Advertising Age cable reporter Andrew Hampp and MediaWorks Editor Ann Marie Kerwin sat down with Sean Cunningham, president-CEO of the Cabletelevision Advertising Bureau, and several top cable executives to discuss this success and the challenges ahead. The roundtable included Ed Erhardt, president of ESPN/ABC Sports customer marketing and sales; David Levy, president of Turner Broadcasting Sales and Turner Sports; Steve Mandala, exec VP-cable ad sales, NBC Universal; Joe Abruzzese, president-ad sales, Discovery Communications; and Arlene Manos, president of Rainbow Media national network advertising sales.
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AD AGE: At last year's upfront, it seemed the conversion to commercial ratings and the overall decrease in broadcast prime-time viewership were only benefiting cable. How do you view the importance of this year's upfront, particularly as it relates to what's going in scatter right now?
MR. ABRUZZESE: Pricing has been really strong through all of 2007, and the first half of 2008 has been very strong. ... So as far as pricing is concerned, it should be a strong upfront.
MR. LEVY: A lot of money will move in the upfront. There's a higher demand of dollars in the upfront.
On the supply side, the broadcast networks are down 17% year over year right now, with less supply and strong demand. That will tend to lead toward a stronger upfront. What we're hoping that clients and agencies are preparing themselves for is the broadcast-only home, which is one-seventh of all broadcast viewing, and that's 13 million homes, I believe. We're going to have an interesting situation on Feb. 19, with the digital converter box. We're hoping the agencies have figured that into their models when they talk about the [requests for proposals]. With all of these factors in place, I think it will lead to an interesting upfront and a strong upfront for clients.
MR. ERHARDT: I think it's more than a TV upfront; I think it's going to be a video upfront this year for the first time. Digital video is going to be a big part of the marketplace for all. Increasingly, I'm hearing from both clients and agencies they'd like to do business with us in video and digitally. I think those networks that have strong assets digitally are going to win. ...
Cable has a significant amount of strong brands, and you'll see that translate to the upfront.
AD AGE: Marketers have been saying they want to go to 360-degree buying. From what you're saying, more is available. Is broadcast going to have to shift how it sells?
MR. CUNNINGHAM: The pressure we're getting from agencies is how to counsel in a pending economic recession. And the counsel we give is taking a look at three consecutive recessions and sitting and watching where those that continue to invest and invest strongly wind up in a better place when things clear up a bit.
What we see is there isn't really a cause-and-effect relationship in terms of ad spend that you can sit there and say: Will the dial move this way in terms of the economy, therefore the ad economy will move in some kind of proportionate dial? That doesn't exist. Even if there's the thought there's another shoe that might drop, we've put a lot of thought and data in it.
AD AGE: The agencies are eager to get to set-top-box data. What do you have access to that you're making available to marketers?
MR. ERHARDT: We're doing an experiment with Nielsen Connect right now. And the goal is to really provide our customers with a single source where they can see digital and also how TV and mobile are viewed and used in the home with the same device. We're excited about the initial response we're getting to that. There are up to about 600 homes in the sample that have agreed to be part of this next test of multiscreen usage. It should be in the marketplace in about 60 to 90 days.
MR. LEVY: I think that is the end-game for all of us. Whether you're looking at TV ratings, impressions on the internet, broadband or through the phone, if there's a way to aggregate all those impressions and sell one package across all the different platforms -- and be able to post that way -- you not only deliver on television but overdeliver on broadband. I think that really will be how media is bought and sold in five to 10 years.
MR. ERHARDT: When you talk about that particular measurement thing we're up to, it's about how do you make one number. We find the agencies are still very concerned about being able to convert a digital video impression into a TV impression. What is it? What's it worth? How do I use it? The interesting thing is a video stream is a video stream. If someone watches it, that seems to be a good indication of what we're seeing on TV. ... If we can show what Nielsen can't audit -- if someone watched a commercial inside a video stream -- I think you're good to go.
I think Nielsen is in a position right now where they have to step up and start to look at this kind of measurement. We need a third-party auditor. We start to look at things like video on demand. ... No one has yet figured out how to take a video-on-demand program and add it to the Nielsen rating. To accelerate this to how consumers are using it, Nielsen has to get in or someone else will.
MS. MANOS: With the set-top-box data, I mean, they're getting bits and pieces of it from here and there, but they're not getting anything that's actionable in terms of anything that's uniform because it's all over the place.
MR. ERHARDT: We've had a fair amount of success if a brand is really isolated on its own. ... It is a different kind of measurement in that if Totino's Pizza Rolls decides they want to launch a new brand within the Winter X Games, and the only place they advertise across all media happens to be ESPN, and they see their sales jump 19% in a two-week period, you know that worked. But you can't do that with great scale right now, and that's part of the challenge.
MR. ABRUZZESE: It starts with the 30-second commercial. It starts with the biggest reach you can get. How do we extend it? Eventually you get a call to action for somebody to buy the product, through the course of someone getting it through the internet or VOD, and then you win. But two years from now, it's going to be very different from what it is now.
MR. MANDALA: On Hulu.com at NBC Universal ... the commercial that's embedded in the pre-roll, the consumer has the opportunity to select which commercial they want to see. If it's an auto client, they could choose whether it's a van, passenger car or an SUV that they want to see. And I think that type of self-selection is something that's going to be interesting to see, experiment with and learn how to incorporate into a broadcast environment.
MR. LEVY: Contextual advertising is also going to play a role. We've done a couple of tests so far. One is "Very Funny" commercial pods, where we basically tell a viewer to stay tuned to this pod; there's going to be funny commercials. We're basically saying to the audience, "This is going to be a great pod; you're going to love it." And viewers are holding.
MR. ERHARDT: You don't always have to spend a million bucks on a spot. I'm hearing increasingly from agencies they want to create multiple executions for multiple things. ... When we started doing something with Gatorade a while back, they created 31 10-second spots because they knew how important it was to have different work coming up in the sports context. ... There are a lot of challenges that go along with that, but nevertheless, brands need to be able to think in that respect.
AD AGE: So how does that translate to how advertisers view branded entertainment? Does it really help make up for poor commercial retention?
MR. MANDALA: I think advertisers are increasingly seeing branded content and product placement as part of a larger menu, and that larger menu is marketing rights. And that's perfect for what we all represent, because when they are strong brands, you can find that intersection for a marketing-rights campaign. We've all done them. It involves multiple screens, and I think it's going to continue to be important.
MR. ERHARDT: But you can't scale 50 branded-entertainment things at every network. It's not possible. For those things to stand out, [you can't] have 12 things happen within the show. With all due respect, some of the things [Donald] Trump has done with his show, after a while you kinda go, "There's the Pizza Hut, there's the ..." At what point does the viewer say, "Hold it"? And I think you have to be mindful of that.
MS. MANOS: Otherwise you have an infomercial on your hands.
MR. ABRUZZESE: We do a lot of product integrations, and our research says this: First, the viewer expects it, thinks positively about it. Secondly, it's got to be kind of organic. Thirdly, when it retains what that message is. But when that message is accompanied by a free-standing commercial, it's twice as measurable. The media metrics we do with IAG show it does work, and we're involved in it heavily.
AD AGE: How many more years do we have left for upfront presentations?
MS. MANOS: For the longest time, we have and really should have been doing smaller individual presentations at our networks, and there is a move to personalize them, tailor to individual clients. That's accelerating somewhat all over the place.
MR. ERHARDT: Advertisers and agencies want to see what everybody's got, and you have to do them in a big way and you have to do them in a small way. And we all go about that. We made a decision last year to bring ESPN to a week that has been traditionally thought of as the broadcast week. David has now made that decision for his properties. I know NBC Universal is going to do the NBC Universal upfront as opposed to an NBC upfront, and CBS just announced one as well.
I think the upfront notion of doing that kind of thing is going to be more important than before. If I'm an advertiser, wouldn't I want to be able to see as much stuff in the same context over a short period of time as I could?
MR. LEVY: You have to do both. It's always going to be a showcase of your programming, what your opportunities are. But it doesn't mean you're not talking to planners on a 52-week basis. ... The combination of the one-on-one surrounded by the presentation is strongest.
MR. ABRUZZESE: When I first came to Discovery, we didn't do an upfront; we did 150 small ones. Then we thought, to save some money, let's do a big upfront. And it looked great. ... We said this is a great platform. The challenge we have is: How do we represent 14 networks in two hours? Broadcast wrestles with representing four new shows or six new shows in two hours; is that really the best use of the upfront? I need two hours to say what's going on. It's a bigger platform for us, and it makes a lot more sense for us. We then take it to six cities, and every opportunity goes to it. It's part of the 365-day transformation.
MR. ERHARDT: So the demise of the upfront ...
MR. MANDALA: ... is greatly exaggerated.
MTV Gears Up for '08 Upfront
Hank Close is a forward-thinking rogue agent in cable. For example, while colleagues scramble to craft branded-entertainment opportunities, Mr. Close already has several years of fully integrated projects under his belt, involving heavyweights including Unilever and Procter & Gamble Co. Here are some key insights from MTV Networks' president of ad sales.
On being one of the last holdouts in 2007 for the new C3 ratings that measure how many people view commercial breaks live or within three days on a DVR:
"I feel the tack we took was really a good one for us and a good one for the market. We claimed at the time we felt like it was not the time for this system to come out of beta. It was kind of a principle decision; it had less to do with the marketplace. We just didn't think it had been tested."
On making branded entertainment a major part of MTV's business model even as the industry debates whether engagement from such a ploy can ultimately make up for poor commercial retention:
"Some of the research results we've seen show they definitely do aid retention, and we have to believe they aid engagement. ... The other question that research asks is: Are you more favorably disposed to this advertisement after a different form of commercial message? The response is overwhelmingly yes."
On how the economy is going to affect the 2008 upfront:
"We haven't seen any impact ... yet. Most of our base categories have been very strong—the studios and home video, video games, beverages, [quick-service restaurants], and casual dining. Wireless was the only thing that had a couple players fall out. We're going to see carriers revise their services and data-heavy services, but we like very much the way the wireless category sets up."
On what buzzword will characterize the 2008 upfront:
"Multiplatform. ... At this time last year, a very small percentage of our deals were for more than one digital property. Now we're talking about a very significant percentage of sales reaching digital screens. ... The opportunity in virtual worlds is you enter conversations about changing the cost-per-thousand model and you can get to the cost-per-interaction model."
-- Andrew Hampp