Ad buyers, sellers too cozy with the industry status quo

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Resignation to the status quo is not urgency," says John Kotter, a professor of leadership at Harvard Business School. We quoted him in our major report last week on the breakdown of the ad-buying process ("Cracks in the foundation," AA, Dec. 8). But the problem goes beyond resignation: Both buyers and sellers are actually quite cozy with the current arrangements.

Why else would buyers put up with the crazy "upfront" TV buying bazaar? Why would magazines shrug their shoulders over the monthly ritual of throwing away, unsold, 70% of their newsstand product?

The answer is they like it that way. As a marketer is said to have proclaimed long ago, he knew half his advertising was "wasted" (he just didn't know which half). Why go through wrenching changes only to prove 50% is a low estimate of the "wastage"?

The ad industry is more in flux than at any time in memory, yet there is considerable resistance to change. It's sort of like the "devil you know." TV ad buyers spend money based on what 5,000 viewers watch, and sometimes the numbers vary with age or other demographic shifts in the viewership. But the big networks put up with the ratings system because new technology could reveal an even greater erosion in their audience.

And if people today have plenty to do besides watch TV, isn't it a stretch to say commercial TV is destined to fall apart because of TiVo, a device to make it easier to watch more TV (and also eliminate the commercials)? I'll say it again: TiVo is a straw man concocted by the networks to sell a whole new revenue system (in the form of product placements within the programs).

Rather than assume TiVo users are going to stockpile hours and hours of their favorite programs, I submit there's a simpler solution to their needs: video on demand. Why collect shows if you can order a program when you want to see it? You can't watch "Friends" that way now, but it won't be long before you can-and the commercials will still be intact.

New technology also presents opportunities to print, but magazines, fearing ad readership might be impacted, seem less than enthusiastic. If they think it's a crime to shred 70% of all newsstand copies, why not experiment with digital editions? Set up kiosks in places like malls and airports, where readers can plug in and download a digital edition for viewing on the plane or at home. "Won't happen in my lifetime," I heard a magazine guy say. But think how digital editions could cut those wasted copies, not to mention that digital and online versions of magazines and newspapers could help slow the fall in print subscriptions (and they could be billed to credit cards, cutting down on costly renewal notices).

The above is bad enough, but what's really broken in today's system is the amount of very bad advertising that gets approved by top management. Are CEOs so absorbed by trying to make their next deal that they tolerate the inept and stupid ads guaranteed to alienate their best customers?

The bottom line is this: The buyer-seller relationship could shift to a more rational basis, but little would be accomplished to make ads more effective if the quality of the ads themselves continues to be so poor.

Wouldn't you agree, Mr. Kentucky Fried Chicken and Mr. McDonald's?

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