Media Buying: Negotiating Network Upfront

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Media Buying Negotiating Network Upfront
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Buying media the communication plan
Client Marketing Objectives
Media Objectives Strategies
Media Mix
Media Plan
Media Investment
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National TV

• National TV divided into three primary vehicles
• Network
• Cable
• Syndication

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Network TV Dayparts

• Network TV divided into dayparts
• Early Morning
• Daytime
• Evening News
• Primetime
• Late Night
• Kids
• Sports
• All national commercial time is sold in packages
  by daypart

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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

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Frequent complaints

• Negotiations too far in advance
• May 04 purchases of September 05 inventory
• Inventory purchased isnt what runs
• Program failures reality programming
• Sellers have an advantage
• Can stall, pool all inventory requests to gauge
  market
• Agencies cant 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

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Early Morning
5.50 A25-54 CPM
11.50 A25-54 CPM
Nielsen 2003
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Daytime
5.30 W18-49 CPM
9.00 W18-49 CPM
Nielsen 2003
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Pricing Gap Growing
3.6x
2.2x
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Bulk of spending still goes to network

• Old client habits can be hard to break

Cable 5.5B
Syndication 2.3B
03/04 Upfront Reported Spending
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The network upfront marketplace

• How does it work?

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A true supply demand marketplace

• (Unlike print, cannot add more supply
  if demand increases)
• A few scenarios . . .

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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

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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

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Upfront Timeline Macro View
Mar Apr May Jun Jul
Aug
Negotiations
Market Review
Place Orders
Final Budgets/ Preliminary Buying Strategy
Go to Hold
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Upfront Process Micro View
Gather client needs
Analyze supply/ demand
Evaluate networks schedules, strengths
Form strategies plan investments
Submit needs request plans
Evaluate request revisions
Evaluate networks schedules, strengths
Form strategies plan investments
Evaluate request revisions
Place inventory on hold
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Evaluating networks schedules

• Overall ratings trends leaders vs. laggards
• Which series are aging vs. growing?
• How many holes must be filled?

Position of strength
Position of weakness
Neutral
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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

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Submit needs request plans

• What you submit varies by network
• Play your cards carefully
• Specify rating point needs OR total budgetnot
  both!
• Submission to each network should be a FRACTION
  of total needs
• Give them enough info to do their jobsbut not
  enough to see the total picture
• Knowledge is power

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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

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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?
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What I did

• The client McDonalds
• The network Fox
• The year 1992
• Chose to heavy-up in show A, based on all-family
  appeal and proven male lead
• Split units roughly 70/30 between the two,
  hedging bets in case show B proved the winner

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The Shows
Show B
Show A
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Example 2

• Show X
• 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

• 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

Which would you buy?
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The Shows
Show X Friends
Show Y Coupling
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Our overall goal Invest the clients dollars
wisely

• Similar to a financial advisor
• Identify opportunities
• Undervalued properties
• The next big thing
• Manage risk
• Maximize ROI
• Build for the future

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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!
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Once youre donebe 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 1-3 (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

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The network upfront marketplace

• What does the future hold?

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Serious Challenges

• Personal Video Recorders (PVRs)
• Video on demand
• Shifting of power to consumers
• Lowest-common-denominator programming
• My own viewing habits

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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 Susans of
  the world
• Protected time slots no longer relevant

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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
• Content integration
• Program sponsorship
• Vignettes
• Video-on-demand (VOD) testing
• Tickers
• Interactive commercial creative

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Interactive TV Consumers in control

• No more couch potatoes
• Idea that television is a passive medium is
  finally shifting
• Superbowl now fully interactive experience
• ABCs 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
  advertisers television creative has resulted in
  immediate sales growth for some categories
  previously thought stagnant

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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 arent just in primetimeor
  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

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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 advisorsbut its their
  money