A big question facing the cable television industry: Can individual cable networks survive if they are forced to stand on their own as à-la-carte products outside cable's bundled pricing model?
These networks were initially offered to consumers along with dozens (now hundreds) of other programming options by the cable operators at a price somewhat reflective of their combined value.
This strategy, called bundling, enabled all these networks to slowly and steadily build their audience and brand recognition. And while not much has changed since Bruce Springsteen wrote "57 Channels (And Nothin' On)" in 1992, the quality was much worse when most of the networks launched in the 1980s. CNN was widely ridiculed as the chicken noodle network, E! was an endless loop of movie trailers and TNT featured mainly old movies.
Today, amidst the mostly dead wood, these cable networks do feature some of the most widely viewed sporting events and original programming on television; and many have become iconic global media brands.
Yet, it seems their future, much like their birth and life to this point, is intricately tied to the cable operators who provide more than half their total revenue in programming fees, enabling them to spend the money to pepper their line up with hits.
Which leads me to the well publicized battles here in New York between Time Warner Cable and Fox, and Cablevision and Scripps over these fees. How can two sides of an enormously successful business relationship air their grievances in such a public manner? (Millions have been spent on newspaper and TV ads.)
In The New Yorker this week, James Surowiecki eloquently describes the consumer appeal of bundling and why à-la-carte pricing could disrupt the entire cable industry.
"Successful bundling depends on the idea that what your are paying for is 'cable television,' rather than a collection of channels. Public fighting over programming costs disrupt that idea. When HGTV says it wants more money for its programming, it makes people who don't watch HGTV wonder why they should pay anything for it at all."
Will more of these battles force a public outcry for à-la-carte pricing and which networks, other than the top few would survive?
Wednesday, January 20, 2010
Wednesday, January 6, 2010
Ad Spending Is Completely Out Of Whack
Ad Age just published their annual ad spending issue featuring all sorts of charts, graphs and lists showing where advertising dollars are spent and who is spending them. Here is where the ad dollars fell by media category:
Media Spending (dollars in millions)
Broadcast TV 46,385
Cable TV 19,635
Magazine 30,037
Newspaper 23,385
Internet 9,710 (20+ billion with search included)
Radio 9,411
Outdoor 3,729
Total 142,291
More than half the total spending went to Broadcast TV and Magazines. Note Internet spending, third from last, barely beating out Radio. (Would still be third from last with search included, but almost tied with newspaper.)
The following chart is from Forester and shows where people are actually spending their time:
We all know that ad spending is not properly aligned with media consumption. But to this extent? People spend almost as much time on the Internet as they do watching Television, yet the Internet garners only 14% of TV ad spending.
While much of the gap is a result of major brand advertisers poorly allocating their media budgets, another key factor is the dramatic price difference between the two platforms. It's significantly cheaper to advertise online.
Jeff Zucker's famous warning that the Internet would "trade analog dollars for digital pennies" is clearly becoming a reality. It seems quite possible that as advertisers move more of their ad budgets online, their overall ad spend will decline significantly.
Media Spending (dollars in millions)
Broadcast TV 46,385
Cable TV 19,635
Magazine 30,037
Newspaper 23,385
Internet 9,710 (20+ billion with search included)
Radio 9,411
Outdoor 3,729
Total 142,291
More than half the total spending went to Broadcast TV and Magazines. Note Internet spending, third from last, barely beating out Radio. (Would still be third from last with search included, but almost tied with newspaper.)
The following chart is from Forester and shows where people are actually spending their time:
We all know that ad spending is not properly aligned with media consumption. But to this extent? People spend almost as much time on the Internet as they do watching Television, yet the Internet garners only 14% of TV ad spending.
While much of the gap is a result of major brand advertisers poorly allocating their media budgets, another key factor is the dramatic price difference between the two platforms. It's significantly cheaper to advertise online.
Jeff Zucker's famous warning that the Internet would "trade analog dollars for digital pennies" is clearly becoming a reality. It seems quite possible that as advertisers move more of their ad budgets online, their overall ad spend will decline significantly.
Tuesday, December 22, 2009
Local, Local, Local
The amount of deal activity in local media over the past few months has been breathtaking. Dozens of startups targeting local advertisers and the communities that support them have announced marquee fund raising rounds; and almost every major media company has made a move to expand their presence at the local and hyper-local level of the advertising ecosystem.
Much of the activity follows the traditional media model of creating compelling content that advertisers will want to attach themselves to. AOL is dedicating significant resources to Patch, the hyper-local news network it purchased earlier in the year; CNN just announced an investment in Outside.in, a fast-growing hyper-local content and advertising platform; and ESPN is planning a national network of local sports news sites. All are capitalizing on extraordinary marketplace efficiencies while newspapers and broadcasters are weighed down by outdated distribution and consumption models. Interestingly, the success of these three initiatives are somewhat dependent on the promotional and content resources of a big mother ship.
Many of the venture-backed businesses are betting on the widespread shopper adoption of mobile apps. It was not uncommon this holiday shopping season to see shoppers snapping pictures of intended items and price comparing. Startups like Groupon (which just announced a $30 million funding round) and Postabon are creating social, online and mobile deal finding networks featuring local retailers. I recently typed my zip code and "jeans" into the iPhone Postabon interface and was directed to a 50% off sale for Lucky jeans in my neighborhood posted by another user.
Google's ambitions in local have been nothing short of schizophrenic. Just two months after launching a new search product for local businesses, they pulled the plug and were rumored for a few hours to be purchasing Yelp for $500 million. When Google initially announced their plans for the new product, many local media experts questioned their chances of success without a large, seasoned local ad sales force to cajole digital-media-resistant small advertisers. Undoubtedly, Yelp's 300 person sales force was a critical factor in Google's interest. The new rumor is that Yelp is planning an IPO.
The weakness of the newspapers, the emergence of mobile, and the ease of entry into the local conversations are driving all the activity in local.
But local advertising is a tough business. As a well-known local media consultant said, "local is sold not bought." Three things are needed for a company to succeed in local: a great product, significant capital to drive awareness and, most importantly, a big local sales force. The Yellow Pages became a $20 billion category, dominating local local advertising for years, based in large part on a famously aggressive local sales force numbering in the thousands.
It will be interesting to see who gains traction in 2010.
Much of the activity follows the traditional media model of creating compelling content that advertisers will want to attach themselves to. AOL is dedicating significant resources to Patch, the hyper-local news network it purchased earlier in the year; CNN just announced an investment in Outside.in, a fast-growing hyper-local content and advertising platform; and ESPN is planning a national network of local sports news sites. All are capitalizing on extraordinary marketplace efficiencies while newspapers and broadcasters are weighed down by outdated distribution and consumption models. Interestingly, the success of these three initiatives are somewhat dependent on the promotional and content resources of a big mother ship.
Many of the venture-backed businesses are betting on the widespread shopper adoption of mobile apps. It was not uncommon this holiday shopping season to see shoppers snapping pictures of intended items and price comparing. Startups like Groupon (which just announced a $30 million funding round) and Postabon are creating social, online and mobile deal finding networks featuring local retailers. I recently typed my zip code and "jeans" into the iPhone Postabon interface and was directed to a 50% off sale for Lucky jeans in my neighborhood posted by another user.
Google's ambitions in local have been nothing short of schizophrenic. Just two months after launching a new search product for local businesses, they pulled the plug and were rumored for a few hours to be purchasing Yelp for $500 million. When Google initially announced their plans for the new product, many local media experts questioned their chances of success without a large, seasoned local ad sales force to cajole digital-media-resistant small advertisers. Undoubtedly, Yelp's 300 person sales force was a critical factor in Google's interest. The new rumor is that Yelp is planning an IPO.
The weakness of the newspapers, the emergence of mobile, and the ease of entry into the local conversations are driving all the activity in local.
But local advertising is a tough business. As a well-known local media consultant said, "local is sold not bought." Three things are needed for a company to succeed in local: a great product, significant capital to drive awareness and, most importantly, a big local sales force. The Yellow Pages became a $20 billion category, dominating local local advertising for years, based in large part on a famously aggressive local sales force numbering in the thousands.
It will be interesting to see who gains traction in 2010.
Wednesday, December 9, 2009
A Massive Oversupply of Media Impressions
Most advertising is wasted. Billions of media impressions every day hit the wrong people. While there is some truth to the premise that advertising is working subconsciously, the reason most of us glaze over ads, confident they didn't have an impact, is because we are right. They completely missed the target.
Every day we are exposed to a few more ads than we were the day before as advertising invades every nook and cranny of our lives. But when so many horns are blaring, we really can't hear anything. A recent study revealed that online banner advertising click-through-rates have fallen to basically zero.
The big media agencies that control roughly half of the $150 billion spent on advertising each year are desperately trying to develop better tools to plan and evaluate media placements while dozens of new companies are introducing more sophisticated ad targeting technologies.
This will help, but for the foreseeable future there will be, in the words of Martin Sorell, "a massive oversupply of media impressions."
Amidst such clamor, never has good, old fashioned, word-of-mouth ("WOM") advertising been more effective. According to a recent article in Media Daily News, WOM is the single most effective tool to promote a TV program after actual TV tune-in ads.
Every interaction I have had with a brand during the last week was based on a WOM recommendation - from viewing a new cable TV program to buying a pair of jeans at a new store to checking out a new item at Trader Joes.
Seems the best thing a brand can do is delight their customer and do everything they can to get them talking about their experience.
Which is why social media has quickly become a brand's most important marketing tool. After all, social media is simply a platform to monitor and amplify WOM.
The two busiest businesses in my neighborhood are Trader Joes and Whole Foods, both notorious for little-to-no traditional advertising but tremendous WOM buzz and social media savvy.
More and more top brands are assigning their best marketing executives to social media roles, putting even more pressure on the standard advertising formats to hit their marks.
Every day we are exposed to a few more ads than we were the day before as advertising invades every nook and cranny of our lives. But when so many horns are blaring, we really can't hear anything. A recent study revealed that online banner advertising click-through-rates have fallen to basically zero.
The big media agencies that control roughly half of the $150 billion spent on advertising each year are desperately trying to develop better tools to plan and evaluate media placements while dozens of new companies are introducing more sophisticated ad targeting technologies.
This will help, but for the foreseeable future there will be, in the words of Martin Sorell, "a massive oversupply of media impressions."
Amidst such clamor, never has good, old fashioned, word-of-mouth ("WOM") advertising been more effective. According to a recent article in Media Daily News, WOM is the single most effective tool to promote a TV program after actual TV tune-in ads.
Every interaction I have had with a brand during the last week was based on a WOM recommendation - from viewing a new cable TV program to buying a pair of jeans at a new store to checking out a new item at Trader Joes.
Seems the best thing a brand can do is delight their customer and do everything they can to get them talking about their experience.
Which is why social media has quickly become a brand's most important marketing tool. After all, social media is simply a platform to monitor and amplify WOM.
The two busiest businesses in my neighborhood are Trader Joes and Whole Foods, both notorious for little-to-no traditional advertising but tremendous WOM buzz and social media savvy.
More and more top brands are assigning their best marketing executives to social media roles, putting even more pressure on the standard advertising formats to hit their marks.
Tuesday, November 24, 2009
Cable Operators Secure At The Top Of The Video Food Chain?
It’s been a good couple of months for cable companies. Comcast is buying NBC; TW Cable’s stock is having a nice run and Cablevision’s profits tripled in the third quarter.
What’s most striking is how effectively they are leading their enormous customer base into the new world of on-demand, time-shifted television viewing. VOD usage is showing double-digit month-over-month growth and DVR subscriptions are soaring. (Driven much by cable’s efforts, more than 1/3 of US TV households now subscribe to DVR.)
The DVR story is actually quite compelling in its own right. Maligned by the advertising and programming communities for its ad-skipping capabilities as recently as a few months ago, DVRs are now seen as a powerful ally, adding millions of viewers (now tracked by Nielsen), giving some faltering shows new life and adding much needed ad revenue to the networks. That’s right – adding ad revenue- because, it now turns out, only 50% of DVR users actually skip the commercials.
In a recent blog post, Mark Cubin wrote with religious fervor about the enormous opportunities created by DVR technology:
"Do you not realize that the DVR is the one device that can save all things traditional and holy to your business and stock price? That the DVR is what every internet based TV delivery device or service aims to be when they grow up? That the more powerful and feature rich that you allow DVRs to become, the sooner your customers, the people that pay an average of what, $80 dollars a month to consume your content, will realize that all the capabilities that the internet pundits predict that the future of the internet will offer, are available today for the DVR ?"
The cable operators are making every move to be sure they control their own destiny as video consumption habits change with breathtaking speed and dozens of competitors eye the ultimate prize of the living room TV screen. (Including, now, game consoles like the Xbox 360 and PlayStation 3.)
Comcast and TW Cable's still somewhat nebulous TV Everywhere plan has captured the attention and imagination of the media blogosphere. Through an online authentication system, TV Everywhere will provide cable customers access to premium cable programming online anytime they want.
Like VOD and DVR, TV Everywhere could become another enormously successful product that keeps the cable companies firmly in front of consumer viewing behavior and at the top of the video distribution food chain.
What’s most striking is how effectively they are leading their enormous customer base into the new world of on-demand, time-shifted television viewing. VOD usage is showing double-digit month-over-month growth and DVR subscriptions are soaring. (Driven much by cable’s efforts, more than 1/3 of US TV households now subscribe to DVR.)
The DVR story is actually quite compelling in its own right. Maligned by the advertising and programming communities for its ad-skipping capabilities as recently as a few months ago, DVRs are now seen as a powerful ally, adding millions of viewers (now tracked by Nielsen), giving some faltering shows new life and adding much needed ad revenue to the networks. That’s right – adding ad revenue- because, it now turns out, only 50% of DVR users actually skip the commercials.
In a recent blog post, Mark Cubin wrote with religious fervor about the enormous opportunities created by DVR technology:
"Do you not realize that the DVR is the one device that can save all things traditional and holy to your business and stock price? That the DVR is what every internet based TV delivery device or service aims to be when they grow up? That the more powerful and feature rich that you allow DVRs to become, the sooner your customers, the people that pay an average of what, $80 dollars a month to consume your content, will realize that all the capabilities that the internet pundits predict that the future of the internet will offer, are available today for the DVR ?"
The cable operators are making every move to be sure they control their own destiny as video consumption habits change with breathtaking speed and dozens of competitors eye the ultimate prize of the living room TV screen. (Including, now, game consoles like the Xbox 360 and PlayStation 3.)
Comcast and TW Cable's still somewhat nebulous TV Everywhere plan has captured the attention and imagination of the media blogosphere. Through an online authentication system, TV Everywhere will provide cable customers access to premium cable programming online anytime they want.
Like VOD and DVR, TV Everywhere could become another enormously successful product that keeps the cable companies firmly in front of consumer viewing behavior and at the top of the video distribution food chain.
Wednesday, November 11, 2009
User Generated Ad Campaigns Come of Age
Jim Farley, Ford's VP of Marketing, gave a thoroughly revealing and insightful presentation at the JD Power Automotive Marketing Conference last month.
He was particularly forthcoming about Ford’s marketing strategy, showing examples from more than a dozen initiatives across every budget range and media platform. What he seemed most excited about were the relatively low cost, user generated/crowd sourcing campaigns like the Fiesta Movement introduced earlier in the year to support the launch of the 2011 Fiesta.
He showed various clips submitted by users "that didn't cost a dime" but more importantly provided buzz, customer feedback and probably a treasure trove of ideas for future campaigns.
The initiative has generated hundreds of submissions like the one above. Regarding performance, Ford provided the following stats to Mashable:
"It's no secret ... that user-generated content was a sucker punch to the jaw of the marketing world over the past several years. A fundamental shift has now occurred in which brands have become a conversation -- and audiences have just as much of a say in the shape of that dialogue as marketing directors and agency copywriters."
And while a marketer with billions to spend was waxing poetic about the power of customer collaboration, Etsy, an online crafts marketplace with a loyal and growing following, ran a contest inviting users to submit 30-second commercials. The contest and subsequent submissions got the attention of none other than Bob Garfield at Ad Age, who was effusive in his praise and stark in his prediction of a new order.
"The results are positively remarkable. The 10 semi-finalists are as a group better thought-out and realized than any 10 random commercial running on TV anywhere in the world. And a whole lot more charming," Garfield said.
Is there any doubt that user generated ad campaigns have come of age?
He was particularly forthcoming about Ford’s marketing strategy, showing examples from more than a dozen initiatives across every budget range and media platform. What he seemed most excited about were the relatively low cost, user generated/crowd sourcing campaigns like the Fiesta Movement introduced earlier in the year to support the launch of the 2011 Fiesta.
He showed various clips submitted by users "that didn't cost a dime" but more importantly provided buzz, customer feedback and probably a treasure trove of ideas for future campaigns.
The initiative has generated hundreds of submissions like the one above. Regarding performance, Ford provided the following stats to Mashable:
- 4.3 million+YouTube views thus far
- 500,000+ Flickr views
- 3 million+ Twitter impression
- 50,000 interested potential customers, 97% of which don’t own a Ford currently.
"It's no secret ... that user-generated content was a sucker punch to the jaw of the marketing world over the past several years. A fundamental shift has now occurred in which brands have become a conversation -- and audiences have just as much of a say in the shape of that dialogue as marketing directors and agency copywriters."
And while a marketer with billions to spend was waxing poetic about the power of customer collaboration, Etsy, an online crafts marketplace with a loyal and growing following, ran a contest inviting users to submit 30-second commercials. The contest and subsequent submissions got the attention of none other than Bob Garfield at Ad Age, who was effusive in his praise and stark in his prediction of a new order.
"The results are positively remarkable. The 10 semi-finalists are as a group better thought-out and realized than any 10 random commercial running on TV anywhere in the world. And a whole lot more charming," Garfield said.
Is there any doubt that user generated ad campaigns have come of age?
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