Media Buying: Negotiating
Network Upfront
Buying media the communication plan
Client Marketing Objectives
Media Objectives & Strategies
Media Mix
Media Plan
Media Investment
National TV
• National TV divided into three primary vehicles:
– Network
– Cable
– Syndication
Network TV: Dayparts
• Network TV divided into dayparts
–
–
–
–
–
–
–
Early Morning
Daytime
Evening News
Primetime
Late Night
Kids
Sports
Most Efficient
Least Efficient
• All national commercial time is sold in
packages by daypart
Two Ways To Buy: Long-Term & Short-Term
•
UPFRONT (Q4 through Q3)
Long-term purchase, 3 to 4
quarters at a time
•
•
Negotiated in May/June
•
Inventory airs in upcoming
broadcast year
•
•
Typically best pricing
•
Best program/network
availability
•
Audience delivery
guarantees
•
Cancellation options can be
negotiated for outer quarters
•
•
•
•
•
SCATTER (as needed)
Short-term purchase,
typically done in quarterly
increments
Negotiated anytime prior to
air date
Inventory airs in upcoming
weeks/days
Typically more expensive
than the upfront
Risk of limited
program/network
availabilities
No audience delivery
guarantees
Inventory is firm upon order
Frequent complaints
• Negotiations too far in advance
– May ’04 purchases of September ’05 inventory
• Inventory purchased isn’t what runs
– Program failures; reality programming
• Sellers have an advantage
– Can stall, pool all inventory requests to gauge market
– Agencies can’t do same thing
• Late nights lead to mistakes
– Do you really want your agency spending your
$200MM budget at 2 a.m.?
• CPMs and ratings going in opposite directions
Early Morning
Early Morning Share of Viewing
50
45
44
44
43
41
40
40
35
41
39
36
35
33
30
98
99
00
01
02
Nielsen 2003
3-Netwo rk
B asic Cable
Daytime
Daytime Share of Viewing
50
46
45
42
42
40
40
3-Netwo rk
38
39
39
47
B asic Cable
36
35
35
30
98
99
$5.30
W18-49 CPM
00
01
02
Nielsen 2003
$9.00
W18-49 CPM
Pricing Gap Growing
Primetime A18-49 CPM Comparison
$30.00
$25.00
$20.00
3.6x
$15.00
3-Netwo rk
B ro ad Cable
$10.00
2.2x
$5.00
$0.00
90/91
92/93
94/95
96/97
98/99
00/01
02/03
Bulk of spending still goes to network
• Old client habits can be hard to break
Prime
$9.3B
Cable
$5.5B
Network
$12.1B
News
$430MM
Early Morn
$785MM
Day
$895MM
Late
$710MM
Syndication
$2.3B
03/04 Upfront Reported Spending
The network
upfront marketplace:
How does it work?
A true supply & demand marketplace
Supply
Demand
Vendor Avails
Advertiser Budgets
Commodity
Rating Points
(Unlike print, cannot add more supply if demand increases)
• A few scenarios . . .
Supply Down
Demand Up
CPM Increases
Supply Up
Demand Down
CPM Decreases
Supply Up
Demand Up
CPM Flat-ish
Beating The Market
• No one has perfect knowledge
– Agencies do not and cannot talk to each other
– Networks not supposed to talk to each other
– Everyone tells the side of the story that best suits them
•
Good buyers collect as much info as possible
– Draw upon all available resources for educated predictions
Supply
Demand
•
Look at historical ratings performance
•
Review general economy
•
Review new programs
•
Study how advertising typically reacts
•
Determine potential winners/losers
•
Talk to investors about category predictions
•
Develop projections for future
•
Extrapolate internal budgets
•
Talk to vendors
•
Talk to vendors
Beating The Market
•
Everything is negotiable
– Typically judged on CPM premium vs year ago
• And how that compares to results of other agencies
•
Accurate knowledge of future supply and demand is important
– Called “Reading the Market”
– Supply typically does not fluctuate dramatically
– Demand sometime does
• Timing is critical in securing best price
– If spending up significantly, usually smartest to buy early
– If down, we may wait until vendors get nervous
•
Diversified scale also a driving force
– Not just lots of money, but the right kinds of money
Upfront Timeline: Macro View
Mar
Apr
May
Jun
Jul
Negotiations
Market
Review
Final
Budgets/
Preliminary
Buying
Strategy
Aug
Place
Orders
Go to
“Hold”
Upfront Process: Micro View
Gather
client
needs
Evaluate
Form
Submit
Analyze
Evaluate
networks’
strategies needs &
supply/
& request
schedules,
& plan
request
demand
revisions
strengths investments plans
Place inventory
on hold
Evaluating networks’ schedules
• Overall ratings trends: leaders vs. laggards
Position of
strength
Neutral
• Which series are aging vs. growing?
• How many holes must be filled?
Position of
weakness
Investment Strategies
• Seek out vendors’ “pulse points”:
– Cross-daypart help
• FOX weakness
– Corporate synergies
• NBC linkages
– Weaker vs. stronger players
• Creating winners & losers
– Client assets - partnerships
• Packaging, in-store, other real estate
• Determine approximate share of buy for each
player
– Subject to change throughout negotiation
Submit needs & request plans
• What you submit varies by network
• Play your cards carefully
– Specify rating point needs OR total budget—not
both!
– Submission to each network should be a
FRACTION of total needs
• Give them enough info to do their jobs…but
not enough to see the total picture
– Knowledge is power
Evaluate plans and revisions
• Compare mix and pricing to year-ago benchmarks
– Primetime the most labor-intensive analysis:
•
•
•
•
Day of week
% of units/TRPs in movies/newsmagazines/reality
% in best, worst shows on each network
Quarterly presence in each show
– Avoid having all of best units in summer
– Look at sweeps presence: first-run episodes are best
• Competitive counter-programming
– Is your only unit in The Simpsons running against the Super
Bowl?
• % new shows vs. returning shows
– 70% failure rate, on average
You be the buyer: The Friday
Night Dilemma
Show A:
• Genre action-comedy
• Proven male lead
– Cult following
•
•
•
Generous production
budget
All-family fun; likely male
skew
7pm airtime (Central)
Show B:
• Genre action-drama
• Unknown talent in front
of & behind the camera
• Reasonable production
budget
• Adult, conspiracy-driven
plot; likely male skew
• 8pm airtime (Central)
Which would you buy?
What I did
•
•
•
•
The client: McDonald’s
The network: Fox
The year: 1992
Chose to heavy-up in show A, based on allfamily appeal and proven male lead
– Split units roughly 70/30 between the two,
hedging bets in case show B proved the winner
The Shows
Show A
Show B
Example #2
Show X
Show Y
•
•
•
•
•
•
Sitcom
Concept derived from
show already proven
successful
Thursday night time slot
on NBC
Six attractive NY singles
– No “name” talent in front
of the camera
Sitcom
Concept derived from
show already proven
successful
• Thursday night time slot
on NBC
• Six attractive NY singles
– No “name” talent in front
of the camera
Which would you buy?
The Shows
Show X:
Friends
Show Y:
Coupling
Our overall goal:
Invest the client’s dollars wisely
• Similar to a financial advisor
• Identify opportunities
– Undervalued properties
– “The next big thing”
• Manage risk
• Maximize ROI
• Build for the future
Getting what you need:
Negotiation as life skill
• “You catch more flies with honey…”
• Respect person on the other side of the desk
• Discussions based on fact rather than emotion…
– …but recognizing the value of emotional “hot buttons”
• Always recognize the value of long-term
relationships over short-term “victories”
Remember during a buyers’ market…
that it will eventually be a sellers’ market!
Once you’re done…be ready
to revise
• Approved plans go to “hold” pending client approval
• Recommended purchases are presented to client
– Subject to input, revision
• Approved buys are then ordered
– But still subject to cancellation options for quarters 13 (two to four quarters out from buy)
– Allows client ongoing budget flexibility
• Additional needs can be purchased in short-term
market - try to take advantage of opportunities
The network
upfront marketplace:
What does the future hold?
Serious Challenges
•
•
•
•
•
Personal Video Recorders (PVRs)
Video on demand
Shifting of power to consumers
Lowest-common-denominator programming
My own viewing habits
The PVR
•
Personal Video Recorders (TiVo, RePlay) allow
impressive consumer control over TV viewing
– Live pausing
– Show title/performer searching
– Commercial zapping
• Up to 77% of viewers zapped commercials during replay
•
Networks’ once closely monitored schedules could soon
become a thing of the past - Counter-programming?
– Retrieve programs you want and view them when you want
• Now can do so easily at home with TiVo or Replay
• Soon will be able to do so remotely on the internet
– Does not bode well for the “Suddenly Susan”s of the world
• Protected time slots no longer relevant
The PVR
• PVR and similar technology will have a massive
effect on how planners and buyers behave
– Penetration currently very small
• But growing quickly
– Solutions to combat this increased control
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•
•
•
•
•
Content integration
Program sponsorship
Vignettes
Video-on-demand (VOD) testing
Tickers
Interactive commercial creative
Interactive TV:
Consumers in control
• No more couch potatoes
– Idea that television is a passive medium is finally shifting
• Superbowl now fully interactive experience
• ABC’s version of Who Wants to Be A Millionaire and its Internet
companion site early example
• Viewers determined which contestant on CBS’ Big Brother
walked out with $500,000
• Game Show Network leading pack in development
• American Idol still dominating the ratings
– TV holds power to motivate viewers to crave more
information - tremendous latent power
• Just the ability to put a website address on an advertiser’s
television creative has resulted in immediate sales growth for
some categories previously thought stagnant
Is the upfront still relevant?
• Entire network programming model is threatened
– Syndication back-end disappearing as reality thrives
– More difficult to launch new shows as time-shifting increases
•
•
Year-round programming cycle increases uncertainty
…But consumers still connect passionately with their
favorite programs
– Need to be smarter about tapping into that passion
– Passionate followings aren’t just in primetime…or even
exclusive to TV - ex. Gawker Media Group
•
“Old-school” upfront less relevant, but still serves
purpose of mapping availabilities and market needs
– Will converge with other media (e.g. online) in the near future
The bottom line
Upfront needs to evolve along with the industry
– Take steps now to align buying for the future
• Discussions need to focus on the real issues
– Arbitrary rules of engagement can and will be
subverted by cleaver buyers and sellers
• Ongoing client education is a must
– Buyers are the expert advisors…but it’s their money