Earlier this year, tracking services indicated that television as an advertising medium had declined in real terms for one quarter. This sparked a few headlines and some gloom and doom comments. Yet looking at the last few years, as newspaper, magazines and, to a lesser degree radio have faltered, TV has held is own in terms of dollar share of total advertising expenditures as internet and mobile spending has increased smartly.
For nearly a decade many pundits have been talking about the death of TV as an advertising medium. It definitely has not happened. I have felt that it inevitably will decline but that the fall off will take a very long time. Recently, I surveyed a number of agency people across the country as well as a handful of advertisers and their comments only reinforced my belief.
Each year, several people ask me whether this coming year will be the final bow for the network TV upfront marketplace. I always say no but, when pressed, refuse to forecast when it will become obsolete. People who put precision around such events remind me of the economic Cassandras who pen books entitled with catchy titles such as HOW TO BEAT THE CRASH THAT IS SURELY COMING. Every generation someone gets the timing right but much of that has to be luck.
Is advertiser supported TV in trouble? Yes and no. It is definitely changing and no longer packs the communications wallop that it had not that long ago. Here is a motley mix of comments that I received from agency professionals, a few retired media executives, some active and very anonymous broadcast sales executives, a digital media director, and a local cable trailblazer.
--Retired Network Sales Executive--“Of course, we are in a steady and permanent decline. Hell, even I am a Netflix junkie these days. My former colleagues are a scrappy bunch and they will be standing longer than many realize. They are doing a nice job of bringing new advertisers on air. Some of the tech guys should know better as they do not need us all that much.”
--Agency Media Strategist--“You once asked me how things were going in my shop as we evolved in to digital. I was annoyed with you but there is a “knife fight” (your term) going on each year among the network buyers and the planning team. We keep pulling network TV back in our initial plans and adding more digital. Clearly, we are winning but the haves, the old line negotiators, are not rolling over. We spend too much in all forms of TV but directionally things are getting better.”
--Agency Media Chief--“My big problem is a few of our biggest clients. Network TV is a security blanket to them. Off the record, we still do too much. I am trying to have my team wean them away from it. Several years have gone by and we are making progress. To me, network TV is not going to dry up and blow away. It is getting downscale and a lot older. That argument seems to work with our more traditional clients.”
--Sales Manager, Local Market (Network Affiliate)--“it comes down to two things, Don. We are taking clients that we never would have considered 10 years ago and are proud to get them. Also, we are licking our chops about the upcoming political season. This would never have happened years ago. And, as you and I have discussed the last decade, TV does not work nearly as well anymore. Our local news is awful but is still a station cash cow. Go figure.”
--Digital Media Director--“I try to move people along into more digital options. We are always recommending tests. I have avoided wars with the broadcast players at my agency and traditional clients. The smart old ones see what is happening and are riding it out until retirement. A lot of money is being wasted but it used to be worse.”
--Local cable sales star--“We are doing more and more with zoned buys and strong promotions. The little retailers love it and we have made TV affordable for them. It is a lot more work but we will prolong the life of our version of TV longer than most are betting.”
--Local TV sales chief--“Whenever I have a bad day, I tell myself, it could be worse. You could be selling newspaper or radio (laughs). We have lost the under 30 crowd except for a few sporting events. Game over? No way. But, we cannot turn this ship around no matter what New York says.”
So, US TV is still a big force in advertising. Its influence is sagging and smart young people are going to work elsewhere according to my sources. Video usage will continue to grow but advertising avoidance should move in lockstep with it.
If you would like to contact Don Cole directly, you may reach him at doncolemedia @gmail.com
Sunday, November 22, 2015
Thursday, November 12, 2015
The Disease of Short-Termism
In recent years, American business has increasingly ceased to look at the long term benefits of a strong and consistent approach to marketing and to advertising. When you ask people about it, most simply shrug. Those who talk to me about it are in one of two camps:
1) Things are changing so quickly with all the new platforms and media opportunities that people do not know what to do so they pull in their horns a bit too much.
2) The simple truth is that Wall Street runs America and not Main Street. Publicly traded companies will do anything to avoid missing Wall Street earnings estimates so many things suffer, particularly marketing and also, not insignificantly, honest accounting.
It might surprise many of you who know me that I tend to lean toward camp #2.
I have a long standing habit that amuses my wife but other people find to be more than mildly eccentric--I devour annual reports of companies from all over the globe. As I have gotten better at analyzing them, I notice that, increasingly, seemingly reputable companies are engaging in what I would categorize as accounting shenanigans. A CPA wrote to me recently, “I was up for a contract with a company somewhat larger than my usual client. The presentation went well and the prospect seem comfortable with my both me and my team. Then she asked, “How imaginative are you guys at managing earnings for your clients.” “I responded that we used every legitimate loophole to lower taxes but we never managed earnings. We were (politely) shown the door.”
A tax lawyer with international experience tells me that multi-nationals have a tough and bewildering job paying taxes in dozens of nations. He even added that the IRS often does not have the expertise to sort it all out. Given currency fluctuations and local taxes, the temptation is often great to move funds around or account for them in different years to avoid a “roller-coaster effect” of up and down earnings.
Years ago, I read an editorial from then Wall Street Journal editor Robert Bartley. One line will stay with me forever. He wrote, “True profits are represented by cash--a fact--rather than reported profit--an opinion.” One does not find such candor or clear thinking much these days.
Games are always being played. In recent years, more and more companies are doing huge buybacks of their stock. By decreasing the number of shares outstanding, earnings tend to rise. Even Warren Buffett admitted considering it for Berkshire Hathaway during the dark days of 2008-2009 but he found other ways to deploy his huge capital which he felt promised a better return. When your stock is clocked 50% yet earnings are holding up and the future looks solid, buying back shares in a great idea. Yet, CEO’s almost always believe that their shares are undervalued. I have seen a very prominent company continue to buy back its shares from a price of 110 down to 70. Surely, it may be a good buy at 70 but it definitely was not at 110. And, a few companies are even borrowing at today’s historically low interest rates to buy back some of their shares.
In 1974, I read a book by Robert Townsend, former president of Avis Rent A Car entitled UP THE ORGANIZATION (1970). It was a wonderful primer for someone just entering the business world. He had a mini-chapter in it where he talked about telling the press when you thought you stock was priced too high. I am a business news junkie. NEVER have I ever seen or heard or anyone acting on Townsend’s suggestion. Not once in over 40 years!
So businesses answer to Wall Street and are worried almost exclusively about the next 90 days rather than the long term health of their brands. I remember vividly owning Kellogg’s share in the early 1980’s. Earnings were stagnant one year and the CEO wrote to us saying that with many new product introductions marketing expenses would be unusually large for the coming year and would effect earnings. I see nothing like that today. Not even close.
Okay, what does this have to do with advertising and media? A lot.
An agency chief wrote to me to say that he provided a five year plan to his biggest client showing how they should increase spending across many platforms for the next 24 months and then ease up as two of their brands could become “cash cows” for the company. The client smiled and said no five year plans. They call up and want quick promotions or some carpet bombing couponing effort in print, online, and mobile but no one, client side, is in to the long term establishment of company brands. He put it nicely when he said, “These guys are all smiles and nod vigorously when we talk of brand-building but they never open their wallets when the time comes.”
A marketing director whom I respect says, “ You have to understand the reality. My CEO gets compensated for good stock performance. So, he buys back shares when he has excess cash. Sometimes his timing is good, sometimes not. And, he is manic about quarterly earnings. His long term is 90 days. He is not a bad guy or a crook. All he does is reflect the culture of the times which is dominated by Wall Street.”
If you think this is bad, talk to senior executives at media companies. A few comments from some old pros:
--“It is a cliche but still true. Many companies cut the ad budget when there is the first sign of trouble. They get away with it, FOR A WHILE. Earnings float along okay and then bam. They have to buy market share back. It is hard for us to plan.”
--“I have a very seasoned sales team. They warn me when clients are cutting back with no rational reason. My CEO does not care and give me the old chestnut about our debt service. We scramble like hell to get new clients on board. And, if people knew how inexpensive and effective lots of social media is, we would be finished.”
So, will things change? Will Wall Street loosen its grip? Will earnings be straightforward again? Will companies stop giving guidance to analysts and or will they refuse to turn somersaults to hit their numbers?
I would say that it is unlikely. A century ago, Upton Sinclair, the great journalist, put it well--“It is difficult to get a man to understand something when his salary depends on not understanding it.”
If you would like to contact Don Cole directly, you may post a comment on the blog or reach him at doncolemedia@gmail.com
1) Things are changing so quickly with all the new platforms and media opportunities that people do not know what to do so they pull in their horns a bit too much.
2) The simple truth is that Wall Street runs America and not Main Street. Publicly traded companies will do anything to avoid missing Wall Street earnings estimates so many things suffer, particularly marketing and also, not insignificantly, honest accounting.
It might surprise many of you who know me that I tend to lean toward camp #2.
I have a long standing habit that amuses my wife but other people find to be more than mildly eccentric--I devour annual reports of companies from all over the globe. As I have gotten better at analyzing them, I notice that, increasingly, seemingly reputable companies are engaging in what I would categorize as accounting shenanigans. A CPA wrote to me recently, “I was up for a contract with a company somewhat larger than my usual client. The presentation went well and the prospect seem comfortable with my both me and my team. Then she asked, “How imaginative are you guys at managing earnings for your clients.” “I responded that we used every legitimate loophole to lower taxes but we never managed earnings. We were (politely) shown the door.”
A tax lawyer with international experience tells me that multi-nationals have a tough and bewildering job paying taxes in dozens of nations. He even added that the IRS often does not have the expertise to sort it all out. Given currency fluctuations and local taxes, the temptation is often great to move funds around or account for them in different years to avoid a “roller-coaster effect” of up and down earnings.
Years ago, I read an editorial from then Wall Street Journal editor Robert Bartley. One line will stay with me forever. He wrote, “True profits are represented by cash--a fact--rather than reported profit--an opinion.” One does not find such candor or clear thinking much these days.
Games are always being played. In recent years, more and more companies are doing huge buybacks of their stock. By decreasing the number of shares outstanding, earnings tend to rise. Even Warren Buffett admitted considering it for Berkshire Hathaway during the dark days of 2008-2009 but he found other ways to deploy his huge capital which he felt promised a better return. When your stock is clocked 50% yet earnings are holding up and the future looks solid, buying back shares in a great idea. Yet, CEO’s almost always believe that their shares are undervalued. I have seen a very prominent company continue to buy back its shares from a price of 110 down to 70. Surely, it may be a good buy at 70 but it definitely was not at 110. And, a few companies are even borrowing at today’s historically low interest rates to buy back some of their shares.
In 1974, I read a book by Robert Townsend, former president of Avis Rent A Car entitled UP THE ORGANIZATION (1970). It was a wonderful primer for someone just entering the business world. He had a mini-chapter in it where he talked about telling the press when you thought you stock was priced too high. I am a business news junkie. NEVER have I ever seen or heard or anyone acting on Townsend’s suggestion. Not once in over 40 years!
So businesses answer to Wall Street and are worried almost exclusively about the next 90 days rather than the long term health of their brands. I remember vividly owning Kellogg’s share in the early 1980’s. Earnings were stagnant one year and the CEO wrote to us saying that with many new product introductions marketing expenses would be unusually large for the coming year and would effect earnings. I see nothing like that today. Not even close.
Okay, what does this have to do with advertising and media? A lot.
An agency chief wrote to me to say that he provided a five year plan to his biggest client showing how they should increase spending across many platforms for the next 24 months and then ease up as two of their brands could become “cash cows” for the company. The client smiled and said no five year plans. They call up and want quick promotions or some carpet bombing couponing effort in print, online, and mobile but no one, client side, is in to the long term establishment of company brands. He put it nicely when he said, “These guys are all smiles and nod vigorously when we talk of brand-building but they never open their wallets when the time comes.”
A marketing director whom I respect says, “ You have to understand the reality. My CEO gets compensated for good stock performance. So, he buys back shares when he has excess cash. Sometimes his timing is good, sometimes not. And, he is manic about quarterly earnings. His long term is 90 days. He is not a bad guy or a crook. All he does is reflect the culture of the times which is dominated by Wall Street.”
If you think this is bad, talk to senior executives at media companies. A few comments from some old pros:
--“It is a cliche but still true. Many companies cut the ad budget when there is the first sign of trouble. They get away with it, FOR A WHILE. Earnings float along okay and then bam. They have to buy market share back. It is hard for us to plan.”
--“I have a very seasoned sales team. They warn me when clients are cutting back with no rational reason. My CEO does not care and give me the old chestnut about our debt service. We scramble like hell to get new clients on board. And, if people knew how inexpensive and effective lots of social media is, we would be finished.”
So, will things change? Will Wall Street loosen its grip? Will earnings be straightforward again? Will companies stop giving guidance to analysts and or will they refuse to turn somersaults to hit their numbers?
I would say that it is unlikely. A century ago, Upton Sinclair, the great journalist, put it well--“It is difficult to get a man to understand something when his salary depends on not understanding it.”
If you would like to contact Don Cole directly, you may post a comment on the blog or reach him at doncolemedia@gmail.com
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