Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
UBS 39TH ANNUAL GLOBAL MEDIA AND COMMUNICATIONS CONFERENCE
The Outlook
for the Broadcast Networks
David F. Poltrack
Chief Research Officer, CBS Corporation
President, CBS Vision
Good Morning. First, the required preamble.
UBS 39th Annual Global Media and
Communications Conference
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This presentation may include "forward-looking statements" within the meaning of section 27A
of the Securities Act of 1933 and section 21E of the Securities Exchange Act of
1934. Forward-looking statements inherently involve risks and uncertainties that could cause
actual results to differ materially from the forward-looking statements including those due to
changes in economic, business, competitive, technological, strategic and/or regulatory factors,
and other factors affecting the operations of the entities' businesses described herein
including, without limitation, of CBS Corporation. Such entities' news releases and filings with
the Securities and Exchange Commission including, but not limited to, their respective most
recent Forms 10-K, 10-Q and 8-K contain a more detailed description of factors that could
affect future results. The forward-looking statements are made only as of the date of the
presentation and we do not undertake to update any forward-looking statements to reflect
subsequent events or circumstances.
2
The Cautionary Statement Regarding Forward-Looking
Statements.
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Communications Conference
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
UBS 39TH ANNUAL GLOBAL MEDIA AND COMMUNICATIONS CONFERENCE
The Outlook
for the Broadcast Networks
David F. Poltrack
Chief Research Officer, CBS Corporation
President, CBS Vision
My theme this morning will be that broadcast network television
not only remains a the dominant mass medium today but that it
has enhanced its mass medium status by…
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Broadcast Network Television:
The Amassing Medium
4
…Amassing viewers through new distribution channels. Let’s
start with the short-term outlook.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
The Outlook
ƒ Outlook for 2012
ƒ Review of forecast for 2011
5
Before presenting the Outlook for 2012, I will review my 2011
forecast from last year.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Original 2011 Forecast
ƒ Network Television Ad Revenues
ƒ Underlying Growth Rate
+3.4%
+5.0%
6
My original forecast for 2011 called for a gain of 3.4% in
broadcast network television advertising revenues. Since this was
a non-Olympic year, adjusting for the 2010 Olympics yields an
underlying gain of 5.0%.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
The Outlook
ƒ Outlook for 2012
ƒ Review of forecast for 2011
ƒ The economic picture turns hazy
7
At this time last year, we were fairly confident that we were on the
road to recovery but less confident regarding the pace of that
recovery. Moving forward to the present time, we remain
confident that we are still on the road to recovery and still less
confident about the pace of that recovery.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
The Outlook
ƒ Outlook for 2012
ƒ Review of forecast for 2011
ƒ The economic picture turns hazy
ƒ Savings down/Spending up
ƒ Private sector strengthening
ƒ Government sector weak
8
The recent recession was characterized by a significant shift in
the ratio of savings and spending among consumers, with
consumers reacting to the loss in value of their 401K plans and
their homes by increasing their rate of savings. This year that
trend was reversed. The rate of consumer savings is down and
consumer spending is increasing in real terms. Based on the
early holiday sales, this trend appears to be continuing. In fact,
the private part of the economy looks strong. The drag on the
recovery is in the government sector. Government spending is
down due to the national and local budget crises. This is the
missing element relative to the previous recovery which was
stimulated by increased spending from the government sector.
This is also what is keeping the unemployment level so high.
While the current government crisis and the problems in Europe
will remain a drag on the recovery, we believe that consumer
spending will continue to increase, fueling that recovery.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
The Current Market
ƒ Strong Upfront Market
ƒ Cautious Scatter Market
9
The positive signs in the economy in the first half of 2011 led to a
very strong scatter market which, in turn, led to a strong 20112012 Upfront Market. This was also in line with my original
forecast. However, the difficulties in Washington and the growing
European problems have created uncertainty on the economic
horizon. This has led to some concern on the part of advertisers.
While scatter prices for the 4th Quarter remain above Upfront,
advertisers are moving cautiously. Marketers want to get out in
front, but not too far out in front, of the consumer as that
consumer increases spending. Some of them are now holding
back as the calendar year closes due to the continued economic
uncertainty and the normal last minute efforts to reach their fullyear financial goals.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Current 2011 Forecast
ƒ Network Television Ad Revenues
ƒ Underlying Growth Rate
+3.4%
+5.0%
10
Despite the impact of these factors, I still expect the full year 2011
gain to equal my original 3.4% estimate and 5.0% underlying
growth rate, adjusting for the 2010 Olympics.
Which brings us to 2012.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
2012 Forecast
ƒ Network Television Ad Revenues
ƒ Underlying Rate
+7.3%
+5.0%
11
I am going to stay with my original 2011 underlying growth rate of
5.0% through 2012. Adjusting for the 2012 Summer Olympics,
that brings the total ad revenue growth for the four broadcast
networks in 2012 to 7.3%. I would use the analogy of a NASCAR
race to describe the current television advertising market. The
latest economic setbacks have resulted in the advertisers
operating under a “caution” flag during the 4th Quarter of 2011.
They are jockeying for position, conserving fuel, and fine-tuning
their race strategies, but no one has dropped out of the race. As
soon as the economic clouds clear and the green flag is given,
they will begin competing at full throttle to capture a share of the
increased consumer spending. The only question is when they
will see that green flag.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
The Outlook
ƒ Outlook for 2012
ƒ The Audience Situation
ƒ The Competition from Cable
ƒ The Election Year Impact
ƒ The Summer Olympics
12
Meanwhile, the fundamentals for the broadcast networks are very
strong. Starting with their season-to-date performance.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
The Outlook
ƒ Outlook for 2012
ƒ The Audience Situation
ƒ Audience Deficiencies
13
As is the case every year, the networks’ ability to capitalize on
any increased market demand will be affected by the audience
delivery of their programming and the degree to which they avoid
accumulating a significant amount of audience deficiencies with
their upfront advertisers. Let’s see how they are doing.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Primetime – Year-Over-Year
2011-12 Season-to-Date – Live+7
+22% +21%
+6%
+6%
+3% +4%
+27%
+23%
+3% +1% +3%
n.c.
-6%
CBS
Homes
-8%
-6%
-7%
NBC
Viewers
ABC
A25-54
FOX
A18-49
Source: Nielsen NPM. 9/19/11-11/13/11 vs. 9/20/10-11/14/10;
Primetime, All Programs; Live+7 Data
14
First, looking from the viewers’ perspective, we see a positive
picture for three of the four major broadcast networks in Live+7
day program ratings.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Primetime 4-Network Totals
2011-12 Season-to-Date – Live+7
+6%
+7%
+6%
+2%
4-NETWORKS
Homes
Viewers
A25-54
A18-49
Source: Nielsen NPM. 9/19/11-11/13/11 vs. 9/20/10-11/14/10;
Primetime, All Programs; Live+7 Data
15
Overall, the four networks are up on a total audience and key
demographic basis.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Primetime – Year-Over-Year
20112011-12 SeasonSeason-toto-Date – “C3”
+45% +46%
+38%
+31%
+4% +3% +2% +3%
-6%
CBS
Homes
-5% -7%
-6%
NBC
Viewers
-1% -2%
-5%
ABC
A25-54
-6%
FOX
A18-49
Source: Nielsen NPM. 9/19/11-11/13/11 vs. 9/20/10-11/14/10;
Primetime, All Programs; Live+3 Commercial Data
16
Switching to the advertiser’s perspective and the all-important C3
currency measure, we see two of the four networks posting gains
and two posting declines. The higher percentage gains shown
here for FOX are a function of the big gain from a seven-game
World Series which has a low ratio of playback to live viewing.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Primetime 4-Network Totals
20112011-12 SeasonSeason-toto-Date vs. Year Ago – “C3”
+8%
+8%
+5%
+5%
Homes
Viewers
A25-54
A18-49
Source: Nielsen NPM. 9/19/11-11/13/11 vs. 9/20/10-11/14/10;
Primetime, All Programs; Live+3 Commercial Data
17
Collectively, the four networks are up in Total Viewers and in the
key demos. So, on an overall basis, we do not see the network
market being negatively affected by a significant audience
deficiency problem. But that is on an overall basis. We all know
that the broadcast networks’ leverage in the ad market is derived,
to a large extent, by the demand for their top programs. When we
look at just the top programs, the results for the networks are
even stronger.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Primetime – Top Show Performance
20112011-12 SeasonSeason-toto-Date vs. Year Ago – Live+7 and “C3”
Top 10
Top 20
+11% +12%
+8% +9%
+3% +1%
-1%
Live+7
Homes
+4%
+1%
+7% +9%
n.c.
n.c.
+5%
+8%
-2%
C3
Viewers
Live+7
C3
A25-54
A18-49
Source: Nielsen NPM. 9/19/11-11/6/11 vs. 9/20/10-11/7/10;
All Programs; Live+7 and Live+3 Commercial Data
18
Whether you focus on the top ten programs or the broader top
twenty programs, on a key demo basis, season-to-season gains
for both Live+7 or C3 measures reflect that the top network
programs are, collectively, performing better than last year. In
other words, the “big money” shows are performing well.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
The Outlook
ƒ Outlook for 2012
ƒ The Audience Situation
ƒ Audience Deficiencies
ƒ New Programs
19
The key to the long term success of a broadcast network is its
ability to re-generate its primetime line-up with new franchise
programs to replace key aging hit programs.
This season the networks have been quite successful in
developing promising new series.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Primetime – New Series Rank
2011-12 Season-to-Date
Source: Nielsen NPM. 9/19/11-11/27/11, Excludes cancelled series;
Live+SD and Most Current Data
20
Here are the top new programs ranked by total viewers. Also
shown for each program is whether or not it is number one in its
time period in viewers or key demos; and whether or not it is up
from the program in its time period last fall. As has been
reported, there are several promising freshman series.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
The Outlook
ƒ Outlook for 2012
ƒ The Audience Situation
ƒ Audience Deficiencies
ƒ New Programs
ƒ The Cable Competition
21
Now let’s take a look at the cable competition.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Primetime – Year-Over-Year
2011-12 Season-to-Date – Most Current
+2%
+1%
+2%
-1%
-4%
All Ad Supported Cable
Homes
Viewers
-2%
-9%
-5%
Top 10 Billing Cable
A25-54
A18-49
Source: Nielsen NPM. 9/19/11-11/20/11 vs. 9/20/10-11/21/10;
All Programs; Most Current Data
22
On a Most Current basis, the Ad Supported Networks are down
slightly in Total Viewers and up slightly in the key demos.
However, the Top 10 Billing Cable Networks are down in all key
categories.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Primetime Cable C3 – Season-to-Date
20112011-12 SeasonSeason-toto-Date vs. Year Ago
All (40) Ad-Supported Cable Networks
Plus
Minus
Same
Adults 25-54
4
6
30
Adults 18-49
8
8
24
Source: NTI, 9/19/11-11/6/11 vs. 9/20/10-11/7/10;
40 Measured Ad-Supported Cable Networks
23
On a network-by-network basis, we see a continuation of the
pattern of last year with a fairly even split of gainers and losers…
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Primetime Cable C3 – Season-to-Date
20112011-12 SeasonSeason-toto-Date vs. Year Ago
Top 10 Billing Ad-Supported Cable Networks
Plus
Minus
Same
Adults 25-54
0
3
7
Adults 18-49
3
5
2
Source: NTI, 9/19/11-11/6/11 vs. 9/20/10-11/7/10
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…and a slight majority of losers among the Top 10 networks.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Primetime - Share of A18-49 Audience
20112011-12 Combined Broadcast vs. All AdAd-Supported Cable
THIS SEASON
LAST SEASON
60%
59%
41%
4-Broadcast Networks
Ad Supported Cable Networks
40%
4-Broadcast Networks
Ad Supported Cable Networks
Source: NTI, 9/19/11-11/20/11 vs. 9/20/10-11/21/10, Most Current Data
25
When you put it all together, you have the broadcast networks
gaining on their cable competitors…
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Primetime - Share of A18-49 Audience
20112011-12 Combined Broadcast vs. Top 10 AdAd-Supported Cable
THIS SEASON
LAST SEASON
36%
33%
67%
4-Broadcast Networks
Top 10 Cable Networks
64%
4-Broadcast Networks
Top 10 Cable Networks
Source: NTI, 9/19/11-11/20/11 vs. 9/20/10-11/21/10, Most Current Data
26
…and making more substantial progress against the Top 10 adsupported cable networks.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
The Outlook
ƒ Outlook for 2012
ƒ The Audience Situation
ƒ Audience Deficiencies
ƒ The Cable Competition
ƒ The Continued Impact of the DVR
27
The DVR continues to have a major impact on the primetime
performance of the broadcast networks and their cable
competition.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
DVR Penetration
100%
90%
80%
70%
60%
50%
40%
29%
38%
43%
21%
30%
20%
34%
11%
10%
0%
Fall 2006
Fall 2007
Fall 2008
Fall 2009
Fall 2010
Fall 2011
Source: Nielsen NPM Sample Penetration
28
DVR penetration is still growing at a significant albeit slower pace.
From last fall to this fall penetration went from 38% to 43%.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
DVR Impact
2011-12 Season-to-Date vs. Prior Two Years
DVR PENETRATION
Primetime – All DVR Playback*
Primetime - All DVR Playback
5.4
HHLDS
34%
38%
6.3
+17%
+8%
43%
6.8
4.0
+12% 4.5
A18-49
+6% 4.8
2009-10
2010-11
2011-12
DVR PENETRATION
2011-12
2010-11
2009-10
Source: Nielsen NPM. 9/19/11-11/13/11 vs. 9/20/10-11/14/10
vs.. 9/21/09-11/15/09
29
While the absolute gains in time-shifted viewing remain
substantial, the relative gains are lessening. This season, timeshifted viewing is up just 8% on a household basis and 6% for
younger adults, compared to 17% and 12%, respectively, last
season.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Primetime - Network Live+7 vs. DVR Playback
2011-12 Season-to-date
8.5
6.5
6.2
6.8
4.8
3.6
2.6
HH RATING
CBS
2.9
3.6
DVR Playback
DVR Playback
4.8
ADULTS 18-49
NBC
ABC
FOX
Source: Nielsen NPM. 9/19/11-11/6/11; Live+7 Data for Networks
30
In total, collective playback exceeds the live Adult 18-49 audience
of each of the four networks and the total audience of every
network but CBS. For the broadcast and cable programmers, this
means that they have to compete with another major competitive
force in each primetime hour, playback of their own programming.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
DVR Playback – Viewers (000)
2011-12 Season-to-date
5-Net
Avg
1,064 1,650
7,246
9,960
8,028
17,040
2,438
3,011
22,489
NCIS
18,608
Modern
Family
10,082
3,438
4,659
18,179
13,019
Live
Same Day Playback
1-7 Day Playback
C3
Source: Nielsen NPM, Primetime Original Entertainment Series;
9/19/11-11/6/11
31
Up until now, I have been dealing with averages. However, time shifted
viewing is concentrated among the most popular shows. This chart
highlights two shows with an extraordinary amount of playback, NCIS
and MODERN FAMILY. NCIS, the #1 program, adds over five million
playback viewers to its 17 million live viewer base to reach over 20
million viewers overall. MODERN FAMILY, the program with the highest
playback audience, adds about 8 million viewers to its 10 million live
audience base. Unfortunately, not all of these viewers are included in
the C3 currency audience. The yellow bars show the C3 viewers for
each of these programs
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Primetime - Share of Playback
2011-12 Season-to-Date
36%
64%
Broadcast Networks
Ad-Supported Cable Networks
Source: NTI, 9/20/11-11/6/11, Playback Only, Households
32
The DVR has provided the broadcast networks with a valuable
weapon in their fight for viewers with the growing array of cable
challengers. This season, looking at the combined broadcast + ad
supported cable audience in Primetime, 64% of Primetime
playback is to broadcast network programs vs. just 36% to cable
programs.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Primetime - Share of Playback vs.. Live
2011-12 Season-to-Date
LIVE
PLAYBACK
38%
62%
Broadcast Networks
Ad-Supported Cable Networks
62%
38%
Broadcast Networks
Ad-Supported Cable Networks
Source: NTI, 9/19/11-11/6/11 vs.. 9/20/10-11/7/10,
Playback Only vs.. Live Only, Households
33
When you contrast these playback shares to the live audience
shares, you really get the picture of how the DVR has enhanced
the competitive position of the broadcast networks. The broadcast
networks’ 64% of playback far exceeds their 38% share of live
viewing.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Primetime – Broadcast vs. Cable Share
2011-12 Season-to-Date vs. Year Ago
THIS SEASON
45%
LAST SEASON
59%
58%
4-Broadcast Networks
Ad Supported Cable Networks
43%
4-Broadcast Networks
Ad Supported Cable Networks
Source: NTI, 9/19/11-11/13/11 vs. 9/20/10-11/14/10,
Household Share, Live+7 Data
34
Overall, this season-to-date the networks have re-captured share
from their cable competition, moving from an overall primetime
share of 43% to 45% while the ad supported cable networks
collectively dropped one point, from 59% to 58%. Remember,
shares can add up to over 100% because a home can have a
cable show on one TV and a broadcast show on another TV.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
The Outlook
ƒ Outlook for 2012
ƒ The Audience Situation
ƒ Audience Deficiencies
ƒ The Cable Competition
ƒ The Continued Impact of the DVR
ƒ The Election Year Impact
ƒ The Summer Olympics
35
The final two elements that will a boost the advertising revenues
for the four broadcast networks are the quadrennial elements of
political advertising and the Summer Olympics.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
2012 Forecast
ƒ Network Television Revenues
ƒ Underlying Rate
+7.3%
+5.0%
36
So my 2012 forecast is built upon the assumptions of a
continuation of the economic recovery with that recovery picking
up in pace as the year progresses; a stable audience picture for
the broadcast networks; no significant competitive advances by
the cable competition; a growing contribution to broadcast
audiences from DVR playback and the full quadrennial boost from
political advertising and the Summer Olympics.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
The Longer-Term Outlook
37
Now I would like to turn to the longer-term outlook for the
broadcast networks.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
An Overview
38
As I was beginning the preparation for this report, I thought to
myself at least this year I will not have to refute the “end of
broadcast network television” theme that has been regularly
surfaced by the misinformed and misguided throughout the thirty
years that I have been speaking at this conference. You can,
therefore, appreciate how surprised I was to see the following
headline in one of the major trade publications.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Big 4 TV Nets Wane As Google, Facebook Command Ad Dollars
39
“ Big 4 TV Nets Wane As Google, Facebook Command Ad
Dollars”. If this article was confined to the belief of its author, I
would not be concerned, since this author has incorrectly forecast
the end of broadcast network television for most of that thirty-year
period. What does concern me is that the article used material
from several of the most respected Wall Street analysts to
support its argument. So today I will, once again, present the
case for broadcast network television. I will, hopefully,
demonstrate how the broadcast networks will not only survive, but
thrive, in the new video marketplace.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
The Broadcast Network Television System
40
Those of you that have heard my earlier addresses know that I
believe that you cannot evaluate the future prospects of the
networks if you do so outside of the context of the full network
television system. That system begins with a studio that develops
and produces programs for the network and it includes the owned
stations that carry the network’s lineup, the syndication operations
that sell the network’s programs internationally, in the secondary
domestic syndication market and the new internet, VOD, and
mobile platforms for those programs. My comments this morning
will be made in reference to this broader broadcast network
television system.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
An Overview
ƒ The Outlook for the Broadcast Networks
ƒ The Viewer: Greater access to their programming by
viewers
ƒ The Advertiser: Growing demand for television advertising
ƒ The Subscriber: Potential new revenues from realignment
of current consumer video subscription fees
41
What I will be presenting to you today is a somewhat contrarian
perspective on the outlook for the broadcast networks. I will
address this subject from the perspectives of the viewer, the
advertiser, and the subscriber. I will make the case for a scenario
that has viewers gaining greater access to broadcast network
content; advertisers favoring the mass medium of television over
targeted media; and the realignment of the subscribers’ video
subscription expenditures in favor of the broadcaster. Let’s start
with the viewer.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
An Overview
ƒ The Viewer
ƒ More content than they need or are seeking
42
The television business is centered on the viewer as both a
consumer of television programs and a target of television
advertising. Today, the average viewer has the choice of over 130
channels of programming, thousands of hours of VOD content,
and a vast library of legacy programs from suppliers such as
Netflix, iTunes and Amazon. In addition, the average viewer has
wide choice of video options online. Finally, almost one-half of
those consumers have their own inventories of stored programs
on their DVRs. So my first premise is that the average consumer
has more content than they need or are seeking.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
An Overview
ƒ The Viewer
ƒ More content than they need or are seeking
ƒ Limited access to that content
ƒ Life gets in the way
43
What the average viewer does not currently have is adequate
access to that content. New technologies have, in the past few
years, done a great deal to solve the problem of limited access to
content. They have substantially increased the amount of
program content available and the places where that content can
be accessed. What they have not done is fully eradicate the
major constraint to the viewer’s access to that content, the lack of
time. Life gets in the way. Most of the population of the United
States has access to more video content that appeals to them,
than they have the time to watch that content.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
An Overview
ƒ The Viewer
ƒ More content than they need or are seeking
ƒ Limited access to that content
ƒ Life gets in the way
ƒ Needed: Greater access to favorite programs
44
So, I will argue that the consumers are not so much seeking new
programming choices, as seeking greater access to their favorite
programming. And, today, as has been the case throughout the
last sixty+ years, the majority of their favorite programs are the
programs presented by the broadcast networks. And while the
consumers welcome the increased choice provided by the new
technologies, they welcome even more the increased access to
their favorite broadcast network programs provided by those
technologies.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
An Overview
ƒ The Advertiser
ƒ Better measures of ROI
The other critical player for the broadcast networks is the
advertiser. Even as new revenue streams are opening to those
networks, the major source of revenue is, and, for the foreseeable
future, will continue to be, advertising. Overall, the news on the
advertising front is very good. New research tools are allowing
marketers to accurately measure the ROI from advertising
investments. As a result, the marketing department is better able
to defend advertising investments with the CFO and CEO. This is
resulting in a movement of dollars back into advertising.
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Communications Conference
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
An Overview
ƒ The Advertiser
ƒ Better measures of ROI
ƒ Television Advertising gains share
ƒ Search enhances television advertising
These same research tools have also demonstrated the superior
ROI for television advertising, resulting in gains for television in
share of total advertising expenditures despite the emergence of
the internet as a major new advertising medium. The
development of internet search has actually contributed to the
value of television advertising. For the first time, consumers have
an immediate way to act on the awareness of, and interest in, a
new product or a new product feature generated by television
advertising.
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Communications Conference
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
An Overview
ƒ The Advertiser
ƒ Better measures of ROI
ƒ Television Advertising gains share
ƒ Search enhances television advertising
ƒ Borrowed Interest
As I read the aforementioned article suggesting that Google and
Facebook were going to lead to the demise of the four broadcast
networks as advertising media, I realized that the position
presented in the article may have been invalidated by a false
assumption as to how advertising works. Underlying the
discussion in the article is a belief that consumers devote a
substantial amount of their time to seeking out information for
everyday buying decisions; that they are willing to devote time to
researching which snack food or soft drink to buy. That is not
how it works. Most consumers want to make these decisions as
efficiently and effortlessly as possible. Television advertising is so
effective because it employs the concept of borrowed interest to
impart information about the benefits of certain products and
services in the context of an activity, the viewing of television
programs, that consumers seek out and with which they spend a
great deal of time. Neither Google or Facebook has yet figured
out how to command the attention of consumers for enough time
to match the commercial message delivery power of network
television.
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Communications Conference
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
An Overview
ƒ The Advertiser
ƒ Better measures of ROI
ƒ Television Advertising gains share
ƒ Search enhances television advertising
ƒ Borrowed Interest
ƒ “Mass “ media efficiency versus targeting precision
Another popular theme with the new media advocates cited in this
article is the targeting advantage of these new media versus the
mass media and the resulting lack of “wasted” impressions.
While, on the surface, this makes intuitive sense, in practice is
usually does not work out that way. Today, I will present research
showing that, in most real life cases, mass media efficiency
trumps targeted media precision.
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Communications Conference
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
An Overview
ƒ The Subscriber
ƒ Point of Resistance
ƒ Broadcasters’ Share
Most U.S. households are paying some form of subscription fee
for their television content. For cable and satellite customers, this
fee is usually determined by pre-set or tiered packages of
channels. These fees have grown considerably as the number of
channels have grown. Economic pressures and new, more
limited, but less expensive, video distribution options have led to
recent resistance to these fees; and some minimal “cord cutting”;
and a more significant amount of downgrading of these
subscriptions or cord “shaving”. From the subscribers’
perspective, what they are paying for includes clear access to the
broadcast channels. Until recently, the broadcast stations and
networks did not share in the subscriber revenues. Today, that is
changing. The broadcasters’ are beginning to receive
retransmission payments from the cable and satellite distributors
and also are entering into shared revenue arrangements with the
new video distributors.
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Communications Conference
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
An Overview
ƒ The Subscriber
ƒ Point of Resistance
ƒ Broadcasters’ Share
ƒ Towards subscription fee/viewing alignment
The new configuration of the video distribution market is likely to
lead to a significant realignment of the allocation of subscription
fees among the various players. It is still too early to predict how
this disruption of the current video distribution market will play out.
However, it is very likely to result in a more consistent alignment
of subscription fees and actual viewing. If this does turn out to be
the case, the upside for the broadcasters, with their large shares
of overall viewing, will be substantial.
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Communications Conference
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Broadcast Network Television:
The Amassing Medium
51
Returning to the viewers and their quest for greater access to
their favorite programs, one place where access to that content is
growing is on the internet, through video streaming.
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Communications Conference
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
TV Program Streaming
Have Streamed Programs
86%
60%
85%
64%
62%
68%
51%
41%
Total Viewers
Adults 18-34
2010
Adults 35-54
Adults 55+
2011
Source: CBS Entertainment Panel, Nov. 2010, Nov. 2011
52
We have been tracking video streaming for several years now with the
members of our Entertainment panel. This panel in made up primarily
of people that are heavier than average television viewers and internet
users. Last month, just under two-thirds of these panelists, 64%,
reported streaming television programs. This percentage was up from
60% last November. As you would expect, the younger adults are
more likely to be streamers. However, the rate of growth in streaming
is greatest among the older viewers.
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Communications Conference
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
TV Program Streaming
More Often
30%
36%
Total Viewers
34%
41%
31%
Adults 18-34
2010
35%
Adults 35-54
34%
24%
Adults 55+
2011
Source: CBS Entertainment Panel, Nov. 2010, Nov. 2011
53
About one-third of these streamers, 36%, say that they are streaming
programs more often, up from 30% last November.
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Communications Conference
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
TV Program Streaming
Less Often
21%
Total Viewers
22%
21%
20%
13%
12%
10%
Adults 18-34
2010
Adults 35-54
15%
Adults 55+
2011
Source: CBS Entertainment Panel, Nov. 2010, Nov. 2011
54
This compares to the much lower, and declining, percentage of viewers
that say they are streaming less often.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
TV Program Streaming
How Streamed
58%
50%
62%
42%
27%
18%
On Desktop
On Laptop
2010
On TV
19%
10%
On Mobile Device
2011
Source: CBS Entertainment Panel, Nov. 2010, Nov. 2011
55
This streaming is also moving from the desktop computer to the laptop
computer and, more significantly, to the television set and/or mobile
devices.
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Communications Conference
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
CBS.com Breaks Records with Premiere Week
Results extending through Q4
ƒ CBS.com had the best premiere week ever with
7.5mm unique visitors (up +50% YOY).
ƒ Set single day record for traffic on Monday 9/19
with over 1.8mm Unique Visitors.
ƒ Broke that record the next day, Tuesday 9/20, with
more than 2mm Unique Visitors (up 100% YOY).
ƒ Broke records in social referrals (2mm+)
…reflecting the popularity of CBS.com social
events like Tweet Week and its Facebook pages.
ƒ CBS.com/CBS Audience Network generated nearly
18mm total video views and 7.5mm full episode
views the first full week of premieres.
Source: CBS internal logs
This season, the impact of this growth in streaming activity was clearly
evident in the performance of CBS.com. For Premiere Week, CBS.com
attracted 7.5 million unique visitors, up 50% from last season’s premiere
week level. Overall, CBS.com and the CBS Audience Network
generated nearly 18 million total video views and 7.5 million full program
views during the first week of premieres.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
CBS - The #1 Broadcast Network Online for 35 months
Monthly Average Total Unique Viewers
Monthly Average Total Streams (Sept’
Monthly Average Total Streams (Sept’10‐
10‐Sept’
Sept’11)
(Sept’
(Sept’10‐
10‐Sept’
Sept’11)
330M
275M
18.2M
#1
CBS
#1
8.6M
ABC
4.6M
NBC
FOX
1.1B
804M
#1
#1
ABC
79M
Monthly Average Total Minutes (Sept’
Monthly Average Total Minutes (Sept’10‐
10‐Sept’
Sept’11)
5.4M
CBS
90M
NBC
FOX
CBS
386M
ABC
NBC
352M
FOX
Source: comScore VideoMetrix, September’10-September’11
Keeping CBS.com #1 among the broadcast network home sites
consistent with the CBS dominance with Total Viewers on air.
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Communications Conference
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Leading Ad Completion
Video Ad Completion Rate by Video Length, Q2 2011
96%
81%
77%
59%
Full Episodes
Industry Average
Source: CBS internal logs, Q2 2011; *FreeWheel Q2 2011 Report
Clips
CBS/CAN
58
This has enhanced online as a valuable advertising outlet for CBS on
both a full-episode and program clip basis. Ad completion rates for
CBS & Audience Network have been consistently high. In Q2 2011,
overall video ad completion rates for Full episodes was 96%, 15
percentage points above industry average, while completion rates for
Clips was 77%, 18 percentage points above industry average.
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Communications Conference
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
A New Broadcast Network Television Model?
Current Model
Ad Value
Live
10 Minutes of Ads = 20 Ads x .95
19.0
DVR Playback
10 Minutes of Ads = 20 Ads x .44
8.8
Online Streaming
2 Minutes of Ads = 4 Ads x 1.00
4.0
Last year at this conference I introduced the concept of a new
Broadcast Network Television Model. Let’s revisit that subject.
Originally, online streaming of television programs only included
two minutes of ads. This made online streaming a far less
attractive alternative than either live on-air or DVR playback
viewing in terms of advertising revenues. However, research we
had done at that time and experimentation with full ad loads
online by CW demonstrated that viewers would accept far greater
ad loads online.
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Communications Conference
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
A New Broadcast Network Television Model?
Current Model
Ad Value
Live
10 Minutes of Ads = 20 Ads x .95
19.0
DVR Playback
10 Minutes of Ads = 20 Ads x .44
8.8
Online Streaming
10+ Minutes of Ads = 20 Ads x 1.00+
20.0+
So we increased our ad loads in the CBS programs online to 14
ads per hour. Since not every ad position is filled each day, we
have used a 10+ ad unit level in the chart shown. We also
currently get a significant CPM premium for these online ads as
compared to the broadcast CPM. All of which translates to an ad
value of 20 plus for an online streamed view. What that means is
that a viewer streaming our program online is now worth
substantially more to us than a person watching that program in
playback mode and skipping many of the commercials. In fact,
the value of the online viewer is now surpassing that of the live
viewer as well.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Broadcast Network Television:
The Amassing Medium
61
That is truly amassing! The broadcast network system amasses
audiences in other ways as well. Let’s look at what is happening
with VOD.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
VOD
62
When I spoke to this conference in 2003 and 2004 I took the then
controversial position that the DVR would enhance not damage the
position of the broadcast networks. I called that one right. However, I
made another prediction which has not yet been realized. I predicted
that the DVR was a transitional technology that would be rendered
obsolete by VOD. The cable and satellite distributors went in another
direction promoting the DVR. As this device brought in new revenues,
they resisted the advertising-subsidized VOD model that I believed
would replace the DVR. Well, I have not given up on this prediction yet.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
63
An industry coalition, the Advanced Advertising Media Project, has
recently been formed to study the subject of VOD advertising.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Sponsors
64
The coalition includes key players from all sectors of the business,
broadcast and cable networks, MSOs, advertising agencies, the 4As,
and technology companies. The first two phases of a planned threephase research project have been completed.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Key Findings
1. VOD is fundamentally a television experience, but different
2. Consumers accept advertising on VOD
3. Ad load on VOD does not impact ad efficacy or viewer
enjoyment
4. VOD rewards different ad formats
Source: AAMP | Ipsos
65
Here are the key findings: VOD is fundamentally a television
experience, but different; Consumers accept advertising on VOD; Ad
load on VOD does not impact ad efficacy or viewer enjoyment; VOD
rewards different ad formats; Work is just beginning on Phase III a real
world test of the recommended approaches from this research.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
CBS VOD Performance
2011-12 Season-to-Date
15 Primetime Shows
Viewing Increase
2011 vs. 2010
Source: Rentrak OnDemand Essentials;
9/20/11–11/27/11 vs.. 9/21/10–11/28/10.
66
Meanwhile, VOD is growing as a distribution medium for primetime
network programming. At CBS we have seen a 19% increase in VOD
viewing of our primetime series this fall.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
CBS VOD Performance
2011-12 Season-to-Date
15 Primetime Shows
70 Million Views
Source: Rentrak OnDemand Essentials;
9/20/11–11/27/11 vs.. 9/21/10–11/28/10.
67
Adding up to 70 million views. With its addressability and dynamic ad
insertion capabilities, VOD remains an advertising medium of great
potential. I have not given up on my prediction yet.
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Communications Conference
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Broadcast Network Television:
The Amassing Medium
68
I have characterized the U.S. viewer as having access to more
desirable television content than they could possibly watch. I
would not make that same characterization regarding television
viewers outside of the U.S.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
The International Market
ƒ 1,300,000,000 English speaking people in the world
ƒ 75% outside of the U.S.
ƒ 565,000,000 Internet users access Internet in English
Source: Wikipedia
69
Today, there are approximately 1.3 billion people throughout the
world for which English is a first or second language. Three
quarters of them live outside of the U.S. In addition, English is
the Internet language for over 500 million internet users. The
English-speaking portion of the world’s population outside of the
U.S. represents a huge and growing market for the programs of
the broadcast network system.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
ƒ 6 of Top 10 U.S. series in Italy
ƒ 4 of Top 10 U.S. series in Germany
ƒ 3 of Top 10 U.S. series in France and Sweden
ƒ 2 of Top 10 U.S. series in Spain
Source: CAD/MSS/MediaMetrie, October 2011
70
And that market is not confined to just those English speaking
viewers. CBS International currently has top performing series
dubbed into many different languages.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
ƒ Reaching $1 Billion revenue mark
ƒ CSI named by Mediametrie as the most watched series in the world
ƒ New Distribution deals
ƒ Netflix: Canada, Latin America
ƒ Hulu: Japan
Source: MediaMetrie
71
As a result, International distribution is a fast growing part of the
broadcast network system. CBS International is poised to break
the billion dollar mark in revenues.
CSI was named by MediaMetrie as the most watched series in
the world. And CBS International is also entering new distribution
relationships with Netflix in Canada and Latin America and Hulu
in Japan.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
India
Both channels have grown to #2 positions with their target markets in first year
Australia
Tv1 is the #2 subscription TV channel
ELEVEN is the #1 digital free-to-air channel in its target demo
Sci-Fi, the only channel in Australia dedicated to sci-fi and paranormal programming
U.K.
Our channels have doubled their audiences since launch.
Source: India=TAM; Australia=OzTAM;UK=CAD/BARB
72
We are also very excited about the early returns from our new,
jointly-owned networks in India, Australia and the U.K.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Big 4 TV Nets Wane As Google, Facebook Command Ad Dollars
73
Now, let’s switch the focus to the advertiser. The argument for
the future decline of the broadcast networks presented in the
article contains two advertiser-related elements common to much
of the conjecture about the bleak future for network television.
They are…
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
The Longer-Term Outlook
ƒ The broadcast networks will continue to lose share of national
television advertising to cable television networks.
ƒ More targeted new media options will capture advertising dollars
from mass media.
74
1. The broadcast networks will continue to lose share of national
television advertising to cable television networks. 2. More
targeted new media options will capture advertising dollars from
mass media. Let’s start with broadcast versus cable.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Advertising and Marketing
Total
Marketing
Spending
Advertising
Television
Broadcast
Networks
$ Billions
% of Total Marketing
% of Total Advertising
% of Total Television
Advertising
1997
650
27.2
25.8
28.5
2002
880
24.0
26.7
26.6
2007
1,080
24.0
26.5
24.2
2008
1,065
23.3
27.5
24.6
2009
975
21.8
28.6
25.1
2010
1015
22.7
29.3
25.6
2011
1040
22.6
29.1
26.5
Year
Source: Wilkofsky & Gruen
75
During the recent recession, broadcast network advertising
revenues were affected by the decline in marketing spending, and
the decline in advertising’s share of that spending. Offsetting
those forces was the shift of a greater share of advertising dollars
to television advertising. If you study the last column showing the
share of television advertising going to the broadcast networks,
you see a positive trend from 2007 to the present. However, this
is somewhat misleading. The gains in broadcast network share
were a function of the decline in the local television share of
overall television dollars. Actually, during this period, the
broadcast networks were losing share to the cable networks.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
All TV Ad Spending - Share Shift
Broadcast to Cable
Total Spending – All Categories
62%
52% 48%
48% 52%
38%
Broadcast Share
2000
Source: Wilkofsky & Gruen;
4 Broadcast Networks vs.. All Cable Networks, All Dayparts
Cable Share
2005
2010
76
If we examine the long-term trend in television spending, we see a
greater share of television advertising dollars moving from the
broadcast networks to the growing array of cable networks. Today,
the split is 48/52 in favor of the cable networks for all advertisers.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Growth in the Number of “Rated” Cable Networks
95
65
43
2000
2005
2010
Source: Nielsen NPM; Ad-Supported Cable Networks rated by Nielsen
77
A significant amount of this shift is the result of the introduction of more and
more new cable networks and the increase in the penetration of these
networks. As more and more cable networks have been introduced, Nielsen
has expanded its sample in order to be able to measure these new channels
with their niche audiences. As soon as one of these channels reaches the
minimal audience size to be measured, they can start selling advertising on a
national level. It is the proliferation of these new cable channels and their
growth in penetration as the distributors have expanded their channel
capacity that has allowed cable to take audience share, and with it
advertising dollars away from the broadcast networks.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
All TV Ad Spending - Share Shift
48% Share to 52% Share
Total Spending –All Categories
+$1,600,000,000
Actual 4 Broadcast Network
Spending
Source: Wilkofsky & Gruen
4 Broadcast Networks and Cable Networks, All Dayparts
With 52% Share
78
Since 2005 alone, this change in share has moved 1.6 billion dollars
from the broadcast networks’ to the cable networks’ column. The billion
dollar+ question is whether or not this migration will continue. We have
already seen some evidence suggesting it will slow down significantly, if
not stop. The proliferation of cable networks has pretty much run its
course and most of the popular cable networks have reached full
penetration. And, as we have already seen, the cable networks,
particularly the major cable networks, do not appear to be capturing
significant audience share from the broadcast networks. But this
competitive change is likely to be less important than the answer to the
basic question: Did this shift to cable work? Did it deliver a positive ROI
for the advertiser?
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
CPG TV Spending - Share Shift
2010
Total Spending – $20+ million with 60% Cable Share CPG Categories
68%
32%
Broadcast Share
Source: Kantar Media/CMR, Jan-Dec Totals;
Broadcast Networks and Cable Networks, All Dayparts
Cable Share
79
Most of the money shifting from broadcast to cable came from the major
CPG advertisers. These advertisers have always been the most priceconscious media buyers. Faced with static or declining demand during the
recession, they shifted money to the lower CPM cable option. We have
isolated 36 product categories each with over twenty million dollars in
spending between broadcast and cable and over 60% of that money going
to the cable networks.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
CPG TV Spending Share Shift – 2010
From 32% to All-Category 48% Broadcast Share
Total Spending – $20+ million with 60% Cable Share CPG Categories
$1,032,000,000
$688,000,000
+$344,000,000
Actual Broadcast Spending
Source: Kantar Media/CMR, Jan-Dec Totals;
4 Broadcast Networks and Cable Networks, All Dayparts
With 48% Share
80
What if we could demonstrate to these advertisers that they are spending
too much in cable and not enough with the broadcast networks? Just
getting these categories back to the all-category 48/52 split would add
$344 million in broadcast network spending. Most of these CPG
advertisers use some form of media mix model or algorithm to plan their
television campaigns. In recent years, as media prices rose and audiences
did not, the media buyers have found it more and more difficult to meet
GRP and Reach & Frequency targets with the budgets they had been
given. This led to a leaning of the mix, replacing higher cost media such as
broadcast network primetime with lower cost media such as cable ROS.
But did this leaning of the mix reduce the effectiveness of the advertising
campaign?
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
81
New single-source marketing research tools from TRA and
Nielsen/Catalina are allowing advertisers to answer that question for the
first time. Advertisers can now directly measure the Return-OnInvestment for each component of an advertising campaign.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
82
TRA has specifically addressed the relative effectiveness of broadcast
network primetime advertising versus advertising on cable and in other
dayparts .
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
TRA - Primetime ROI Analysis
Broadcast = 3X Greater ROI vs. Cable
Average Multivariate ROI (National)
Broadcast
Dominant
Buys
Cable
Dominant
Buys
$0.99
$0.32
Source: TRA; eight multivariate studies conducted between 2008 and 2011.
TRA’s early work in this area showed Broadcast Network
dominant buys, despite their premium price, delivered superior
Return-On-Investments when compared to cable dominant buys.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
TRA – Primetime ROI Analysis
Higher Broadcast = Better ROI
Percent
Broadcast
Percent
Cable
ROI
Food Brand “A”
55.5
45.5
$1.49
Food Brand “B”
57.9
42.1
$0.87
Food Brand “C”
56.2
43.8
$1.10
Personal Care Brand “A”
38.8
61.2
$0.31
Personal Care Brand “B”
32.5
67.5
$0.31
Personal Care Brand “C”
30.5
69.5
$0.17
Source: TRA , Multivariate Studies Conducted Between 2008-2011
84
More recent work by TRA has specifically addressed the issue of the
broadcast/cable mix of television campaigns. In this work, TRA found that
campaigns with over 50% of the their GRPs on the Broadcast channels
delivered consistently higher ROIs than campaigns with over sixty percent
of their GRPs in cable.
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David Poltrack - December 5, 2011
IAG Program Engagement
2010-11
Primetime – All Regular, No Sports
A25-54
A18-49
CBS
79%
79%
NBC
77%
77%
ABC
79%
78%
FOX
74%
72%
Total Broadcast
78%
77%
Total Cable *
60%
57%
Source: Nielsen IAG data, 9/20/10-5/30/11; Originals and Repeats
* 18 Measured Cable Networks
85
This should come as no surprise to analysts familiar with the work of IAG
which I have presented to you at previous conferences. IAG demonstrated
that Broadcast Network Primetime programs offer advertisers a superior
advertising environment with higher program engagement
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IAG Brand Recall
2010-11
Primetime – All Regular, No Sports
A25-54
A18-49
CBS
33%
31%
NBC
32%
31%
ABC
30%
29%
FOX
32%
30%
Total Broadcast
32%
30%
Total Cable *
25%
23%
Source: Nielsen IAG data, 9/20/10-5/30/11; Originals and Repeats
* 18 Measured Cable Networks
86
Leading to higher levels of advertising recall, 32% vs. 25% for cable with
Adults 25-54 and 30% vs. 23% with Adults 18-49.
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CPG TV Spending Share Shift – 2010
From 32% to All-Category 48% Broadcast Share
Total Spending – $20+ million with 60% Cable Share CPG Categories
$1,032,000,000
$688,000,000
+$344,000,000
Actual Broadcast Spending
Source: Kantar Media/CMR, Jan-Dec Totals;
4 Broadcast Networks and Cable Networks, All Dayparts
With 48% Share
87
So, I believe that this new research capability will motivate advertisers to
shift ad dollars back to broadcast primetime. At CBS, we are investing
heavily in creating experiments with these heavy cable spender CPG
clients utilizing the single source resources of TRA and Nielsen/Catalina
Solutions. With the main drivers of the migration of ad dollars from the
broadcast networks to cable, a growing number of cable alternatives,
greater cable penetration, and a recession-inspired search for lower CPMs
all becoming less relevant, the demonstration of the true superior ROI from
effective broadcast network campaigns should shift the momentum back to
the broadcast networks.
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The Longer-Term Outlook
ƒ The broadcast networks will continue to lose share of national
television advertising to cable television networks.
ƒ More targeted new media options will capture advertising dollars
from mass media.
88
To address the second point regarding the relative effectiveness
of mass media vs. more targeted media, I will have to put on my
academic hat and call on my 30 plus years of experience as an
adjunct marketing professor at NYU and Columbia and my work
with the Marketing Science Institute, where I am currently serving
as Chairman of the Executive Committee. You see, this is a very
old debate among marketing academics, a debate that has, in the
past, usually favored the mass media advocates.
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The DVR
“The new technology from TiVo and Replay
provides the ultimate in television
convenience, it will spy on you, destroy
prime time and shatter the power of the
mass market”
market”
—“Boom Box”
Box”, Michael Lewis;
New York Times
Magazine
August 13, 2000
89
At the turn of the century, this was a major part of the argument
put forth by those predicting that the DVR would spell the end of
mass media. They referred to the coming age of demassification. This argument is essentially an argument
regarding the relative trade-off of the efficiency of mass media
and the precision of targeted media.
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Smarter Targeting
Associate Professor Jenni Romaniuk
EhrenbergEhrenberg-Bass Institute for Marketing Science
90
The Ehrenberg-Bass Institute for Marketing Science is one of the
most prestigious international academic centers for the study of
marketing. Its U.S corporate sponsors include Unilever, Procter &
Gamble, Coca-Cola, Mars, Kellogg’s, Nielsen and CBS. The
Institute has done a great deal of research on the subject of
targeting which is brilliantly summarized in a paper entitled
“Smarter Targeting” by Jenni Romaniuk. I cannot possibly do the
full paper justice in the short time that I have today. I urge you to
get a copy. Here are some of the key points made in the paper…
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Smarter Targeting
ƒ Consumer profiles of competing brands seldom differ
91
Consumer profiles of competing brands seldom differ;
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David Poltrack - December 5, 2011
Smarter Targeting
ƒ Consumer profiles of competing brands seldom differ
ƒ Even big brands mostly have light buying customers
92
Even big brands mostly have light buying customers;
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Smarter Targeting
ƒ Consumer profiles of competing brands seldom differ
ƒ Even big brands mostly have light buying customers
ƒ For most brands the top twenty percent of customers do not, as
the popular 80:20 Rule suggests, deliver 80% of sales. It is
more like 50% to 60%.
93
For most brands the top twenty percent of customers do not, as
the popular 80:20 Rule suggests, deliver 80% of sales. It is more
like 50% to 60%;
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David Poltrack - December 5, 2011
Smarter Targeting
ƒ Consumer profiles of competing brands seldom differ
ƒ Even big brands mostly have light buying customers
ƒ For most brands the top twenty percent of customers do not, as
the popular 80:20 Rule suggests, deliver 80% of sales. It is
more like 50% to 60%.
ƒ Only about half of your brand’
brand’s heavy buyers this year will be
heavy buyers next year.
94
Only about half of your brand’s heavy buyers this year will be
heavy buyers next year. So the first challenge is how do you
define your target?
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Smarter Targeting
ƒ Media audiences are largely homogenous with TV the least segmented
segmented
of the media types analyzed
95
Now let’s look at the findings on the media side of the equation.
Media audiences are largely homogenous with TV the least
segmented of the media types analyzed.
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Outlook For The Broadcast Networks
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Smarter Targeting
ƒ Media audiences are largely homogenous with TV the least segmented
segmented
of the media types analyzed
ƒ Audience differences are typically overstated in media propositions.
propositions.
Around half of a medium’
medium’s audience on average falls outside of its
claimed target audience.
96
Audience differences are typically overstated in media
propositions. Around half of a medium’s audience on average
falls outside of its claimed target audience.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Smarter Targeting
ƒ Media audiences are largely homogenous with TV the least segmented
segmented
of the media types analyzed
ƒ Audience differences are typically overstated in media propositions.
propositions.
Around half of a medium’
medium’s audience on average falls outside of its
claimed target audience.
ƒ Even with a reasonable percent (of its core), often larger media still
have greater actual numbers.
97
Even with a reasonable percent (of its core), often larger media still have
greater actual numbers.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Smarter Targeting
ƒ Media audiences are largely homogenous with TV the least segmented
segmented
of the media types analyzed
ƒ Audience differences are typically overstated in media propositions.
propositions.
Around half of a medium’
medium’s audience on average falls outside of its
claimed target audience.
ƒ Even with a reasonable percent (of its core), often larger media still
have greater actual numbers.
ƒ Media that claim to be more targeted deliver more wastage, not less.
less.
98
Media that claim to be more targeted deliver more wastage, not less.
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Smarter Targeting
Four steps to smarter targeting:
1. Know your categorycategory-aim for inclusion rather than exclusion
2. Learn about mediamedia-follow absolute numbers, not skews
3. Do the mathmath-check the returns outweigh the costs, don’
don’t assume, factor
in fixed costs
4. Kick the habit, have a default plan
99
Professor Romaniuk offers four steps to smarter targeting: Know your
category-aim for inclusion rather than exclusion; Learn about media-follow
absolute numbers, not skews; Do the math-check the returns outweigh
the costs, don’t assume, factor in fixed costs; Kick the habit, have a
default plan; And what does she recommend that default plan should be?
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Smarter Targeting
The Default Plan:
ƒ
Target Market
Everyone who buys in category
ƒ
Media Objective
Reach as many of these people as cost
effectively as possible
ƒ
Message Strategy
Tap into the different reasons people
buy the category.
100
The Default Plan: Target Market = Everyone who buys in category; Media
Objective = Reach as many of these people as cost effectively as
possible; Message Strategy = Tap into the different reasons people buy
the category. Conceptually targeting makes sense, practically it often
does not. Let me provide you with a real life demonstration.
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100
Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Television Audiences Can No Longer Be
Defined by Age and Sex Alone
101
Many of you are familiar with my perpetual battle against the advertising
industry practice of defining television audiences by age and sex alone.
Age, in particular, has been found to be a very poor surrogate for
consumption or potential consumption for most products and services. Yet,
the practice of buying and selling television time still focuses on the two age
segments of Adults 18-49 and Adults 25-54, and their male and female
components, as the key currency measures. Now, with far more relevant
and precise measures of true audience value, advertisers have the
analytical tools necessary to finally move beyond these inadequate
measures in media planning and buying. And the time to do that is now.
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Adults 18-49
As a Percent of Total Adult Population
2002‐03
18-49
62%
2010‐11
50-54
10%
50-54
9%
55-64
13%
65+
16%
18-49
57%
55-64
16%
65+
17%
Source: Nielsen Universe Estimates
102
You see, the Adult 18-49 demo has actually been declining as a percent
of the total adult market since 2002, from 62% to 57%, while the Adult
50+ segments have been growing.
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Adults 18-49
As a Percent of Total Adult Population
2010‐11
2015‐16 (Est.)
50-54
10%
50-54
9%
55-64
16%
18-49
57%
65+
17%
18-49
55%
55-64
17%
65+
19%
Source: Nielsen Universe Estimates
103
From today through 2016, the 18-49 segment will continue to decline as a
percent of the adult population, from 57% to 55%, and the 50-54 segment
will also decline, from 10% to 9%. The growth will be in the 55-64 and 65+
segments. Marketers cannot afford to let these 55+ consumers disappear
from their marketing sights.
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New Television Audience Segmentation
104
Therefore, we believe that now is the time to develop a better way to define
television audiences. This has led us to develop a new television audience
segmentation model.
But we did not do this alone.
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New Television Audience Segmentation
Collaboration of CBS and Nielsen
ƒ Tied to All Nielsen Databases
ƒ Nielsen “Ratings” Can Be Computed by Segment
105
We turned to Nielsen to help us build this new segmentation model. More
precisely, we turned to Cambridge Marketing, the renowned marketing
consulting firm recently acquired by Nielsen. We commissioned Cambridge
not to just develop this segmentation model, but to integrate it with all of
Nielsen’s data bases. As a result, we now have a new model defining and
segmenting the television audience which can offer us and our advertisers
Nielsen “ratings” for each of the segments comprising the television
audience as well as cross media usage profile encompassing the Nielsen
online panel and the MRI data base.
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Outlook For The Broadcast Networks
David Poltrack - December 5, 2011
Six Demand Profit Pool Personas
Role and Relationship with TV and Technology
TV
Companions
Sports
Enthusiasts
Use TV for
companionship. TV is
always on,
but in the
background
Interest is
anchored in
sports, but
also extends
to actionoriented
programming
Watch select
content
across
multiple
screens
Percent of
Pop: 16%
Percent of
Pop: 15%
Percent of
Pop: 15%
Streamers
TV
Moderators
Media
Trendsetters
Program
Passionates
Seek to
minimize
their TV
usage
Early
adopters of
both TV
content and
technology.
Social
diffusers
Dedicated to
a group of
programs.
Most likely to
time shift to
stay up to
date
Percent of
Pop: 15%
Percent of
Pop: 21%
Percent of
Pop: 18%
106
Let’s look at each of the six segments. I do not have enough time to full
profiles. Here is a quick look at a typical member of each segment. First, TV
Companion: Older female; stays at home; uses TV for companionship.
Sports Enthusiast: Middle-aged male; interest anchored in sports+actionoriented programs. Streamer: Younger man or woman; watches select
content across multiple screens. TV Moderator: Older, conservative; seeks
to minimize TV usage. Media Trendsetter: Urban, multicultural social
diffuser. Program Passionate: Younger, upscale woman; most likely to time
shift favorite programs.
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Six Demand Profit Pool Personas
Media Consumption
107
These segments divide the population into six groups that are clearly
different in terms of lifestyle and consumer interests. Given that the
segmentation was done on a profile that was very detailed in respect to
media use and, more specifically, television viewing, you would expect the
television viewing choices of the members to vary significantly.
Nielsen was able to employ the analytical process of fusion to combine this
segmentation base with the TV panel and develop Nielsen “ratings” for each
program. Here are the season-to-date results…
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David Poltrack - December 5, 2011
Six Demand Profit Pool Primetime Ratings
2011-12 Season-to-Date
Source: Nielsen/Cambridge Fusion, 9/19/11-10/9/11,
Primetime Regular Programs, No Sports; Live+7 Data
108
On a network-by-network basis, CBS is the leader in all six categories.
Yes, CBS is number one with Streamers. The actual rating levels change
but the overall ranking is about the same. FOX and ABC which are close
on an overall viewer basis do switch place in some categories. More
significant is the fact that this pattern holds on the top program level.
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Six Demand Profit Pool Primetime Rankings
2011-12 Season-to-Date
Source: Nielsen/Cambridge Fusion, 9/19/11-10/9/11,
Primetime Regular Programs, No Sports; Live+7 Data
109
Here are the Top Ten programs with each of the segments. You can
see, for the most part, the same programs make up the top ten for each
segment.
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Six Demand Profit Pool Primetime Rankings
2011-12 Season-to-Date
Source: Nielsen/Cambridge Fusion, 9/19/11-10/9/11,
Primetime Regular Programs, No Sports; Live+7 Data
110
And, yes, there are a lot of CBS programs on these lists. Which brings
us back to the paper on Smarter Targeting.
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Smarter Targeting
ƒ Media audiences are largely homogenous with TV the least segmented
segmented of
the media types analyzed
ƒ Audience differences are typically overstated in media propositions.
propositions. Around
half of a medium’
medium’s audience on average falls outside of its claimed target
audience.
ƒ Even with a reasonable percent (of its core), often larger media still have
greater actual numbers.
ƒ Media that claims to be more targeted deliver more wastagewastage-not less.
111
This segmentation clearly supports two of Professor Romaniuk’s
findings related to media: Media audiences are largely homogenous
with TV the least segmented of the media types analyzed; Even with a
reasonable percent (of its core), often larger media still have greater
actual numbers of any target group. So, another problem with
targeting is that it does not work well with television. And television is
the most effective advertising medium. Which brings me to another
major CBS/Nielsen initiative.
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112
CBS has been working with Nielsen and their partner, Catalina Marketing,
on the development of a single-source measurement service combining
purchase behavior and television viewing activity in the same households.
This work has led to the creation of an analytical tool for media planning
and selection.
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Volumetrics
113
Volumetrics enables Nielsen Catalina Solutions to define television
audiences for advertisers in terms of actual product purchase behavior as
opposed to surrogate demographic measures. The application of this form
of audience evaluation often substantially changes the relative ranking of
programs.
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Adults 18-49 Rating Points
Source: Nielsen/Catalina Fusion, 6/28/10 – 6/26/11,
Primetime Regular Programs, No Sports; Live+3 Commercial Data
114
As a reference point, let’s look at how primetime programs layout on a
graph relative to Adults 18-49 delivery. The vertical axis represents the
number of Adults 18-49 viewers being delivered. The higher on the
graph, the better.
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Adults 18-49 Rating Points
Source: Nielsen/Catalina Fusion, 6/28/10 – 6/26/11,
Primetime Regular Programs, No Sports; Live+3 Commercial Data
115
The horizontal axis represents the concentration of Adults 18-49 by
program. The further to the right, the higher the concentration. The goal
is to be in the right-hand, upper quadrant. The fact that there are not
many colored boxes in that quadrant is a testimony to the
homogeneous viewer profile of broadcast network primetime programs
as Professor Romaniuk pointed out.
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Adults 18-49 Rating Points
Source: Nielsen/Catalina Fusion, 6/28/10 – 6/26/11,
Primetime Regular Programs, No Sports; Live+3 Commercial Data
116
Now we are going to compare this graph with the graphs based upon
product usage as opposed to demographics. Watch how the programs’
positions shift when I change the slide. I have highlighted one program,
BLUE BLOODS, to make it easier to see how the switch from the
demographic surrogate measure to the product usage measure
changes the program landscape. I will use the soft drink category in
this demo, since is a category that normally uses Adults 18-49 as a
surrogate measure.
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Soft Drinks - Brand Rating Points
Source: Nielsen/Catalina Fusion, 6/28/10 – 6/26/11,
Primetime Regular Programs, No Sports; Live+3 Commercial Data
117
First, we replace Adults 18-49 with Soft Drink Purchasers. You see that
the programs switched positions to a substantial degree. BLUE
BLOODS has now moved into the desired upper right-hand quadrant.
But let’s go one step further. Let’s classify each viewer not by just
whether or not they purchase soft drinks, but by the amount of soft
drinks they purchase.
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Soft Drinks - Volume Rating Points
Source: Nielsen/Catalina Fusion, 6/28/10 – 6/26/11,
Primetime Regular Programs, No Sports; Live+3 Commercial Data
118
Once again we see significant movement among the programs along
the two axes. BLUE BLOODS has moved to an even more favorable
position. Up until this point, we have not included the variable cost
of an ad in each of the programs in our analysis. Since Adults 18-49
is a major currency measure in the national television market,
programs with high concentrations of Adults 18-49 tend to get a
premium Cost-Per-Point or CPM.
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Soft Drinks - Volume Per Dollar
Source: Nielsen/Catalina Fusion, 6/28/10 – 6/26/11,
Primetime Regular Programs, No Sports; Live+3 Commercial Data
119
When we add cost into the equation and produce a Cost-Per-Point
or “Volume Per Dollar” of Soft Drink consumption, we see greater
separation among the programs and BLUE BLOODS again moves
into an even more favorable position. Many of the most
sophisticated television advertisers already use this form of media
analysis in the planning stage; however, due to the lack of available
data, few have employed it directly into the program selection
process. With the new single-source measurements provided by
TRA and Nielsen Catalina Solutions, this is changing today. What
these new tools will do is enable advertisers to use the television
medium more effectively; thereby, enhancing the value of the
medium for those advertisers.
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The Subscriber
ƒ Point of Resistance
ƒ Broadcasters’
Broadcasters’ Share
ƒ Towards subscription fee/viewing alignment
120
Let me conclude my remarks with a brief update on the
subscriber. Last year, I presented the results of research on new
distribution options that we conducted at our Television City
research facility in Las Vegas. Shortly after the conference, we
updated that research. In this new technology research we
present all of the video distribution options available to the
consumer. We have them compare these options to each other
and to their current television distribution service.
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The Viewers Choose
121
After the respondents have evaluated each of the options, we
give them a list of all of the current television programs rated by
Nielsen and ask them to tell us which of these programs a
television distribution service would have to include for them to
consider subscribing to that service. Here are the results…
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Programs: A New Distribution System
Must Have
ƒ Average “Must Haves”
Haves” = 14 Shows
ƒ Top 50 = 54% of Mentions
ƒ Top 100 = 83% of Mentions
ƒ Broadcast Network Programs
ƒ 82% of Top 50 Mentions
ƒ 67% of Top 100 Mentions
Source: CBS Television City Survey, January, 2011
122
From our master list of over 160 current television programs, the
average respondent chooses 14 “must have” shows. Over half,
54%, of all mentions are accounted for by just 50 programs,
Almost all of the mentions, 83%, are accounted for by 100
programs. Most of these programs are broadcast network
programs: 82% of the top 50; 67% of the top 100.
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Programs A New Distribution System
Must Have
ƒ Average “Must Haves”
Haves” = 14 Shows
ƒ Top 50 = 54% of Mentions
ƒ Top 100 = 83% of Mentions
ƒ Broadcast Network Programs
ƒ 82% of Top 50 Mentions
ƒ 67% of Top 100 Mentions
Would failure to include at least half of “must have”
have”
programs be a deal breaker?
breaker?
Source: CBS Television City Survey, January, 2011
123
After this exercise, we asked our respondents: if you were
offered a new distribution alternative that provided less than onehalf of your “must-have” programs, would that be a deal breaker
regarding paying for it.
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Programs A New Distribution System
Must Have
ƒ Average “Must Haves”
Haves” = 14 Shows
ƒ Top 50 = 54% of Mentions
ƒ Top 100 = 83% of Mentions
ƒ Broadcast Network Programs
ƒ 82% of Top 50 Mentions
ƒ 67% of Top 100 Mentions
90% DEAL BREAKER
Source: CBS Television City Survey, January, 2011
124
…90% said that it would.
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The Subscriber
ƒ Point of Resistance
ƒ Broadcasters’
Broadcasters’ Share
ƒ Towards subscription fee/viewing alignment
ƒ Retransmission Fees
ƒ New Distributors
125
The new competition in the distribution sector is heating up. This
has already increased the value of those must-have broadcast
network programs and will continue to do so.
As a result, the broadcast networks are substantially increasing
their revenues from retransmission fees for the existing cable,
satellite and teleco distributors and entering into new revenuegenerating arrangements with the new distributors such as Netflix
and Amazon. And there is clearly more to come.
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Broadcast Network Television:
The Amassing Medium
126
In summary, going into 2012, I see broadcast network television:
in a stronger position with audiences; in a stronger position with
advertisers; and in a stronger position with subscribers and the
distributors seeking those subscribers. As the economic recovery
gains momentum, the broadcast networks are positioned to lead
the way.
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Thank You
THANK YOU
UBS 39th Annual Global Media and
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