TV options, Mr. Sternberg indexed the 36 Nielsen-rated cable networks against broadcast network prime time, using TN Media's proprietary Opticom system.
With network prime time indexed at a value of 100, he says 36 cable networks averaged an index of 69. The best performing cable network, which Mr. Sternberg declined to disclose for proprietary reasons, indexed at 101 relative to network prime time. The worst, he says, indexes at 36.
"The more that people are getting into it and the more they put all the qualitative factors around it, the more it recognizes the value of network prime time," says Fox's Mr. Nesvig. "A lot of times [optimizers] throw off more budget into prime time than before."
The Fox executive notes all optimization is not necessarily a negative for the broadcast networks. In fact, Mr. Nesvig cites several other recent examples of important industry research that reaffirm the relative value of network prime time.
In a preliminary release of AdWorks 2, a study on the advertising effectiveness of thousands of consumer brands, Information Resources Inc. and Media Marketing Assessment recently concluded that brands placing a high percentage of their TV budget into prime time generated significantly higher sales results than brands that do not.
In another important finding, ad effectiveness researcher Michael Von Gonten unveiled research at the Association of National Advertisers' Television Forum that indicates that relative to network prime time, cable and syndication often perform like the advertising campaign is "off-air."
While heartening to network sales managers, such findings do not explain an essential paradigm shift that agencies are using to plan and buy TV differently this year, says Mr. Muszynski.
It's not about prime time vs. daytime vs. cable versus syndication, he says.
"It's no longer about day parts. It's about what schedules work best for your budget," says Mr. Muzynski.
Mr. Mandese is editor of "The Myers Report."