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Sunday, March 21, 2010

A Personal Dose of Media Realism

Last week, the phone rang. Someone who reads this blog at the encouragement of his boss and a client, asked me to do the network TV buying (around $7 million) for a large client of his. I thought for a moment and refused.

He was stunned. To paraphrase, he wanted to know how I could walk away from an easy commission. I told him that while I am deeply experienced and actually began network activity way back in 1975, I had been away from it for a few years and the game has changed dramatically. He still did not believe me and we talked a bit and I asked him to send me over some distribution and sales data for the brand. After promising confidentiality he e-mailed me the data. I did some fast calculations and knew that I was right to turn down the assignments for two reasons.

The first is media pricing. Twenty years ago, I was one scrappy negotiator who took very limited dollars from my clients and stretched them with imaginative use of regional network TV in high distribution areas, opportunistic buying in 1st and 3rd quarters often buying primetime for 30 cents on the dollar, and using cable networks more aggressively than most and getting some outstanding deals on niche networks.

Today, that world is (sadly) largely gone with the wind. Five or six players dominate network TV negotiation and if a consultant such as I competed against them it would be like a cub scout with a cap pistol going up against an armored tank division spending $700 million in the medium vs. my $7 million. A big player would have a price advantage of at least 20% over whatever I could work out and, at certain places in the business cycle; the advantage would be much, much higher.

My prospect admitted to some of this but said he did not feel that he would be treated well by the buying behemoths and the client would love my personalized service and quick response time on issues. I agreed that my service and interest level would be excellent but they could not nullify the likely price disadvantage that I would deliver relative to a giant.

The second reason that I did not take it was when I looked at sales and distribution. They were not homogenized across the country. Some large markets in the top 20 had virtually no distribution and sales skewed heavily to two regions of the U.S. totally about 60% of the population. A basic sin is to advertise to empty shelves as national advertising will only cost you money. It will not force much incremental distribution. When I e-mailed back, he did not think that I was crazy anymore. My calculations indicate that in two years, his client may well be ready for national network TV. Until then, pound away at certain markets with more weight and grow his distribution steadily.

So, I lost a nice payday but won a few friends and, in a few years, maybe I can police a large buying service, work toward a strong mix of cable channels and broadcast programming, and help put these fine people on the map.
I write this as a cautionary note to a lot of people. When I talk to young media types, they often cannot do the “crossover analysis” where you learn at what point it is more economical to jump to national media vs. local. When you ask about distribution, their eyes glaze and often respond with “its pretty good in many areas.” Also, some people are buying network time that should not. About three years ago, I spoke with an agency principal who confessed to me that he considered it a perk for his media director to negotiate the time for their one network account. “She just loves to go the network premiere parties each year”, he told me. Hey, I loved going them to them as well but do you waste a couple of millions dollars of client funds so your media chief gets a few days in New York? It still goes on, believe me.

So, yes, I could lay out a fine network plan with a carefully crafted roster of cable channels that would fit the needs of almost any product or service. But, my feet are firmly planted on the ground when it comes to pricing. I cannot compete effectively anymore and most people cannot either.

My prospect knows that I am writing this and supports my stance. Know thyself!

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

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