Time for TV Networks to Guarantee Big Bundled Audiences, Quickly
Twenty years ago, when four large broadcast networks dominated TV, almost every one of their prime-time shows had big ratings. Whether advertisers were releasing a blockbuster movie, introducing a new car or trying to keep their soda brand in the forefront of consumers' minds, only broadcast TV commercials could deliver the impact many marketers needed. The spots were precious, scarce and perishable. It's no wonder that a sort of futures market developed around them -- the infamous TV upfront -- and the gross rating point became adland's primary currency.
Marketers now need three times as many broadcast prime-time commercials to deliver the same impressions as 20 years ago. In the early 1990s, when the broadcast networks represented more than 70% of all TV viewing in the U.S. and you only had to buy a few dozen commercials to get 100 gross ratings points.
Now, when the broadcast networks' share of total viewing has dropped to less than 30%, the hundreds of upfront broadcast spots needed to achieve comparable media weight also deliver a massive amount of audience duplication. According to Nielsen data, each upfront gross ratings point today requires five to seven times more frequency than it did in 1992.
Having to buy more spots to reach the same number of people undermines an advertiser's ability to control the amount of times that heavy TV viewers will see its ads. Every additional spot an advertiser needs to buy is going to duplicate some of the audience delivered by the other spots.
Given this, it is no longer enough to just buy reach. If advertisers and agencies can't get reach from TV fast enough, without using too many spots and too much time, they will get it elsewhere -- probably online and in web video.
As part of advertisers' upfront commitments, networks should offer guarantees not just on reach but on frequency and specific demographics. For example, a movie studio that buys 20 weekly GRPs in the 18-49 demographic might be guaranteed that their ads will be seen by at least 70% of that demographic watching TV that week and see the ad no more than three times each.
Networks would probably charge a premium for this guarantee -- maybe a substantial one -- because they will be delivering much more value to advertisers than they do now. And many advertisers would probably be happy to pay it, since their waste would be dramatically reduced.
But it's not just a good idea for some point down the line. Here is why the industry should act on this now:
Data-driven packaging of audience is the future of TV. In a world where A&E's "Duck Dynasty" beats 90% of prime time, NBC comes in fifth among broadcast networks and a surprisingly low rating can still win a night, there is no way for anyone to know ahead of time exactly how each show is going to do.
Sure, media buyers have long since adapted to a world where they can't pick every show, but it's time to take the next step and for TV to follow the lead of online and embrace data-driven audience packages as a complement to content-driven buys.
It's time to bundle broadcast and cable as single, audience-driven buys. The latest Nielsen numbers tell us that more people are watching more TV than ever before -- but, they are watching on more networks and at more different times in the day. Today, three of the four largest broadcast networks also own large portfolios of cable networks. They should be sold together. Of course, the best "bundlers" will be the media agencies. They work across all networks and dozens of clients each, but the more sellers "chunk" their inventory into bundled packages, the easier it will be for agencies to shift into frequency-based buying.
It creates better and more flexible pricing. Some advertisers may be fine with frequency-heavy ratings points. In fact, maybe they can get a discount if they don't mind the many repetitions. On the other hand, those that value reach and efficiency will probably pay more for guaranteed reach, maybe significantly more. For networks needing double-digit pricing increases to pay for climbing content production costs during periods of ratings declines, this could be an answer.
Audience-based bundling sets TV networks up well for digital packaging. More and more advertisers want cross-platform media buys, but it won't happen just because they say it. Someone has to deliver it. This is the place for TV networks to lead, proactively adding digital and web video as incremental reach to their TV packages. Now is the time, or the online folks will do it first.