TV Upfront

Screams for SCREENS

How TV upfront's buyers, sellers are adapting to variety of delivery systems, changing consumer viewing choices

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The roundtable is no longer confined to a round table, thanks to Advertising Age and its first "Upfront Conversation."

With the upfront selling frenzy approaching, Ad Age assembled a group of high-power panelists from the advertiser, agency and media sides. Those watching from the floor-also members of the marketing community-got to be part of the give-and-take, too. An edited transcript begins on Page S-4.

ADVERTISING AGE: After years of increases, last year the upfront take was down. So everyone from Wall Street to the man on the street will be watching this year to see whether it moves back. And there have been plenty of other hot-button issues for them to track, too. Do you feel the system needs to change, that the system needs to evolve, or are there just people who don't know how to play in the upfront market?

DENNIS DONLIN: I'm somewhat of a realist, and I'm accepting the fact that unless there's some motivation on the seller's side to try to really look at a different model, that there's not going to be much traction for serious change in the short term. And I think there are a lot of pressing issues right in front of us, so we kind of focus on them.

I am getting more and more convinced that there's not going to be a single monetization strategy for TV as we move forward. It's going to be very different how script-to-drama may be monetized, relative to sports, relative to maybe even comedy. And so I think that for an advertiser like General Motors, the dialogue is 365 days a year. This is really just sort of a galvanizing moment for it.

But as these different monetization strategies start to come into play, one of the challenges will be that you can't really talk through all the variables of that kind of a strategy in a very short period of time. So I think that's going to put some pressure on what we use this period of time for. But I don't see any real impetus to change the format even in the short term.

MIKE SHAW: We absolutely do business 365 days a year. … We're literally doing business all the time. And the reason the upfront exists is because you're buying inventory that won't be there later on if you don't purchase it in May. That's really what's going on.

If there wasn't a demand that necessitated that we sold out either individual weeks or individual programs, there'd be no need for an upfront. So I see the need for the upfront.

MEL BERNING: The model has changed quite a bit as it exists now anyway. You know, as Mike said, we are talking 365 days a year. I think we finished last year's upfront in August or September, and it seems to me we started at our place in November again talking about the new season.

It requires way too much time to build the integrated elements and the cross-platform elements to do that negotiation in a short period of time. And the model we're seeing is that it's becoming very, very detailed and labor intensive, and you just can't do that in a couple of days.

JOE UVA: Our feeling is that there will be opportunities to bring a forward-looking electronic trading place for parts of our business. And what screens that involves or what properties that involves, time will tell.

But are we going to do that wholesale? No. I think we'll keep using the label "upfront," but what we're really talking about is a long-term market that just gets expanded each year in terms of what gets included. And from an evolutionary standpoint, we have changed quite a bit in terms of what's going on.

TIM HANLON: What we're entering is a bifurcated marketplace in media. There will always be that sort of high quality, highly engaging ad inventory. Right? So broadcast TV could clearly fit that category. High-definition environments could clearly fit that category.

But there's also-as we increase all these media outlets-all these screens for video, for example, we're increasing inventory.

And not all that inventory is going to get sold in these sort of packaged, highly engaging kinds of ways. The folks at Google and others that are sort of in their zeitgeist have started to figure that out. There is an ever growing pool of-you want to call it stressed inventory, you want to call it sort of orphaned inventory. There's a lot of stuff out there that could easily be packaged up, squeezed a bit and monetized in a fairly efficient way.

You're going to see the quality stuff, which is going to be toughly negotiated and it's going to be very intricate in terms of the details. You're going to see this sort of big pile of other stuff that helps effectively get messages out there on a fairly regular basis, maybe in electronic markets.

ANDY JUNG: I don't really think that there is much of an upfront anymore-365 days a year [dealmaking] and I totally agree with that. I had conversations with Mike 365 days a year but on a continuing basis.

There is a big issue of a $60 billion, $70 billion industry that has no common currency ... and I applaud Julie [Roehm, senior VP-marketing at Wal-Mart Stores, who's proposed a controversial revamp of the upfront in which airtime would be sold via a Nasdaq-like trading system] for her creativity and thinking. If the buyers and sellers want to have a more commoditized, more electronic exchange, they should do that and seek a provider for that. Not necessarily Google or eBay or any of the providers out there are necessarily the answer.

FROM THE FLOOR: This is a broadly general question-that the upfront process as it's existed still needs to change to reflect the realities of today's media marketplace? Show of hands. That's a very small number, actually. We had maybe 10% of the audience.

MR. BERNING: I have a hard time understanding this dual strain sort of purchasing vs. effectiveness. And I think that's a real central issue that we all talk around, but we never get any closer to understanding the differences in value and how those values are set.

MR. HANLON: Perhaps the solution to that conundrum is in measurement. The old adage is "That which gets measured, gets bought." The challenge for our industry is that the way we measure has been relatively inelegant, and I think now that's being called on the carpet, given where the media are going and the way we consume.

So I would argue that we may get to a better place when those measurement systems get more sophisticated and more sensitive. We're going to be in a much better position to determine whether something was more valuable, more effective, more efficient than we can today, which is still frankly pretty much a guessing game. Online, not necessarily. But in other forms of media ...You're never going to end up with one universal measurement.

MR. HANLON: But we're sophisticated across many.

FROM THE FLOOr: One of the issues that we need to talk about in the upfront-I think Mel's point-is this schizophrenic personality. There is an opportunity as we talk about negotiating multiple screens and multiple content plays this year, flexibility should be a part of that discussion and negotiation.

I'd love to be able to have the opportunity to offer our clients a percentage of flexibility. Not wholesale, but to say I want to be able to move 20% because we know that is working much more effectively.

TONY PACE: When inventory goes on sale, if you're not there with a window open, you're not going to get the stuff that you want. So in this marketplace, that's called the upfront.

Now you know, any market will tell you it's supply and demand, and it depends on what people are going to do out there. You can have all sorts of estimates of "Gee, what's happening? The auto companies are having a little bit of trouble. Are they going to pull back? Is that going to take a lot of dollars out of the marketplace?" I don't know whether it's true or not.

We think it's our job to understand the passion points of our best customers and our best prospects, and we think we understand where to reach them because we know what they're really into. Now, we're not necessarily going to divulge that to our competitors and divulge that to the people we negotiate with.

We have a pretty good idea before we get to those folks both efficiently, but also going back to the engagement point. Engagement is the X-factor that nobody can really imagine.

I would never personally look at media as a commodity because there are too many things there that are different from brand to brand, business to business … it's not just the composition of our audience there but how really loose are they with particular program properties or subject matter.

MR. JUNG: I agree. It's not a commodity. Media is sort of like a head and tail sort of thing. You've got a "head" of them, which is generally acceptable, general accessible. The season premiere on "Desperate Housewives," for example, is a good head.

But the "tail" of that and where you can search that, get that online, get it on an iPod, get it on anything like that, a DVD release where you can personalize the tail rolls out-that's where the value of that is, and that's where the connectivity with the consumer to Tony's point is, where you can actually build that. … the tail is the part where you've really got the personalization.

bill MORNINGSTAR: The upfront itself has changed over the last couple of years. It used to be really focused on the advertising community, and now it's become a bigger show for Wall Street. The coverage we get out of Wall Street is incredible. It's become a bigger show for the Hollywood community, and there are a lot of different constituencies that are getting involved.

But you want to communicate [several] key things at the upfront. … What's the focus of the network? What's your strategy? And how can we work with advertisers in meaningful ways?

I think more than worrying about what other people are saying [about you], you focus on what you're trying to do and you focus in on your strategy and why it makes sense, and why you think it's going to be effective. And why the parts together are going to equal more at the end of the day for the advertisers.

MR. BERNING: You have to show that you're in the game in terms of adding value up and down the line … And that you recognize there are opportunities on the platforms in media that we can also bring to the party.

I want to pitch a very straightforward question to you-whether you think the upfront is going to be up, flat or down this year? Joe, what's your thinking?

MR. UVA: Flat.

MR. BERNING: I don't think it matters. This tremendous fascination that we've developed with keeping score on where we are on July 12 is about as significant as where we are at halftime in a baseball game-if we had halftime in baseball.

FROM THE FLOOr: I only care where we are at the end of the year. I don't see any new categories emerging that are going to provide any real primary force, and I think we're in a stable and mixed economy, so I haven't seen a real variation in terms of what the overall kind of core demand is going to be.

But in a world where seemingly everything is a choice, I think that [the upfront is] of decreasing importance … And if we're not careful, we may be focusing on the wrong things when the consumers and viewers are doing something completely different.

MR. JUNG: [The upfront] doesn't matter at the end of the day because there are options, there's flexibility, there's a 365-day thing that we've been talking about. It's a continuous thing.

It's far, far beyond just picking new shows. And I hate the characterization of "we pick the shows." There's so much more to it. So much more to it than that. And it diminishes the quality of thinking of people here and all of the hundreds of people who participate in this to just characterize it as picking shows.

MR. SHAW: The flexibility that brands are looking for has taken some of the emphasis off of the need to put your money down in May.

[There hasn't been] a real major penalty to buy late [in] scatter for over three years now. First time you see scatter pricing across the board, including the cable offerings, approaching double digits, you'll see a rush back to the upfront the following year. There has been no penalty to hold your fire, so to speak, the last few years with the exception of individual vendors who are getting decent scatter pricing.

FROM THE FLOOR: You talked about the head and the tail. To what degree are online extensions the head or the tail in both how media are bought and sold in the upfront? For example, talking about ABC putting its content up on the Web. Where does that fall into the mix, and what priority does it have in the upfront process?

MR. SHAW: We haven't decided how to handle that yet. … It's really a test for us. If you called a streaming capability, I think you have about 400,000 streams simultaneously that are available [in the U.S.]. Well, how does that square with 28 million people watching "Desperate Housewives" on a Sunday night? It doesn't. So there are real issues about streaming and how fast we can ramp it up.

I think you could sell all the streaming capabilities that all of us combined have on the vendor side, out in a day. I don't think that would be the correct way to do it.

But isn't it going to be an important part of the packages you're offering?

MR. SHAW: I don't think it's going to be an important part because it's not big enough yet. It's not a scalable business that's large enough for any of us at this point in time to go out and monetize in a real major way.

You've got $9 billion being spent in prime time alone. If you took all the streaming that everybody has and added it up, it's not a real number in relationship to that $9 billion. And that's just prime.

FROM THE FLOOR: It comes back to what we've all said talking here this morning, which is it's really about the idea. It's about the quality of the concept and where the consumer is, and making sure that's the right mix of the right screens with the right idea as core-probably, in our point of view, the most important consideration.

I don't believe every client is going to say, "I've got to have an extension."

MR. MORNINGSTAR: What we're kind of getting is there's not going to be a one-size-fits-all in a lot of these new platforms for a measurement to how I work with [different advertisers]. And this is where you need to connect a brand to a show, the property.

And once you've made that engagement, then where do we go from there? … we all need to figure out, to be in this together, what's the right messaging on the platform itself.

Are you really saying that you don't think these new platforms are what's going to be purchased in this upfront? And you don't think that's going to be a big part of it?

FROM THE FLOOR: First of all, you have to look at this question in its broadest possible construct. If you take a property like the Academy Awards and you say, "All right, currently the head is the presentation, the live presentation of the show itself. But the tail ... It includes It includes an entire frenzy that builds up around this event."

So to a certain degree, you have to look at things in that broad construct rather than just what an individual vendor is going to be doing with that property. Potential in the broader sense of that property is what our divisions are looking for.

[You] say, "OK, I'm going to create depth of content." If I'm going to wrap myself around that, is that a broad enough content area and concept that we could really integrate into and make the assets work?

You'd also have to recognize that mass audiences are not what they used to be. And mass audience isn't necessarily the most supreme thing in advertisers' and marketers' minds.

Just because you aggregate 50, 60, 70 million people for a Super Bowl doesn't mean all of them are interested in the same car or the same snack food. As a matter of fact, quite the opposite. I think the advertising and the marketing have to be a bit more generic or common-denominated, because the audience is so large.

With digital technology, in TV as well as other forms, we are able to get to smaller and more focused and more interested and hopefully more engaged audiences. Consider the sources here. These are the legacy players in the upfront game who have a top-down sort of consumer mentality the way people consume programming.

You are now beginning to move small increments of audience across a lot of different platforms, and it's very, very hard to aggregate that into a chunk of money that this upfront and the next upfront are going to demand in amount of dollars.

The conundrum we're in is whether you throw that 50-yard pass down the field and say, "I will take X amount of money out of TV and put in these digital platforms, because that's where the consumer is going to be in a couple of years. And they're going to want to watch the content on their iPod, on the screen, on their cellphone, wherever it may be."

The day is going to be coming where all of those platforms are going to be more scalable and much more relevant.

What you can say on a marketing point about this upfront is we're interested in all those kind of extensions. … we've got to be smart about what's going on out there and how we can test and work through that process.

Frankly, if you've got to submit a new marketing budget, it's a relatively small number that you're putting against these things and you're worrying about it all the time. So in our viewpoint, it is part of the discussion, but it's not because it's a big number but because it's something we want to know for our brand.

The terminology is quality, not quantity. With all due respect, our business has been more focused about quantity and eyeballs and audience share than it has been about quality. And as we move into things like engagement and more sophisticated forms of measurement, we're going to really see what people are watching, what they're skipping, what they're not watching.

Advertisers will value the higher quality audiences. I would argue, though, that the way we aggregate those audiences over time is going to be in much smaller buckets, and we're going to have to do a lot of addition and interesting math to get to that scale, where it was a lot easier 10, 15, 25 years ago.

We're just going to have to look under a lot more rocks and nooks and crannies, and create that scale. And that's an interesting challenge for everybody.

How do you feel about the time shifted-viewer? How much are you willing to pay for him?

FROM THE FLOOR: I don't think there's any question that a very significant amount of time-shifted viewing degrades the quality of the core impression.

I'd like to see how a consumer is watching something within seven days on a time-shifted basis, how that experience is different from live. And maybe [I'm] willing to pay more for that because they're more engaged.

It's unfortunate that we're in a position where we have to negotiate in a shifting sands kind of environment like we don't know the answers. I would argue that as measurement gets more sophisticated, we're going to truly have those answers. And yeah, maybe that time-shifted viewer-the one who literally goes out of their way to record a quality show on a Sunday night and watches it with great interest on a Tuesday afternoon because that's the only time they can-is a higher value audience.

Measurement is going to get us there. It's unfortunate we're dealing with crude tools for TV measurement. And yet we've got to continue business as business dictates. But this is a longer-term issue that we're going to solve incrementally, not next week.

MR. SHAW: [This topic also] brings up a really interesting point about the creative you guys are giving us to air and how good that creative is and how often it's refreshed and how much time you're spending on that creative. Walt Disney Co. [ABC's parent] has spent over $100 million on the digital build-out. All of our prime time is on high-definition now. "Good Morning America" is on HD. All of our sports is on HD. And we're not getting any ads from HD.

FROM THE FLOOR: And HD doesn't get measured properly by Nielsen, right? It doesn't show up in the ratings.

MR. SHAW: The HD is a truly transformational viewing experience. … There's a reason why the networks in general are flat the last two years in delivery. And one of the big reasons is because of what's going on in HD. And HD is changing the way you watch TV and where you watch first and what your favorite channels are.

And by the year 2010, it's estimated right now that half of the homes in America will have one HD TV. … And I'd love to see some ads on HD come our way, because I think that would help this construction along.

FROM THE FLOOR: It's ironic because all up and down Madison Avenue, the terminology is engagement. Right? And to Mike's point, HD is probably the most engaging kind of TV or in the media in general.

Yet because of an antiquated measurement system, we don't have any measurement data. Now I'm not saying that's the reason why there shouldn't be more advertising in HD. I think there actually should be, because it's kind of a no-brainer. But in terms of the measurement currency that we use today, it's hard to justify. That seems to be like a real problem for all of us to get over.

I don't think we can look to media partners in one shot or two shots and say we're going to get audiences that are going to meet our marketing objectives and goals. I think the onus is on the advertisers and the agencies to create their own aggregate audiences. … Those are audiences in that it could be six or seven or 10 or 12 different groups of aggregate audiences. And the way you compile those groups is going to be different.

Micro-masses. I said earlier massive niches. And the reality is the skill set that we have today is just about finished in terms of its usefulness in an age where the audiences are going to be much smaller.

We don't necessarily sit back and say which of the three networks are we going to put all our advertising to and assume we're going to tens of millions of audiences. We may have to choose now 200 vehicles to get to that level today.

So the skill set of who creates and gets those messages out there has to change. … sometimes with audiences, they're going to be very small, very focused and hopefully measured as well.
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