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Monday, February 24, 2014

Automated TV Buying

Way back in 1978, my boss and I attended an ANA (Association of National Advertisers) conference in New York. One of the last speakers was a 1970’s tech whiz. He talked a bit about how the technology would soon be available where broadcast TV (cable was a very minor player then) could be sold on an auction market basis via computer. After his speech, I approached him and nervously asked a few questions. He was very kind to an inquisitive young man.  Essentially, he envisioned each TV station in America with a “war room” where the sales manager would sit with a few assistants. They would look at bids from buyers for selected inventory and, if they accepted a bid, that inventory was removed from the screens of buyers across the country. He admitted that local car dealers might not participate at first so they would still do annual deals with them and a few other big but unsophisticated players in the market. I asked, “When will this happen?” He laughed and uttered a line that I have used ever since. “Consumers always lag technology, son, so it may be 20 years.”

Here we are nearly 36 years later and I am no longer an earnest young media analyst. And, despite technological gains, we have yet to see automated TV buying to any large degree. Lately, however, the idea, while not gaining traction in the real world, is starting to be discussed more often as exchanges are indeed being established for on line buying.

I put the idea out to my Media Realism panel and to a number of people whom I value and trust. The results were interesting. Some simply did not respond, a few answered with brief locker room expressions, and some said that it was ridiculous. Others gave me measured responses.

Interestingly, the willingness to accept the idea fell sharply along demographic lines:

Those who had recently retired (a small sample of four) said that it was inevitable.
A larger group within three-five years from retirement said it could happen but all felt after they were gone.
Those under 50 were quite dismissive although five said that they feared it.

A few widely disparate verbatim comments were:

A network cable rep in NYC wrote, “My boss is exploring it and it scares me to death. I have two kids in college and need five more years at this sweatshop. It will not happen overnight but management is always looking to cut costs and if they can get rid of some of the sales team they can save a bundle on salaries and benefits.”

Another much younger sales rep at a cable powerhouse was not dismissive but said it did not make sense yet. His comments included “we don’t want to be commoditized so we hold back a lot of good stuff (inventory) for a premium price. If you want customized buys or special programs or promotions you have to deal with a sales rep. Our Direct Response group handles all remnant inventory and always sells out. An automated exchange might only work for a struggling new network.”

A buying service pro says, “Locally, I think an exchange would mean that a lot of inventory would go unused. It would be ever stronger if they tried it in radio. Without a team of sales reps, you might not have any radio sales to speak of.” Several others echoed this sentiment saying that, in smaller markets, automated buying will not be viable for some time.

A local cable maven hinted that affiliates could consider it for day or overnight but sales teams are still needed for the next several years. Other local cable pros said that as their product offerings are expanding, an automated exchange could not cope with it.

An owner of a mid-sized ad agency actually said he hoped it might happen. “Health care insurance is killing me. If I could unload most of my media team and then reward the soul of the agency, my creative team, it would be a good thing.” No one else was so candid but a few media directors felt that was what their boss was thinking when they asked about the topic.

While middle management at stations, cable systems, agencies and buying services was dismissive, virtually all felt that top management had to be considering it and were monitoring developments carefully.

The bottom line appears to be that, at some point, technology will evolve to where it will strongly effect the need for so many TV media salespeople and agency media staffers. While no one can rest easy in today’s environment, that appears to be some years away.

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

Sunday, February 16, 2014

Technology, The Job Killer

I am a bit uneasy writing this piece. For the several years, I have seen this issue building up steam but few people want to speak about it. Quite simply, it is that while technology has enriched all of our lives tremendously over the last decade, it is killing millions of jobs, particularly low paying service jobs.

Technology makes our lives easier. Remember waiting in line to cash your check on payday? Remember bank tellers? Remember getting signals crossed when trying to meet up with people? It never happens now with smart phones. How about online banking or buying stocks online for $8 instead of paying a brokerage house $250? And, most of all, men of a certain age do not have to ask for directions as Google maps or a GPS in the vehicle can save their marriages.

All of these advances make our lives more productive, efficient and sometimes fun. Yet, slowly, a price is being paid.  I have always been a champion of economic progress. When one door closed on me it seemed that five others opened and they were better than the first. Many people today do not seem to be in the same situation.

Simply put, technology seems to be killing more jobs than it creates. Clearly, it is creating some great high paying jobs in Silicon Valley and a few select other areas but not so everywhere else.

Here are a few statistics that I believe make my point better than a long rant. At its zenith, a decade or so ago, Blockbuster had 60,000 employees virtually all of whom were in the service arena. Today, Netflix, which hopped aboard the moving digital train to dethrone Blockbuster, has but 2,000 employees.

How about General Electric, the last original member of the Dow Jones Industrial Average and one of the few remaining poster boys for American industry? It has about 305,000 employees. Google, the surrogate for tech and the knowledge economy has 46,421 employees.

So, as the economy has shifted, many jobs of all kinds are gone forever. The debate that is going on now about minimum wage often centers around the need for caution. Iif we move from the current federal $7.25 to the president’s recommended $10.10, many say that a great many jobs will be lost. Even Bill Gates, on MSNBC recently, weighed in saying that companies will move toward some form of robotics when faced with such a large expense hitting at once. Someone whom I respect tremendously dismissed it as nonsense. Her opinion was that when a company can eliminate a job via technology, they will do it regardless of the minimum wage (Actually, a gradual rise in minimum wage has proven to have minimal effect on unemployment. A nearly three dollar immediate rise would likely hurt many small businesses significantly and shutter a few).

Did you know that the big box retailers are experimenting with RFID technology? It stands for Radio Frequency Identification. I know of two tests going on now; there may be many more. The first has you sign up for an account. As you leave a store with a basket full of goods, your assigned credit card is immediately charged. If you try to leave without an account, security is there to stop you and prosecute. The second approach is a smart phone application that you use as you pick up each item in the store. You do not go to a regular checkout line but a special one where you are given a receipt for your purchases. The retailer also will have a detailed tab on your purchases which will help with couponing and other promotional features. You will have little or no time to checkout. Sounds great but it saves the retailers a bundle as they can lay off thousands of checkout people.

Mining firms around the world are experimenting with using robots for dangerous jobs. If there is a cave in, no one dies. And, as one person wrote to me, robots don’t have sick days, join unions, or ask for raises. Assembly lines are using more robots in western countries.

Eric Schmidt of Google in a recent CNBC interview at Davos reminded us that what we call robots may not be a funny looking science fiction clone but rather a computer program. Netflix’s amazing movie preference feature is a logarithm. Or, how about Google’s algorithm for search? They are in a sense robots replacing thousands and thousands of people.

A restauranteur mentioned to me that he hopes to test putting a small device on each table with his menu on a screen. You can make selections and add comments for special needs and the order goes straight to the kitchen. If it works, he plans to lay off most of his wait staff. An astute friend asked if he the fellow had thought about how he would not have any customers if all businesses took the same approach to squeeze out costs.

Do not get me wrong. Technology is an integral part of my life--I love it. Yet, as jobs continue to disappear forever, what is going to pick up the slack? Some say tech itself will be the silver bullet but I would posit that technological advances will only cover a small fraction of the lost jobs. We are seeing a nice pickup in energy and energy service jobs in Texas, Oklahoma, North Dakota, Ohio and Pennsylvania. They are good paying jobs and often blue collar. Can America rebuild its industrial base? It will be hard but that seems to me to be the only way out of this growing problem.

George Orwell once wrote, “To see what is in front of one’s nose needs a constant struggle.”

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

Sunday, February 9, 2014

Purchasing Power and Changing Retail

By early February, all reports were in from retailers on the type of holiday season that we experienced in 2013. Most of the reports were modestly positive and some were negative (Mastercard reported a 2.3% increase) but, if you dig a little bit, the results were a very clear snapshot of what is going on with wealth distribution in this country.

We had a very slow Black Friday (day after Thanksgiving) kickoff to the holiday retail season. As we moved to December 10th, foot traffic was still slow so retailers began discounting heavily and, when that did not put a zing in sales they began offering last minute shipping deals to push consumers over the edge. It worked to a certain degree but the final volume was so great that UPS could not handle it. Many did not receive their gifts by Christmas Day which left a foul taste in many people mouths.

On top of all of this, there was the Target credit card fiasco, which hurt that retailer significantly especially with post Christmas sales. Even Starbucks felt the pinch as fewer shoppers meant a lower number of people on weekends stopping for lattes.

So, overall, it was not great. Break it down a bit and you see America in early 2014. The top 5% of American households are now responsible for 38% of the consumption. So, your high end retailers such as Tiffany’s and Michael Kors among many others are doing just fine. It appears that the term “wealth effect” which was very prominent in 2004-2007 is back in vogue. With the S&P 500 rising 30% in 2013 and stock indexes hitting all time highs, the affluent consumer is feeling wealthier and is spending again with confidence.  Also, doing well are the “Dollar” stores at the other end of the demographic divide whose growing customer base is  struggling financially and finding Wal*Mart and Target just too expensive these days.

Stores appealing to the middle class are not doing so great. I heard a startling statistic a few weeks ago and was skeptical until I crunched the numbers myself. To be certain, I sent the number out to a few market researchers just to confirm it. Everyone said it was true but no one wanted to be quoted on it. What is the stunning shift in demographics?

Well, let me answer with a question. What is the fastest growing demographic in the U.S? Is it Women over 85? Some ethnic group? College graduates? Nope. It is Americans falling in to poverty! Each month as many as several hundred thousand Americans fall from the lower middle class in to poverty. Some 46 million are now on food stamps which is a record.

Retail has always been an exciting and dynamic part of our economy. And, it is a marvelous indicator of consumer activity. What is happening in retail is a reflection of our nation as a whole. Remember, only 50% of Americans have an IRA or are contributors to a 401k plan. So, the 30% gain in the S&P meant hundreds of thousands of dollars or more to most of the readers of this blog but had zero effect on the lifestyles or prospects of most Americans. The wealth effect is indeed back but is quite selective these days.

On top of all of this, on line buying continues to soar at double digit compounded growth. This has to have retailers dealing with the broad middle class very nervous. Notice how few new malls are going up around the country. If Amazon and fellow travelers keep growing, we will soon not need anywhere near the retail space we currently have nor will we need anywhere near as many service employees.

Retail is changing as it always has. This time, however the changes are happening far more quickly than ever.

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