Thursday, February 26, 2015

Cord-Cutting Exaggeration


There is much chatter these days about “cord-cutting.” This is simply eliminating one’s TV cable or satellite service. Over the last two years, I have tried to track it very closely. The many people whom I have spoken with or exchanged e-mails with tend to place cord-cutting at about 75,000-80,000 households in the U.S each month. Losing 900,000 subscribers a year to pulling the plug is not a death knell to the industry as many new households come on board each year. It certainly does impact Pay TV growth, however.

In recent weeks, I have received significant mail from ad agency media people or principals discussing cord-cutting. Candidly, I find it a bit disturbing. Here are some of the comments that I have received:

--“Something is happening out there. Cord-cutting is really building up momentum. Cable and satellite are toast.”

--“I just have a feeling talking to people that cord-cutting is really taking off.  My shop needs to cut back on using TV.”

--“It seems everyone that I talk to is cutting the cable cord.”

Okay, people often make statements based on anecdotal evidence. I am sure that I am guilty as well. But, these characters should know better. The first rule of a marketer is to step outside of yourself and look at facts. The comments made above are made by people who are masquerading as marketers. If that sounds harsh, so be it. In a society with 319 million people, 80,000 households per month is not “everyone.”

The cable industry itself does not dodge the issue. I have read interviews where cable executives basically said cord-cutting is done by those who cannot afford the service plus those who do not see enough value in a subscription. It is hard to argue with that.

My experience with cord-cutters is as follows: the cord-cutters that I have met have tended to be very well educated millennials who, in most cases, could afford cable or satelllite. They lead busy personal and professional lives and many live in places where there is a lot to do outside of business hours such as New York, Boston, Washington, DC or San Francisco. TV is simply not that important to them. At the same time, I have not met or spoken with a rural person of any age who has cut the cord. TV is likely a serious part of their entertainment so they would loathe to give it up.

So, the mistake the ad professionals make is by listening to young people in the somewhat rarified air of their social network or even well paid staff. Recently, I asked a classroom full of students, many from rural areas, if they had cut the cord. I was met with stares and a bit of laughter. Two young men approached me after the lecture and asked how could anyone give up ESPN? I smiled and told them about the ESPN proposal to charge $30 per month for a streaming service. They both perked up and then sheepishly admitted that their parents picked up the tab for cable in their off-campus apartments.

In recent months, as a test, my wife and I cut the cord for the second time in six years. By using Netflix, Hulu, YouTube and many other on line options, we are doing fine without a subscription. Didn’t we miss the Super Bowl? Nope. We watched it streaming and it was fine. The Oscars? I went to You Tube and caught acceptance speeches 15-20 minutes after the announcement. We are looking in to Apple TV and may try that for a few months to see what it does for us. If we do that we would be “cord-shaving” meaning we downsize our Pay TV commitment to a one time only fee with Apple. Generally, cord-shaving means going from a premium service to a basic cable approach. The $20 per month Sling TV streaming service may be a better example yet of cord-shaving.

Despite efforts, I can find no evidence of many people coming back to Pay TV after they cut the cord. One person wrote to me and said his neighborhood resembles his childhood hometown in the 1960’s as TV antennas are now sprouting up all over the block. This may be true in his case but there is little evidence that this is sweeping the nation.

So, people need to be cautious about the impact of cord-cutting. We all know that TV goes not work as well as it did years ago. Commercial avoidance is soaring but largely due to DVR penetration growth and the strong emergence of the two-fisted viewer who is looking at another device or two especially when a commercial break is running. Those issues are affecting the effectiveness of TV advertising far more than cord-cutting.

Were I a cable or satellite executive, I would be nervous about cord-cutting and try to come up with some pre-emptive strike to slow it down.  Right now, I would say that the problem will only pick up real momentum if the economy tanks badly again (let us hope not) and many people see that eliminating paying for TV is a way to cut expenses. A second factor is that the millennials, saddled with a $1.3 trillion student debt, realize while they are out on their own for the first time, cutting the cord could instantly put $100-150 each month in their pockets for fun or maybe speed up payments on the millstone of student debt that is weighing them down.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Tuesday, February 17, 2015

Is Media Planning Obsolete?

Things are changing and faster than many would like. In the media world, much of this is caused by data driven marketing. Programmatic buying allows one to execute media buys via several digital technology platforms including ad exchanges and agency trading desks among others. The new world of media placement is increasingly quant based and is largely “cookie reliant” where we can track where prospects have been and are likely to go in the future. Programmatic delivers efficient planning at scale. Increasingly sophisticated algorithms can process a staggering volume of data that is  granular on steroids.

Clearly, the old days of understanding media properties, trying to zero in on a target and negotiating hard on a client’s behalf are disappearing and rapidly. On the plus side, what we used to call “scattergun reach” is also going away. We would reach our target but often with huge waste in conventional media.

With change a reality, agencies are learning to adapt. Yet the change is raising a difficult  issue that many whisper about, a few talk about and very few brave souls write about in public. The question I now hear frequently--”Is Media Planning Obsolete?”

My knee jerk reaction is definitely not but it will change and change big time over the next few years. No matter how smart the algorithms predictive skills get, I am convinced that they can only be as effective as the human direction that they have received. Someone has to make the decision of where to go and what mix of media to use. At the same time, it is obvious that, over time, fewer people will be needed in media strategy.

To those who say it can all be done by machine, I always conjure back to the optimization systems used for magazine selection as far back as the 1970’s. I remember a supervisor who would always want to take the “optimal” buy right off the computer printout and buy it. Even as a kid in the business, this really bothered me. I remember vividly asking, “What about editorial content? Doesn’t that count for something? If we buy this we are choosing one book (publication) over another because of a half a percentage point advantage in total reach or a 10 cent C.P.M. edge.” He did not like my comment and considered me somewhat insolent. As I matured, I realized he just did not want to think and could hide behind the optimization run. For evaluating editorial content, a key component in media selection, I became largely self taught.

So, today, if you lean too heavily on programmatic buying, you may not be doing your best. It can help to assist you in reaching the right people in the right place, but is it the right time? Again, analyses are getting more sophisticated but it seems that you need a master puppeteer, a.k.a media strategist or planner, to oversee things.

Proponents, and it is hard to be totally against it, say programmatic can or will give you several things including price transparency, granularity, control, and, in some cases, insight.

I threw the question out to a number of people and here are some of the more interesting responses:

30 year media planning veteran--“No one likes change. Actually, most of us hate it. I have tried really hard to keep up and peers tell me that I am doing well. Then I read where Pete Cory of Google said, ‘The pace of change will never be as slow as it is today.’  We are a solid mid-sized shop. Can we compete in a world of agency trading desks? Hell, I cannot even hire a junior planner. We will have to fake it for a while. As the pace of change accelerates, what do we do?”

Agency CEO (mid-sized)--“We have a wealthy and very well educated young client. Behind his back, we call him ‘Harvard Boy’ even though he did not go there. He has friends and contacts in mega shops and all over Wall Street. Anyway, Harvard boy arranged for me and my media chief to visit an agency trading desk in New York. It was fascinating and very intimidating to us. We went for a drink afterwards. I was laughing at the absurdity of things and my media director looked absolutely frightened. We used to position her as a guru. She asked me never to use that term again.”

Chief Marketing Officer, Publicly Traded Company--“Can’t we just go to Google or someone else directly who is a player in Big Data? Why do we need an agency for this part of our work? The agency has a sharp young woman who plans on our business. I might ask her to come client side and work with us as a contact with Google or whomever. She would make more money and have a future.”

Senior Creative Officer, Major Agency--“Behind the scenes, we are pleased with programmatic buying. Finance keeps saying how many people we can eliminate in media in a few years. Our executives are mixed--some see how important the good ones have been as we have moved to digital. Others just see it as a way to improve the bottom-line. One said if we blow away X many people, it would be likely adding a new account with a huge profit margin. I was hoping that there would be a big renaissance in the importance of media people. Every day one of them teaches one of my staff new ways to use mobile or online. As trading desks get stronger, too much of that may go away.”

Management Rep, Mid Sized Shop--“Of course, we will still need planners! The lead people will need superior analytic skills to guide us through this new maize. We will need fewer people but they will need to be better students of consumer behavior than what I see now. A few may adapt but not many will be able to do it fast enough.”

To close, I will quote at length someone whom I admire greatly. In the media planning world, he could best be described as an elder statesman. Here is his passionate response to the question “Is Media Planning Obsolete?”--

“Oh my god, I can't believe we have reached this fork in the road. I have always thought that as the media world becomes more complex and diverse the need for a strong media planner is more essential.  You need someone overseeing the entire operation and pulling all the moving parts together.  I have always said that media planning is like putting together a patchwork quilt. If you have only one color for all your patches, anyone can put that together. But when you have 15 color and size options, you need to have a strategist to oversee the entire operation and pull everything together.  The more complex, the more you need a media planner. The media buyer who negotiates the best buy is not there to really make the best decisions for each client.  They are there to bring in the best prices. It's a one-size-fits-all approach. There is a huge difference in a media buy for Tide detergent versus Mercedes Benz and that is what the media strategist must figure out.  What selection of media do I need to move MY INDIVIDUAL product.  It's not all about media tonnage. It's about the right message in the right medium at the right time that really moves product. This is THE most important job for media people.  It frightens me to think that planning is getting disrespected like this.  It's like getting in a car and having no idea how you are getting to your destination.  At that time the navigator (the guy with the road map) is a lot more important than the car driver. The navigator knows the goal and has figured out how to get there.  The driver can only guide the car but needs someone (or some machine) to determine the path to success.  And without the smart strategist, we would not really be where we are right now in media.  It was the media strategists who first bought ads on the Internet or on cable or on social media who changed the world of media.  If not for them we would still be buying print and network TV. Eliminating media planners/strategists assumes we have reached the apex in media.  I think not. There is something beyond the media we have available today.  Every day this world is changing.  We have reached Future Shock.  The changes are coming at alarming speed.  The winner in this race is going to be the media person who knows where media is going not where it has been.  Where it has been is the world of the media buyer. Where it is going is the world of the media planner/strategist.  I could not disagree with this thought process more.  Now, more than ever, we need smart media thinkers, not simple media executors.

On that eloquent note, let me say that if you want to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a comment on the blog.




Tuesday, February 10, 2015

Media Mix In A Digital World


In recent weeks, I have been receiving a number of questions and comments about the determination of media mix in a media plan. If one is honest and careful about putting a plan together, this is always a major issue but generally only to the person drafting the plan and his or her immediate superior.

For years, I struggled with this issue and spent countless Sunday afternoons at the office trying to sort the issue out properly in every plan. I used one law of economics to guide much of my decision-making--the law of diminishing returns.

In essence, let us say that TV was the lead medium at the time. I, or a team member, would look at various combinations of day-part mixes and settle on one that delivered a strong portion of our target and was in a configuration that could actually be bought in the marketplace (30% Late Fringe might look good on a computer printout but sometimes there were not that many rating points to be found in a market). When we arrived at a point where it took 20% more dollars to add 5% more in potential reach, sharply diminishing returns had set in and we moved on to another medium.

The process worked well but I and others were never satisfied. When we blended the next medium (assume radio), we took a careful look at the frequency distribution of the messages. Did we reach a large number of people 3-10 times during the advertising flight? We generally dubbed that effective frequency even the we knew that the combined reach was a formula laden with sophomoric sophistry. Still, we tweaked hard and tried to get it right.

Once, and only once, in my long career did someone ask.  My colleagues never wanted to hear the explanation but to their horror they had to sit in a conference room with clients as I took them through an early power-point. The co-workers of mine sat in back. They did not heckle me openly but one started a conversation with a client and I often had to stop my presentation until they quieted down. When it was over, there were a few questions, and then, amazingly, applause. A client came up and said, “I cannot tell you how much I appreciate what you try to do. You are taking good care of the money that my husband and I spend with you.” It remains to me the most profound compliment that I ever received in my career.

Okay, years ago some of us did media mix carefully and we did it with an elan and dedication that few appreciated. What about in 2015? This is what I hear from friends and readers:

--Soon to retire media strategist--“Media mix was always a pain in the ass to get right. But, now! Who knows? Most of my business is getting increasingly digitally oriented but where do I blend in conventional advertising? I am nearly 60 years old and I cannot tell team members with a straight face what we should do. As we cut back on conventional every six months or so (annual plans never seem to last), I rarely get to diminishing returns so sometimes I just do TV and digital. It gnaws at me. How do mobile and online interact? How do you give a reach number for the whole campaign?"

--30 something Media Supervisor--“My boss tells me that an impression is an impression so if you buy TV it does not matter if you watch on a big screen, you laptop, your tablet or your phone. The networks may say that but I do not. Everything is measured differently. And, if someone is watching on their phone are they as attentive as someone watching TV in their family room? Also, with two fisted viewers maybe people watching on their phone are MORE attentive than those who have a laptop or phone at the ready as they view. Commercial ratings by device are badly needed but in the meantime, we are guessing."

--Late 20’s Media Planner--“Your question is stupid, old man. The solution is to only buy digital.” Okay, young man. How do you determine your mix of digital options?

--40 something Associate Media Director--“My fight tends to be with creative. The young ones are itching to do new digital executions and love it when I find a way to make it happen. Often, now they say they cannot do radio. My response is “You are creative. Do it. You sound like a method actor who says I can’t read that line. If you are an actor you do it. So, if you are creative, you should be able to develop some radio.” Management has silenced me so we are delivering plans that I do not consider to be optimal. I am looking for work elsewhere.”

--A Voice of Reason--“A lot depends on who the target  audience is and what are the goals of the advertising. To get to what we feel is the optimal media mix we first do our due diligence by running current media usage reports via Experian Simmons, we'll then overlay the advertising/marketing goals (is this campaign to raise awareness, generate leads, generate direct sales, etc.). We then apply the assigned budget to see what we can afford within the different channels.  What level of spend to each is optimal. We would rather own a channel or two  versus being in too many channels at low levels to make any impact.”


So, in a digital age, this issue is more important than ever. It gets little press and little attention by agency management.  Clearly, untold millions are being wasted every year.

If you would like to contact Don Cole directly, you may leave a response on the blog or reach him at doncolemedia@gmail.com

Monday, February 2, 2015

Crabby Clients?

A long time ago, I heard a colleague voice a theme for the first time that I still hear frequently today. Essentially it was along these lines--“I just love this business. It is my clients that I cannot stand.” We all get older and I hope a bit more mature. When clients were impossible I always reminded myself that they indirectly paid for tuition bills, vacations, and 401k contributions. Yet, in recent years, the complaining seems a bit louder and more strident. Are the criticisms valid? I asked several people at some small and mid-sized shops as well as a few alumni of mega-shops. The answers below were really interesting:

1) Medium sized agency president--“The clients are just plain scared. I remember you e-mailing to me that the average lifespan of a marketing director in a U.S. company was about 24 months. That struck me as crazy until I did some digging. I have seen various reports and asked around a lot. The range seems to be 18-30 months in my unscientific sample. To me, that explains a lot. These men and women come off as tough. Bull@#$%! They are simply afraid. Their superiors, of all types of firms, want tangible results and they want them now. If you are not successful on a project, they put you on notice as they are in trouble as well. It is our short term oriented American business culture that is wrong--not these clients. They come off as hard as nails but they are as scared as our junior account team.”

2) Small agency operations chief--”when we started years ago we were both “gung-ho” about the industry. Where are those kids today? I cannot find them although I must admit they probably do not want to live in our small city. The current team’s total lack of zeal is obvious to our client base. An 80 year old business owner, long since retired, sat in on a client presentation recently. He looked me in the eye and said you need to hire kids who were like you 30 years ago. I would if I could; where are they?”

3) A retiree of a publicly traded mega-shop--“Years ago, advertising was where smart and ambitious people wanted to work. Now, Silicon Valley and investment banking scarf the sharpies up. Our pay cannot compete and the best of breed do not want to wait years to be rewarded financially.”

4) A senior marketing executive at a major agency--“If you are honest, you know that the best ideas, the innovation, bubbles up from smart people client-side. A superstar will recognize this and leave the agency business and go where the real thinking is taking place.  Am I harsh? Maybe a bit. But the questions that I get from 30 year old clients are deeper than any I get within our shop."

5) Media Director at a very successful agency--“Digital media increasingly is giving you measurable results. Conventional media is still pretty murky. The young clients want accountability. We seem evasive after unsuccessful campaigns. There is often no 2nd chance with them."

6)) Account Director at Mid-Sized--“The problem is simple. With cut fees, we have to do more with less. Our young people have a job but are not in love with the game. They get beat up at meetings and are defensive. There is no time to train them properly and I cannot be at every meeting.”

7) Mid-Sized #2--“The kids we hire do not live and breathe the business. I send them articles to read about their client’s category and they ask me if they can read it on company time. One told me that he will never take work home. And, sadly, he is our 2nd best person!  Another one said, “I don’t read.” There is not enough interest in the business. Your contact who said we no longer attract the best really nailed it. I am exhausted and getting old. It should not be like this.”

So, are the crabby clients monsters? It seems a bit more so than in the past. Yet, the landscape has totally changed. Ratings continue to get smaller in TV and cable so forecasting is difficult. The clients are uneasy.  On paper, the economy seems to be crawling upward but few feel content, secure or optimistic. It is hard to establish relationships when client turnover is high as well as on your own staff. And, the people who leave are often the best.

We all have learned how to deal with difficult people. With the digital age upon us and conventional media in retreat, we need to relearn and rethink how and with whom we operate and rework the client-agency relationship.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Sunday, January 25, 2015

Roundtable: The Future of Spot Broadcast from Some Old Pros

The one question that I often get from readers is where I believe the conventional broadcast markets will be several (7-10) years from now. Naturally, that is an almost impossible question given the rapid rate of change in the media world today. While I knew that no one person is going to get it right, especially your correspondent, I decided to ask several people whom I valued as sharp observers of the media scene and clever practitioners of the art of negotiation. All have been in the business for at least 30 years. I never worked with any of them under the same roof and I did compete against two of them from time to time. Each is still in the business but, even the youngest, will likely be retired in 7-10 years. To protect them and their remarkable candor, that is all I will say about them.

While we did not really sit together around a table, I will report in a format that assumes that we were:

Don--How do you think negotiation will change in the years to come?

Buyer #1--“Whenever you read about rules of negotiation or take a seminar concerning it, two things usually stand out--
1) Try to create a win-win situation where the station or interconnect is pleased and you and your client is as well.”
2) “Always be willing to walk away. This second point is key. For decades, we could always walk away from a radio station and we could usually buy around a TV station in any market. Sometimes, if a TV station were really dominant, we would be forced to buy a lighter schedule than normal but we had to give them something. Soon, and I cannot tell you when, we may simply not buy the medium period in a market. Recently, a longstanding client and I made a market trip to a DMA ranked somewhere between 80-110. We had not done it in at least 7-8 years. People were surprised and pretty happy to see us as we have continued spending in this small market when many national accounts have dried up. At one station, which is still a leader but with diminished numbers as all broadcast and cable players are experiencing, a sales manager would not budge on rates or meet any of our requests for promotions or other special features. My client simply said, “Fine, we just will not use TV here this year”. The sales guy said you can’t do that. It will kill your business. I mentioned what we do in network TV and told him that digital could make up the slack nicely. We left and the general manager of the station came running out coatless on a frigid day waving frantically. He apologized and said his young hot shot did not understand how the world was changing. We thanked him and my client held firm.  The digital team did a few things locally but we bought no TV. We were down 2.5% nationally but flat in this Podunk town."

    “Years from now, this may be the norm. We will do media mix much heavier on a market by market basis. If we cannot get the conventional people to make realistic concessions, we will not buy them at all.”

Buyer #2--You sound like Don beating the drum for market by market planning as he has for the last 30 years. It is not going to happen. Maybe a few small but hardworking shops will try to do it or the occasional mid-sized will, but no buying service on earth is going to waste time on that type of labor intensive approach. Once TV is approved they will execute. Also, you need client buy in to let you change a plan in mid-stream.  Few are going to give you carte blanche authority to change the plan on the fly. The idea is sound and fits the new world we may see in a few years, but it is just not practical.  The future is already set in stone. We will have fewer people and more work to do. A broadcast exchange could be the answer but not this.”

Don-- “Any other ideas on the future marketplace?”

Buyer #3--“We have heard about this for years but TV will become a much stronger Direct Response medium. A network sitcom may have a couch or a car in it. You click on the couch and order it and go back to the show. Or, click on a car and you can set up a test drive at a dealer near you. Some of this may be available to local advertisers as well. This could provide much needed revenue to the station. If things do not change they are in real trouble. Many that I deal with already have an appointment with the dustbins of history.”

Buyer #4--“The stations need to face reality. They talk to me as if it were 20 years ago. I too went on a rare market trip in 2014. My last call was at a station who had me watch their evening news and then the sales and general managers took me to dinner. The sales guy kept saying how great the station was and I was getting annoyed. I should not  have had that third glass of wine but when he asked me again how great the station was I said, “Yes, you are the best looking horse at the glue factory.” The GM roared but the sales guy was insulted. I know you need to talk up your product but, face it, local news is often horrible in the mid-sized and smaller markets. The GM drove me back to the hotel and we had a good laugh. He “gets it” but his staff does not.”

Buyer#2--“At some point, the network affiliates will just fade away. Look at the demographics of local news. It is old and increasingly downscale in so many DMA’s. An on demand model will probably emerge from the ashes. Also, it will continue to erode gradually although Neflix, Hulu and Amazon are certainly speeding the process up.”

Buyer #1--“What about Google and Apple? Google has lots of potential with You Tube and both companies have billions lying around. Maybe one will buy Viacom or Disney."

Buyer #2--“Why would anyone want to buy Viacom?”

Buyer#1--“For content and programming expertise.”

Don--any trends that you watch closely?

Buyer #2--“I am all over what upscale millennials are doing. They will be the leaders of tomorrow. The young women are particularly interesting as some do not even have TV’s. How do you reach them? Well, you cannot with traditional media. They are the group that will kill radio and put the last nail in the newspaper coffin. Yet, they have big buying power.

Buyer#1--“I agree but do not follow them all that much or as much as I should. They are several years ahead of the pack so if they have abandoned TV others will see how they are getting video and follow suit.”

Buyer #4--I still look at shrinking ratings. Sales suffer these days if we put too much on TV. And with all the other devices in play while the set is on, even our best creative does not break through as it used to.”

Buyer #3--“The economy. The millennials are largely broke. Lots of low paying jobs and big college debt. I do not see an easy road ahead for these kids.”

Don--are stations preparing for their demise or new role in the media world?

Buyer #2--“Nope. I ask even the old goats whom I have known forever. The network owned and operated stations get it but they say little to me at least. The smaller group operators are often in denial. For them, there is no mid-course course correction option in the cards.” (editors note--quite a statement!)

Buyer #1--“You get vague comments from a few but 90% have not come to terms with what is going on and, more importantly, what is going to happen.”

Buyer #3--“The poor bastards are dealing with debt service. They have to send the money every month to headquarters regardless of the media landscape. In radio, it is the worst. No, they are not reflective. They have to hit their tabs or come close each quarter. It has to be a nightmare. The smart ones know that TV and radio do not work as well as they used to even a few years ago.”

Buyer #4--“Those over 50 say just let me get to retirement with my job and pay intact. It is hard to oversee a dying enterprise.”

Don--how about each of you? How are you treated within your own companies?

Buyer #4--“Hey, I know I am a dinosaur but the CEO and I are joined at the hip. The young digitals in media and creative think I am a jerk but they are afraid of me. I try to reach out to them and I do learn from them. My days are numbered and I know it. I am not rich but I will be comfortable. The business has been good to me.”

Buyer #1--“We, as a company, are way behind the times. I am the progressive one if you can believe it. A few years from now, I will be there to shut off the lights. It has been one hell of a ride.”

Buyer #3--“Absolutely no comment.”

Buyer #2--“My influence is declining and I understand why. A couple of the young digital creatives have told me that I am more respectful than veterans they worked with at previous shops. I will play it out until the ax falls. It still is fun but, obviously, not like the “80’s.”

Don--this was great fun. Any parting shots?

Buyer #2--“Let’s do this again in 10 years if Don is still lucid.”

Don--Very nice!

Buyer #1--”We need a drink.”

Buyer #3--”Too early for me in my time zone.”

Buyer #4--“You never were much fun.”

Please note that the language was cleaned up a bit and fractured syntax was corrected up to a point. Also, a good amount of material was edited and may be used in the future in very targeted posts.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or place a comment on the blog.

Monday, January 19, 2015

The Skyboxification of America

This past week a reader sent me an e-mail thanking me for several past posts discussing the rising economic inequality in the United States. He then asked, “Why don’t you write a post on the Skyboxification of America?”  I fired back, “What a great term. Did you coin it?” He said that he did not but could not remember where he first heard it.

Intrigued, I dutifully Googled it and was soon heading to a local library. As best as I can tell, the term came from Michael J. Sandel, a government professor at Harvard. He outlines the concept in a thought provoking book entitled, WHAT MONEY CAN’T BUY, The Moral Limits of Markets (Center Point Publishing, 2012).

I grew up going to more sporting events than most as my father worked in the field. My brothers and I went to many games and frequently sat on the bench with a team. Some of my favorite memories were when I was 8-10 years old and we would go to afternoon games at Fenway Park. Tickets started at 75 cents for a bleacher seat and may have gone up to a high of $4.50. For $3.25 you could get a seat beside third base (maybe 7-12 rows back). That is where we always sat. You felt almost as if you were on the field as Fenway had and still has the smallest area of foul territory in the game. I remember one game vividly on a hot August day. The Red Sox played the Cleveland Indians. Behind us, a surgeon and his daughter were in a lively discussion with my Dad about a player’s physical rehab program (my father was a former coach and an athletic therapist). Next to me was a man who worked at the Necco Wafer candy company in Cambridge, Massachusetts. Everyone was an enthusiastic fan and the discussion all around us was lively and fun. It was twi-night doubleheader and the man from Necco had to leave in the 2nd inning of game two to work the night shift at the Cambridge plant. He shook everyone’s hand and made a graceful exit. I told my Dad what a great job he had. Imagine working at a candy factory! My father smiled and said it might be fun for a summer job but, Don, you would not like it for a life’s work.

When I saw the term “Skyboxification” in print, that memory came flooding back to me. Going to a professional sporting event back then was almost a civic experience. All types of people went and interacted. They were all fans. Hope sprung eternal as we all rooted for the home team.

Over the years, times changed. Working in the media, I was privy to some incredible perks. Long line to enter Augusta National? Not for me. I had a VIP pass and even bought my swag in the member’s pro shop on occasion. Park blocks from a stadium? Nope. A special pass for a close in lot came with the complimentary tickets. It was amazing how quickly people got used to such perks. I took a young associate a few times to games and we sat in the Skybox courtesy of a regional sports channel. The next opening day I invited my whole team to a game. When I passed out the tickets, he said, “Boss, we sit in the stands?” Yes, we sat in the stands a few rows behind home plate. Somehow, he managed.

The Skybox first appeared, as far as I can determine, in the Houston Astrodome, in 1965. Then, America’s Team, The Dallas Cowboys, put some in Texas Stadium in 1970. Executives and key clients loved it and when many new stadia came on board in the 1990’s, Skyboxes were a key part of the design. When the new Yankee Stadium was built it was said that some 3,000 “normal” seats were eliminated to make room for the ultra-expensive Skyboxes. If one owned a team, you can hardly blame them. Skybox rental is very high and prices for food and drink within them are paralyzing. They have to be very lucrative for any franchise.

Sports, which was something that all kinds of Americans would gravitate to, are now demographically segregated perhaps more than any other form of entertainment. A Texas newspaper columnist some years back had the chutzpah to call Skyboxes “the sporting equivalent of gated communities.”

Each year we grow further and further apart from one another. A guy working at a candy plant can longer afford to go to major league sporting events let alone take his children with him. As inequality continues to soar in the United States regardless of the party in power, we find that the affluent live in different areas, their children go to different schools, and we work and shop in starkly different environments. Interaction with the shrinking middle class gets less and less and the affluent get more out of touch with the American mainstream.

Do read Professor Sandel’s book. I do not agree with all of that he says especially the limits that he would like to put on advertising. He did, however, make me think hard about certain issues in a unique way.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a comment on the blog.

Sunday, January 11, 2015

2015 Media Forecast

Forecasting is always a tricky business but is especially so this year with an uncertain economy coupled with the rapid changes in media going on especially in the United States. A number of people asked me to do a forecast and with help from my panel as well as TV and radio broadcasters, cable salespeople, agency media chiefs, broadcast negotiators, and a few agency CEO’s, I have put the following report together. Many spoke very candidly and I promised not to name any names.

Here goes:

The United States

A big issue regarding the media environment for 2015 in America is the price of oil. In the summer of 2014, a barrel of oil cost over $108. As we publish, it is now just under $50. Some say the oil decline will be V-shaped and snap back quickly as rigs shut down in the U.S. and when Saudi Arabia cuts back on production some time in the next few months. I have no idea and I doubt if any else has a clear handle on what will happen. When oil was over $100 a few Cassandras worried about the price dropping to $80 but I did not hear anyone say it would fall below $50. This is a market that I have followed somewhat closely for over 40 years and all I really know is that the industry is cyclical. When oil prices are low (as they are now) companies cut back on capital expenditures so exploration and production takes a back seat. As production slows and global demand continues upward, prices rise. When prices rise the companies earn big profits and there is a return to large capital expenditures as a result of big profits. Banks also lend more to smaller firms. So, the cycle repeats as high prices retard consumption. Too simplistic? You bet. Yet some variation of that cycle repeats each decade. This means that here in the U.S. the consumer has been handed the equivalent of a nifty temporary tax cut. Forecasters are saying that since July the average American family has $125 more to spend each month as a result of lower gasoline prices.

Both broadcast and cable sales people have said that automotive advertising is holding up very well. And,why not? Cheap gasoline is propelling vehicle sales coupled with an aging North American auto fleet. This could be a big year for General Motors, Ford, Chrysler and Toyota. Profits for SUV’s and full size pickups are big for the manufacturers relative to compacts. Some estimates are that 17 million vehicles will be sold in the U.S. in 2015 if gasoline prices stay low. That is good for Detroit manufacturers but great for all forms of TV and video advertising as well. Early signs are that Ford’s all new aluminum-bodied F-150 pickup will be a real success. Perhaps General Motors can overtake Toyota and reclaim its spot as the #1 car manufacturer in the world!

Medium by medium, we find:

Spot TV--a mixed bag. Right now, automotive as mentioned above, is propping some markets up significantly. With no political spending in most DMA’s and no Olympics this year, things are not great in some markets. Also, media people are shifting increasing amounts of their budgets in to digital in 2015. Local cable people are packaging up deals with an online component and more than one admitted to me that it is really helping them stay competitive. An experienced broadcast negotiator wrote, “I always had a great record for post buy analysis for 20 years. Now, nobody can post anymore. The Nielsen numbers are evaporating book to book. We may lose a key client who is all over each post and daypart delivery within each buy. Nielsen is just plain obsolete but they will not listen.” This sentiment was echoed by three salespeople 1,000 miles from each other.

Two salespeople said that there is clear shrinkage in sales across the board. One said his boss or bosses’ boss, claims victory at headquarters for being flat.

One area that is going to suffer is the oil patch. Over the last few years, Texas, Oklahoma, Wyoming and the Dakotas have had vibrant broadcast sales which bucked the trend. As rigs shut down, the markets will soften. Texas will do better than the others due to their more diversified economy but the glory days are over for a while. A cranky old coot in Houston wrote, “Son, just watch the rig count. Until that rises, places like Odessa-Midland and North Dakota will be weak.” I doubt if many media planners reading this will monitor the rig count, but he makes a good point.

So, on balance, automotive will help the spot marketplace but the shift is in place away from broadcast and that trend will continue. Expect -5% in the weak places and up to +5% in portions of the Southeast.

Local Cable

As was true last year, they will do better than broadcast as they have varied inventory, great promotional offerings, zoned sales, and several digital options that broadcast cannot usually match. So, a modest increase overall with lower declines and higher gains by market than their broadcast brethren.

Newspaper

Death by a thousand cuts continues. The rate of decline may be halted but they will still lose ground in 2015. National papers, The Wall Street Journal and USA Today, are exceptions, but the game is close to over for many papers. Some try offline and online packages but mid-sized markets are in real trouble and the product gets weaker and weaker as wire service copy predominates.

Magazines

Similar to newspaper although, given the selectivity of interest, some titles are thriving. The online product is getting more play but they may be several years too late.

Out of Home

Pretty good prospects! The last mass medium has lots of appeal for established brands with a reminder message. Also, electronic billboards of all sorts should do well.

Radio

This was interesting to look at given the reactions my questions provoked. To my surprise several agency people say that it still worked well for smaller, local retail clients.
Those spending money for major clients either ignored it or have cut back drastically. Talking to broadcasters was striking. Most said that sales would be down a bit although a few markets, particularly in the Southeast, were modestly bullish. The surprise came from those who were successful. All said they made money last year via non-traditional means and that was generally through their websites. Couponing was particularly successful. The only format which seems to be thriving is sports talk and that tends to be in markets where there is no or weak competition.

Mobile

The trade press, in my view, sometimes does this emerging medium a bit of a disservice. Admittedly, some people made somewhat breathless forecasts about how well mobile would advance in 2014. And, they did have a nice percentage gain in sales. They did not become a major player yet and some say it was a disappointment. My attitude is that they are doing just fine and will advance again in 2015. Maybe this year will be their breakthrough year; maybe not. Ignore this category at your peril.

Sports

An old hand tells me that other than the Super Bowl and ESPN, most sports sales are soft. There does appear to be some excessive saturation out there. Also, people are increasingly wondering if the premium for sports is worth it if “two fisted viewers” have a few screens going during commercial breaks.  Sling Media’s inclusion of ESPN in their stripped down TV product is interesting and it will see if ESPN can lure millennials who have never bought cable into paying for some form of TV.

On Line--continued growth here at double digit levels. The big growth spurt comes from on line video which takes many forms and is an especially good way to reach young adults. Increasingly, advertisers are wisely hedging their bets here.

Media Research Issue--Is Nielsen still viable? Our currency for TV measurement appears to be asked to do much in the world of 2015. Can they keep up with the lightning fast changes going on these days. It seems unlikely. Also, when is an impression an impression? Is a TV impression equal to an online video impression?

Conclusion for U.S.--modest growth (3-4%) overall IF the economy continues to crawl higher and oil prices do not spike back upward. Conventional media will struggle or lose ground while online and mobile grow nicely.


Global Growth

There are some 200 countries on earth (depending on how one is counting). Here is a top-line forecast for some in the news:


Briefly, Europe should not see much growth with real weakness in Spain and Italy. Russia is getting crushed with low oil prices so their overall economy will struggle mightily for a while. The Ukraine is obviously a marketing wasteland at the moment.

India, Turkey and Japan will be much helped by lower oil prices so Turkey and India may see advertising perk up for a while.

Southeast Asia will grow at 7%+ in ad revenue which is very good in today’s shaky global economy.

China--always a wild card. The consensus is that Chinese GDP will grow by 7-7.2% in 2015. Also, 25-30 million Chinese will vault in to the middle class. That, to me, translates to a good year for advertising. The press keeps harping on how China is no longer growing at 12%. So, clearly they are growing at a decreasing rate relative to recent years. Yet America is presumed to be growing at a consensus forecast of 3.1%. Wouldn’t we kill for a 7.1% growth rate? Is China cooking the books? Who knows? Advertising should fare quite well there in 2015--up 8%.

In Latin America, Venezuela is a basket case. They may be the most oil dependent country on earth and need a cost of $130-160 per barrel to balance their budget. So, do not look for much activity there. Brazil will be helped by lower oil prices.

That is how I see it.  Good luck to all of us in 2015.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com