'LOST' AND FOUND

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Advertising Age brought together some of the front-line negotiators for a lively debate about the state of the business. This group of buyers and sellers included for the first time an online ad representative, Yahoo's Jerry Shereshewsky, who's both a buyer of traditional TV spots and a competitor for marketing dollars. Ad Age TV reporter Claire Atkinson moderated the roundtable; Multicultural Editor Laurel Wentz also participated. Below is an edited transcript.

ADVERTISING AGE: We've got a down stock market, inflation on the rise, oil prices are up, pharmaceuticals and food are having a tough time, as well as the auto companies. Are companies starting to say, let's look at spending more on marketing and advertising?

DONNA SPECIALE: [The economy is] volatile. I wouldn't sit here and say it's strong, I wouldn't say it's weak. I think it's week by week.

JERRY SHERESHEWSKY: Looking forward, it helps sometimes to look back. We've come out of the worst advertising universe that I can remember in 36 years, around 1990-91. Brands suffer when marketers don't support them. And in today's economy they're building on what they didn't do for a couple of years. Accountability demands are incredibly greater, the press for making the dollar actually do what the dollar is supposed to do. So brands are fighting to be healthy. And the only way you do that is with creativity, wit and, oh yeah, dollars.

MIKE SHAW: It seems to me within the individual categories you have a couple of companies doing really well. And you have further consolidation, Procter & Gamble and Gillette, for example, which makes it hard to now determine from a spending basis does one and one equal 1.8 or 2.2? And that keeps happening. So that makes it hard to get at the spending. Within the individual categories I see reason for optimism.

MS. SPECIALE: There's so much going on right now with [direct-to-consumer drug advertising] and all the federal relations, and Pfizer and Merck got hit hard with those brands that had to get pulled off. So if those two in that particular category are down, are the [GlaxoSmithKlines] of the world going to make up for that? And that's the part now, and the analysis that we are all doing category by category, the top 10 categories. Automotive, theatrical, retail, pharma, telecom.

AA: Can you talk about Kraft and the food business? We're seeing companies like Pepsi and Kraft starting to say, "Well, we need to focus on whole grains and healthy foods." And some are expecting that means that the kids upfront is going to be quite weak.

MS. SPECIALE: I think health in general has hit a lot of different categories-McDonald's, Burger King, the [restaurant] area has definitely taken a much bigger stance we've seen, which is positive. And now the cereal category and the food categories, and Kraft is taking a huge lead in it, and I think it's perceived as very positive. You know, the spend in kids will be off, OK? I'm not going to sit here and determine what off means. Only we know that right now. What has to happen, though, is that they're going to go and reformulate a lot of their stuff, and that takes time.

AA: What about the effect of telecom mergers or what's happening with General Motors?

MR. SHAW: Well, the autos historically, when they get in trouble, try to spend their way out. And in order to protect their share they generally spend more money.

AA: What are growth sectors that we're seeing? Is telecom going to be a big growth sector? Or are we going to see that eventually shrink with all the different mergers that are going on?

PAUL RITTENBERG: Oh, I think that's growth without question. I mean Cingular and AT&T merge and one plus one is going to equal four.

MR. SHERESHEWSKY: Telecom is in the midst of a massive change because of technology. We had 70 years where the telephone basically didn't change. You dialed and you talked. Now you see what little incremental things-oh, take a picture, send a video, this one'll have a zoom, this one'll have more storage-and it's such a dramatic improvement that they are going to be spending not so much for subscribers but for improving the nature of the experience itself. And that's where the subscribers and the "we have it, they don't have it," etc., all come to.

Now where they play that out-whether they play that out in the upfront, or they play it out in newspapers, or they play it out online, or they play it out at retail-that's a story for another day maybe. But unlike most of the other marketplaces, this one is being dramatically changed by technology.

And I guess maybe this is a good moment to say so is television viewing. Where television viewing hadn't fundamentally changed, nor has reading newspapers fundamentally changed-you still read them the same way-but now comes the personal digital recorder.

MR. SHAW: I think television changed when you gave everybody a remote.

MR. SHERESHEWSKY: And now comes the personal digital recorder, which is-I mean I know how it's changed in my house.

MS. SPECIALE: We're going to see more change probably in the next three to five years in our business than has been in the past 50. It is just between cellulars and the mobiles and broadband, and everything that's going on.

The change that's going to occur in three to five years is something that we will not be able to believe. It took 50 years to do so much. And in three to five so much more is going to change.

And we're seeing it. We talk about the shifting of dollars out of television, and that's happening. And it's not massive amounts of money going, shifting, but every client, all agencies, we are definitely looking for that consumer. And that consumer is in a lot of different places now. And that's where the world is evolving.

MR. SHAW: What's interesting is despite all that, television viewing is up year to year. You find that the [personal video recorder] households actually watch more television than any other subgroup of households. You talk about PVR changing the face of the earth. It seems to me like we did that about two years ago. And somebody predicted that today 25% of the homes would have a PVR-I think [in reality] it's under 5%. I'm not so sure the sky is falling, and I'm not sure PVRs, quite frankly, are the game changer that everybody thinks.

MR. RITTENBERG: I also think, to Donna's point about money shifting in and out of the marketplace, that's been true long before the technology issues. I think they're almost a separate thing. The reason the television marketplace has stayed so robust over the years is new categories coming in as old ones fall by the wayside. I mean cigarettes haven't been on the air for 34 years, and everybody thought then that that was going to be the end.

And I see-I won't do a cable pitch yet-but there are new categories coming to cable, national cable, that weren't there [before]. I mean our equivalent now of a movie budget at the Fox News Channel is issue-oriented advertising, corporate campaigns from companies I can't really mention. But people who are trying to reach not a consumer, but an influential Wall Street constituency, a Washington constituency. And they clearly believe that television advertising works. Because I'm talking about a significant amount of money. And will that make up for less breakfast cereal? I hope so. I think so. There's always flux. It doesn't matter about technology.

MS. SPECIALE: I'm not sitting here saying television doesn't work, OK? All I'm saying is the consumer now multitasks in numerous amounts of different ways. And we as the agency and for our clients have to be in every one of those locations. And TV is one of them. But they are multitasking, and they're doing a lot of different things, and getting their entertainment or their information in a lot of different areas, and we have to be there.

chRis KAGER: I think that's right on. The first screen is the television, second screen is the computer and the third screen is the portable cell phone. And so we're really beginning to spend time in that area. And the beauty of that is with content. And content probably is as important as the technology. Because unless there's some compelling reason to get on the cell phone and interact with the content, then it's just another gadget, it's just another piece of technology that really has no source to go to other than when you want to just text-message your friend. But the content is the overriding compelling value proposition.

And everyone in this room is a content provider. So on behalf of us at the syndication and distribution division, this is an area that, quite frankly, we're spending a fair amount of time in. And how do we leverage what we have? I'll say this, I think advertisers are a little slow to coming around to it. That's not a slap, it's just everyone talks about, well, we've got to break through the wall, we've got to break through the wall.

MR. SHERESHEWSKY: We are competing desperately for attention and involvement on the part of an audience that is getting chintzy with their attention and their involvement.

One of the things we have noted that is really kind of fascinating is the amount of not just multitasking but of simultaneous tasking. When McDonald's ran a commercial on the Super Bowl about a French fry that looked like Abraham Lincoln, the impact on Web traffic-ba-bang!-was amazing. When you begin to see things like that, you realize that-I watch my kids living on the computer, with TV, instant messaging, music. The way they combine these things gives us a hint as to how in the future we're going to intersect with them. It's not going to be about passivity at all. It's got to deal with interactivity. And not just interactivity on a computer but interactivity between media.

The television, the Internet-these are media. Media don't buy products. Consumers buy products. And at some point we've got to sell them something; we've got to hear the cash register ring.

MR. RITTENBERG: I do think consumers react differently to the advertising experiences in different media. But the television audience by and large has made the determination that it's worth it to them to watch some advertising to watch a show they like.

MR. KAGER: I believe there are 175 million cell phones in this country today. And what's the penetration of personal video recorders? Five percent, Mike? So the personal video recorder to me is not the issue. The issue is-and in Europe the cell phone is so advanced, I mean it's just so advanced. It's a way of life.

And with 175 million screens in this country available in which to communicate with the consumer, you can communicate with the consumer at any time you want when that consumer is interfacing with that cell phone.

AA: How is NBC Universal capitalizing on that move to the cell phone? Are you able to sell advertising around that screen?

MR. KAGER: We look at it that there are a couple of revenue streams there. There's the ad component, there's the back end of which the consumer opts in to get additional information. And then once they opt in to get additional information, are they making purchasing and acquisitions?

MR. SHAW: But what the cell phone companies are just covering is it's all driven by content, which is how the whole conversation started. They're now coming to us for content.

AA: Every year companies say, "Network TV doesn't work, we want to move our money to the Internet or to other sectors." But at the end of the day don't they always come back and say, "Look, we can't afford to be out of network TV, we can't afford not to spend more money"? I mean is it a little bit of bravado that these companies need to kind of make noises about moving their money elsewhere?

MS. SPECIALE: Again, there isn't a client that's saying TV is not something that's a positive for them. What is happening and what has been happening and will continue to happen is that we need to find that consumer-where and when that consumer wants to be-where that message is and where we can affect that person, OK? They might not want to hear the messaging. So we have to be careful in placing that message, to all your points, of what we're saying and having them respond.

So I don't think we're sitting here saying we want to put our money in television and we want to put our money in magazines. It's basically who is our consumer, what are they doing, what are they passionate about and where can we reach them effectively?

That's what it's all about. So the planners aren't sitting here and saying, I want X% in cable and X% in [broadcast] TV. I mean it's basically who is our target?

AA: This is going to be kind of a funny year since there's been so little erosion on the broadcast network side. And there is kind of a three-way horse race.

MS. SPECIALE: It's good. It's good for everyone. I'm ecstatic that "Desperate [Housewives]," "Lost," "Grey's Anatomy" now-ABC and prime time now-rating erosion has basically sustained itself this year for the first time in many years. And they've done it without reality [programming]. That to me is a great thing, because we've really been making rating points over the past few years because of "American Idol"-but ABC now has finally made hits again without it just being reality. And it was perfect. I mean Sunday night at HBO was definitely now on a downswing, and they found an opportunity that they put the right show in the right time period in the right year. If "Desperate Housewives" came on two years ago when "Sex & the City" was still on, who knows if it would've taken off? But they hit it, they hit the jackpot.

It's great that there are now rating points-between that and cable, where cable ratings are through the roof on every vendor. TLC and Discovery are a little off. But so there are more rating points in cable, and now they're flat if not up on women 18-49 ratings on prime time. We now are going to be buying rating points. This will be the first upfront that we are going in with rating points in our favor, and now we're actually purchasing something and not purchasing less. We're now going to be purchasing more. That's a good thing for everybody.

TOM McGARRITY: I know I represent somewhat of a little different model for the group here. We've had ratings-a week ago we had a show, a Selena special, that had 4.5 million viewers. The month before that we had another prime-time novela show that was 4.5 million viewers. So when you talk about ratings in a marketplace, the Hispanic marketplace continues to thrive. The Univision network continues to really take full advantage in the sense of the population growing.

There's one other issue next year in our marketplace and that is the World Cup. It comes around once every four years. It is the passion point for Hispanics.

MS. SPECIALE: That's key-passion. The passion point. That's what we're trying to find.

AA: Paul, have you got an idea of what cable will be overall?

MR. RITTENBERG: I think that the upfront marketplace in cable will be healthy. The truth is for cable our economic model, setting aside the affiliate fees, is different from these guys anyway because we have probably two-thirds of our upfront business placed in simultaneous broadcast upfront. Another third of it is done on a calendar year basis. And we still need four healthy scatter marketplaces-at least I do to keep my job-when the ratings are going up. So the upfront is very important, but it is not as definitive.

AA: Chris, can you give us your take on syndication? You've got Martha Stewart's new show to sell this year, haven't you?

MR. KAGER: Well, that's being sold by her own sales force. We are involved in the distribution side. And actually we're very pleased with the distribution of the show to date-it's over 90%. I just think it's too early to forecast the marketplace at this point in time.

Last week, I spoke to three or four clients and agencies who tell me that budgets are still not finalized, they're still being worked on. So if anyone at this point in time can say that it's plus this or plus that, God bless them.

AA:: Mike, you're in the catbird seat this year.

MR. SHAW: Well, ABC is going to have a tremendous upfront. I can't speak at this point on behalf of the rest of the networks. I think Donna correctly analyzed the marketplace. You've got flat [gross rating points] in the network, and you've got more in cable. So that being the case, water will seek its own level.

I don't see loud, angry people this year either at the agencies or on the client side screaming that I'm not going to take it anymore. I think ABC's success in particular [shows] not only proved that you could bring different types of programs to the air and have an audience find them, we also proved you can launch them still. Having 99% distribution and being in every home in America tonight is an unbelievable position to be in. And that leg up vs. any other advertising alternative makes people shop there first. And the non-erosion story that no one can spin against the networks makes it very interesting.

You're going to certainly see dollars flow between the networks. That's inevitable given that we're up 16% sitting here today. But, more importantly, we're up, geez, 25% in household, 75,000-plus and 100,000-plus.

The mix of what we bring to the party this year is decidedly better. We're way up in "Good Morning America," we're up in daytime, we're up in "World News Tonight." So our momentum isn't just in prime. You're going to see an OK marketplace. I wouldn't be afraid to scatter next year. I think scatter next year might be pretty good.

AA: What makes you think the scatter market is going to be stronger than last year? It's been pretty weak this year, hasn't it?

MR. SHAW: It usually runs counter to what everybody else thinks. I think this year, given the scatter was cheap, some people may hold some money back-that'll make scatter great.

AA: What do you think about the prospect of a producer upfront where you have the likes of a Mark Burnett or a David Kelley selling their own branded entertainment elements. I mean what's the prospect for those guys?

MR. RITTENBERG: I have to say when I hear about this stuff I'm very, very glad that I sell news and sell it for Roger Ailes, because we don't do this stuff. I mean my take on it-again, anything that can go wrong with product placement will go wrong, and it'll usually be something nobody's even dreamed of. And how producers could get in between Mike and his relationship with the advertisers with some kind of better value proposition is beyond me.

MR. SHAW: Well, they don't get on ABC's air. We have never picked up a program-scripted, alternative series or otherwise-where the producer gets to go out and cut any deal with the advertiser. The only gatekeeper at ABC is the ABC sales department, and we determine every integration and every media buy that goes along with that integration. So it's not an issue for us.

MR. RITTENBERG: To Donna's point about all the things people on her side of the table have to look at, it is more than just the dollars in and out of the upfront and the up or down [cost per thousand], although I know that's going to be the grab somewhere. But the value for advertisers involves a lot of other things they have to look at-number of commercial pods, number of announcements per pod. It's not what's the increase, what's the price? What's the value for our advertiser? Those are complicated things to decide.

AA: We have Viacom splitting itself off. I wonder what really does that say about the future of the cross-platform deals? Do buyers have less interest in doing these big, mega-billion-dollar deals?

MR. SHAW: Not at all. Our cross-platform business has grown at a compound in mid-30% range for 40 years. And what we've discovered is that those deals only work at the brand level-they don't work for a parent company. When you can go in and articulate a brand strategy with very singular objectives, you can then go tee that objective to the 15. In our case, Disney Unlimited-15 individual business units that make up part of Disney Unlimited-and you can articulate a brand objective. They all then will come back with what the most beneficial or, I guess, appropriate plan would be for meeting that objective.

We then take those 15 individual objectives back to Donna or her group, where she analyzes them, and maybe she partakes in six or seven of them. But it's at the brand level and that's a very different thing because that takes months to put together. And that's why you're not hearing about them, because they do not work at the parent company, Ad Age big headline level. That's not where they work.

MS. SPECIALE: It's true. The cross-platform terminology is not used anymore. Now it's brand focus. We may not necessarily be on all the different entities of Mike or Viacom's company. You know, what areas do we want for that brand, and what marketing element do we want to bring to the party?

So I agree with Mike. It's bigger than ever because of branded entertainment that everyone's talking about-branded entertainment is kind of incorporated in that area. Again, totally brand-focused. The split between the Via-com companies doesn't mean anything. Lisa McCarthy's [Viacom Plus] group has been doing this for a lot of years now, and they're very connected to Les [Moonves, Viacom co-president] or Tom [Freston, Viacom co-president] or whomever. So for them personally it's going to be fine. Again, it's completely brand-focused.

Also to Mike's point, we are talking 52 weeks a year. We cannot do these deals within the middle of an upfront. We just can't. There's just too much time and effort that go into these deals for these brands and for our clients, that we can't just throw it together. Whether it's producer involvement or non-involvement, whether it's what are the consumer insights for that brand, what are we trying to hit, where do we want to hit, where is that consumer, what's the target audience? There's so much back and forth that has to go on that these conversations have been happening for months.

AA: Chris, are you seeing any cross-platform activity?

MR. KAGER: We're involved in a few initiatives.

MS. SPECIALE: NBC is just getting into it now that they have Universal. They really couldn't do it that much because they did not have all the entities. They could do some with news because they had MSNBC, CNBC and they had the whole news area. But until the whole Universal merger took place they really were not in that area. And now they're just getting into-they're going pretty strong with it.

MR. McGARRITY: The cross-platform deals over the years moved from a discount mechanism, when they first became kind of vogue, to now being deals that are done around a great idea. And then you attach the assets to the great ideas, as Mike was talking, you go to a brand strategy. Those are the ones that work now, because the discount mechanisms simply were one-year wonders that went away the second year. They just didn't work-they fell apart.

At Univision you've got a collection of great assets. You've got a No. 1 network, a No. 1 portal, a No. 1 radio group, a No. 1 local station, a No. 1 music group. So it's one of the unique companies that just don't have assets to wrap around an idea, you have powerful No. 1 assets. And we'll do a lot more cross-platform, multi-asset, whatever the term in vogue is now. But we'll do a lot more of these coming upfront than we've done in the last couple of years.

AA: What else are you guys expecting from this year's upfront and the conversations you're all having now leading up to it?

MR. RITTENBERG: [Fox News Channel doesn't] do cross-platform you were referring to earlier. I'm responsible for selling the news Web site, and a year ago it was kind of can you, would you, could you? You won't be surprised that, Jerry, far more advertisers have dedicated money, time, research integrating what they do online with what they do on television, and I think that's real. The money is coming.

MR. MCGARRITY: I agree with Paul. Online is going to be one of the bigger stories in this year's upfront. This year it's a lead conversation and one that folks are very interested in making sure that's part of whatever the other assets are.

MS. SPECIALE: Branded entertainment is point of entry into getting into all these conversations now. And there are really no rules. Anything goes.

We have always looked at what the supply in ratings pool is, and we've looked at the categories and we saw what the demand is. And I want that to continue, because the ratings story is favorable this year. And the demand is not going to be as strong as it was. And I do not want to see-and Les Moonves is already making statements, and I feel like statements are being made and numbers are being thrown out because of what Wall Street wants to hear. And that's not how our business is, and that's not how our business has been for years. It's been supply and demand, and I just would like it to continue that way.

MR. SHERESHEWSKY: I'm delighted to hear that everyone is getting very bullish about the Internet market. We are. Because we are solo players, we're not really involved on the merchandising side of, I guess you'd call it, cross-platforms yet.

But we are getting very involved in serious discussions with agencies and clients on how to bring these pieces together and into a coherent communication story.

MediaVest is probably the best example I can think of right now of a company that is really integrating the thinking process of how you communicate. It's not just shove cassettes in the machine and press "play." This is a much more sophisticated world that we are living in.

AA: Can you give a brief example of how Yahoo being involved in an upfront conversation can help the market to learn more about their consumer?

MR. SHERESHEWSKY: It's not so much being involved in an upfront conversation-it's really asking the question of how does a consumer buy a car, and what's the role of television, what's the role of outdoor, what's the role of newspapers?

Five, six, seven years ago with the Internet, we talked about the online shopper. Nonsense. There was never an online shopper, there will never be an online shopper. There are people who buy stuff, and how they buy, and where they choose to buy, and what influences those buys are really dramatically much more complex and nuanced things. We're playing in that world.

ON CHANGE:

"The change that's going to occur in three to five years is something that we will not be able to believe"-Donna Speciale, MediaVest

"Television viewing hadn't fundamentally changed, but now comes the personal digital recorder"-Jerry Shereshewsky, Yahoo

"I'm not sure the sky is falling, and I'm not sure PVRs, quite frankly, are the game changer that everyone thinks"-Mike Shaw, ABC

THE CONSUMER IN CONTROL:

"We are competing desperately for an audience that is getting chintzy with their attention and their involvement"-Yahoo's Shereshewsky

"They are multitasking and getting their entertainment or their information in a lot of different areas, and we have to be there"-MediaVest's Speciale

"The television audience has made the determination that it's worth it to them to watch some advertising to watch a show they like"-Paul Rittenberg, Fox News Channel

ON CROSS-PLATFORM DEALS:

"The cross-platform deals over the years moved from a discount mechanism, when they first became kind of vogue, to now being deals that are done around a great idea"-Tom McGarrity, Univision

"It's bigger than ever. The split between the Viacom companies doesn't mean anything"-MediaVest's Speciale

"Those deals only work at the brand level-they don't work for a parent company"-ABC's Shaw

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