Tuesday, May 15, 2012
Surely, TV is ruined?
In 1776, Adam Smith published his magnificent economic treatise A WEALTH OF NATIONS. It was a defining moment for classical economics and the free market. A few years later, one of his past students, Sir John Sinclair, reported to Dr. Smith about the success of the colonists in the American Revolution. “Surely”, he wrote, “if we are on at this rate, the nation must be ruined.” Smith answered the letter as follows: “Be assured, my young friend, that there is a great deal of ruin in a nation.” His meaning was that despite political bungling it takes a lot to bring a nation down.
I think that the same thing can be said about the TV medium. About a dozen years ago, I spoke at a conference and talked about how TiVo was going to change things in TV in a big way. No one was upset as penetration was in the low single digits at that time. I remember saying that DVR’s (Time Shifting Devices such as TiVo) would lead to greater commercial avoidance and that when DVR penetration hit 40%, TV would cease to be the powerful advertising medium that it had been for 50 years. Even the TV folks in the audience applauded so I repeated my fearless forecast at events over the next few years and never received any push back.
Well. As we write DVR penetration is at 41% of US TV households according to Nielsen and other forecasters claim that it is in the 43-44% range. And commercial avoidance is rampant. Study after study continues to find that not only are viewers skipping many commercials on playback but also people are multi-tasking so much with laptops and Smartphones that many TV commercials are being missed. And, any honest agency person who really analyzes clients sales will tell you that it takes more rating points, sometimes far more, than it did several years ago to move the sales needle.
Yet, this week, the network upfront market is about to explode in New York as each of the major players gives its new season presentations. While few are expecting the 12% uptick in sales that the networks had last year over the previous year, most reliable sources are betting on a high single digit year over year increase which is very good given a domestic economy with only 2% GDP growth and worries about European banks and that continent’s fragile economy (the upfront marketplace is where major network advertisers place approximately 85-92% of commercial dollars. It happens in a two-week cavalry charge in late spring each year. Old network hands say that they sell for two weeks a year and move inventory around the rest of the time. Inventory not sold in the upfront is sold in the scatter market at higher prices than the upfront and a small allocation goes to opportunistic or last minute buys at often very favorable rates).
While all this is going on, Dish Network is introducing Auto Hop, a service that will allow subscribers to automatically skip commercials on many if not most primetime programs. Not a death blow, for sure, but it is clearly another way that network TV commercials lose some more of their effectiveness.
So, what is going on? To me, it remains the same as it has been for the past several years. Increasingly, major advertisers are using more social media and experimenting with mobile. But, national network TV is their security blanket. Package goods have crossed the Rubicon and now spend more on promotion that conventional advertising. In many categories, however, network TV and increasingly national cable TV remain the backbone of their media efforts. And, the networks have done a great job of mining new categories for TV spending.
If you had asked most media analysts five years ago how long the network upfront could last, many would have said 3-5 years. Now, it looks as if it could be 5-7 more years regardless of the extent of commercial avoidance.
Measurement metrics for all new media are improving and some very rapidly. That has to raise the confidence level of marketers over the next few years in reallocating their media dollars.
So, is TV ruined as the dominant advertising medium? Long term, as commercial avoidance grows, it has to be but to paraphrase the great Adam Smith, “there is a lot of ruin in the TV medium”. Stay tuned, my friends. I will.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Friday, May 4, 2012
Mobile Media Set For Takeoff
This past week Apple reported a remarkable earnings story that had the whole financial world buzzing. For the 1st quarter, 2012, they had earnings of $11.6 billion vs. $6.0 billion for the same quarter a year ago. Most analysts had projected earnings to be in the $10 billion range. In the quarter they sold 4 million macs, and 11.8 million Tablets. Currently, they are selling 400,000 I phones a day across the world. In China, sales have quintupled in the last year.
Analysts are falling all over themselves to talk about the $100 billion cash stash that Apple has. With that they could swallow the entire upcoming IPO (Initial Public Offering) from Facebook or buy all of McDonald’s. It is staggering when you consider it. Will Apple be the first company to have a capitalization of a trillion dollars?
I consider all of the stock market buzz to be mostly noise. This Apple news signals to me a significant breakthrough in the media world. This year, mobile media is now 5% of online billing and about 1% of the total domestic advertising handle. But, look closely, my friends. Big players are starting to pile in. With Smartphones and Tablets exploding the big guys now see scalable platforms in mobile via display, search, video and in-app. Mobile spending should be up 50% this year.
The future looks bright beyond belief. I have seen several projections but International Data Corporation’s appears to be the most widely quoted with tablet shipments projected to be up over 50% this year to over 100 million and top 195 million units in 2016. Smartphones are set to reach 660 million units this year and an amazing 1.1 billion by the end of 2015. How is that possible? There are 7 billion people on earth so 15% will get a Smartphone in 2015? Actually, it is within reach as many who have a Smartphone get a new model every two years and couple that with organic category growth and a billion plus units three and a half years from now is definitely within reach. (By the way, what is a Smartphone? There is no formal definition but I use the one from PC Magazine that describes it as “a cellular phone with built in applications and internet access)
Can anything stop this growth? Well, remember Research in Motion and the Blackberry? Now, they are fighting for survival. Or the problems Motorola had when they dominated flip-phones but did move fast enough to web-enabled handsets. The issue is that the players may be different 5 years from now but people want the world in the palm of their hands. Mobile media will capitalize on that desire.
As has been true of every emerging medium, there will be hiccups as you experiment with its possibilities. Don’t let the little bumps in the road deter you—the potential is tremendous and you do not wish to be left behind.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Friday, April 20, 2012
Commercial Avoidance Revisited and The Invisible Gorilla
In January 2009, when I was beginning this blog, an early post was entitled “The Elephant In All Our Offices.” The basic premise was that commercial avoidance was growing steadily and we all had to face up to it.
When I wrote that post DVR (time shifting devices) penetration was at about 28% of US TV households. Recently, Nielsen projected that DVR penetration is now at 41% and other sources peg it at 43-44% of the total household frame.
So, it would seem to be a good time to update the concept of commercial avoidance. A lot has happened in 39 months.
The big issue is the explosive growth of other video options. Netflix and Hulu have both grown nicely and You Tube usage is up as well. You can visit sites of ESPN, CNBC, CNN and dozens of other channels and see streaming video of much of their programming with minimal commercial interruption. Every hour that you spend with them means less exposure to traditional advertising messages. And, with DVR penetration up 46-50% in the last three years, it is clear that people are seeing fewer and fewer commercials.
A new study from Boston College has a few people rattled but not many wish to discuss it. In brief, they state that the majority of viewers are multi-tasking when they watch TV. They toggle back and forth between the TV and another device or two but are not really giving either undivided attention. This is particularly true of young adults. So, they may be sending a text message, watching video on their I-phone or surfing the web during a two minute commercial break. They are underexposed to the advertising often as much as those who are zipping through the commercials in a recorded program.
As I have done for years, I continue to monitor the effectiveness of media weights. There appears to be a direct correlation between DVR penetration and TV advertising effectiveness. Seven years ago, with a tried and true promotion, 1100 rating points in a specific daypart configuration would be sure to move the sales needle for a specific product. Now, that same promotion might need 1450 points to generate the same sales spike. Some people dismiss these findings by saying that the economy is still weak so people are not buying. That could be part of the reason but a big culprit has to be that many people are simply not seeing the message as in the past. People have been channel hopping for over 50 years since the remote came in to vogue. Now, it is rampant across most age groups. If you go to Hulu.com you see a lighter commercial load. If you go to Netflix, you can view commercial free.
And, what of top rated shows in the current environment? Take a leading show such as ABC’s Modern Family. Besides being a Nielsen leader almost every week a new episode airs, it is also a leader in programs that are taped and viewed later. If you want to be in that program in either network or spot TV, the premium on a cost per rating point basis can be very large compared to other primetime fare. But, if 12-16% of the viewing is done days later, how many of people playing it back are seeing your spot? Is the premium still worth it? When I bring this up, people shrug or get silent. Some programs have to be getting somewhat overpriced in this scenario.
The whole issue of commercial avoidance strikes me as not getting nearly enough attention these days. A few panel members were candid with me. Some anonymous comments were: “I am two years from retirement. Why should I bring this up with my clients? It is a lose-lose for all of us. Where would I put the money? We can’t shift much more to social media now. I still can’t prove that it works well. TV is a security blanket for many of our clients. Off the record, I think that you are correct about the gravity of this issue, but I am not going to stir the pot.”
Another said, “We are very busy and understaffed right now. I am not about to address your theoretical issue with my management or clients.”
I understand but I do not think that the issue is theoretical. Rather it is a cancer that is growing each day.
Why are people not facing up to commercial avoidance? There are many reasons but I believe one of the biggest is that my panel member is right when she says that people are busy. When people are busy they focus and focus hard on the issue that is directly in front of them. If you do that, you sometimes miss some big things.
A few years ago, Christopher Chabris and Daniel Simons published a book called THE INVISIBLE GORILLA. It is a fascinating look about how intense focusing can make people blind to the obvious. They actually made a brief film that made the point brilliantly. The movie short had two teams passing basketballs back and forth. One team had white shirts on while the other wore black. Viewers were asked to count the number of passes by the white shirted players but to ignore the black. Doing the task was completely absorbing. After a few minutes, a lady wearing a gorilla suit appeared, crossed the basketball court, beat her chest like a good gorilla, and then exited. Thousand of people have seen the video but usually more than half do not notice the “gorilla”. The task of counting the passes and ignoring the black shirted players absorbs all of the attention and blinds them to the intrusive stimulus. The Nobel Prize winning Behavioral Economist Daniel Kahneman writes that the gorilla study illustrates that “we can be blind to the obvious and we are also blind to our blindness”.
The gorilla study to me is a very nice analogy for what is happening with commercial avoidance. The gorilla is crossing your screen daily and getting bigger and staying longer. But, media and marketing professionals are often so intent on the task in front of them that they are simply not seeing it. And, some, as Kahneman puts it, are actually “blind to our blindness.”
Television’s effectiveness as an advertising medium will not die overnight. But it is losing ground each month and too many are not preparing for the future by hedging their bets and testing alternatives. The gorilla is now 800 pounds. In three more years, he well may be a 1200-pound specimen. Regardless of how busy you are—admit to the problem and start looking at new platforms NOW.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Sunday, April 1, 2012
The Real American Consumer
A little over 20 years ago I was called in to a meeting. Agency staffers were reviewing work for an upcoming new business presentation. I was asked my opinion and said, “Two of the executions seem way too upscale for the target demographic.” The writer, took offense, and asked me to define the target. Briefly, I outlined what market and media research indicated. “Some 70% of the people who would buy this product live in households making less than $50,000 per year”. The young writer laughed in my face and said, “no one could live on that.” Trying to maintain my composure I responded that most people do. He dragged me in to see his boss who told me that something was wrong with my figures. I responded that they were not my figures and ticked off top line income estimates from the U.S. Census, Department of Labor, Merrill Lynch, Mediamark Research, Inc. and Simmons. The upscale executions were kept in the presentation and we did not get the business. I talked briefly at the pitch but my income data were not part of the slide show.
After this event, I turned my annoyance into action. I put together a presentation that I dubbed “The Real American Consumer” that tried to impress upon clients and prospects that everyone in the U.S (and now the world) does not live as all of us do. I update it every year and it holds up well.
The presentation is built on the premise that people who work in marketing, advertising, broadcasting, cable, and publishing tend to lead comfortable lives. As we get older, unless we have very bad habits or get married and divorced too often, we tend to become affluent and, a few, wealthy. Yet, as we grow in wealth, we get more detached from the people who have bought our products and gave us our pleasant lifestyles.
Each year, the Gallup organization does a survey of American opinion. And, the results almost always indicate that some 89% of Americans view themselves as middle class. That is fine but for a marketer it can be a deadly assumption. If senior executives see themselves as “everyman”, then some bad decisions are often made. Once a client rejected a creative campaign because he said that his golf buddies at the club did not like the storyboards that he presented. Another client, a fast food maven worth millions with many stores owned outright, told me that my media buy was no good because he was “not seeing the commercials.” I told him that was good as he was not the target. His response was that he was just a regular guy and he should see his spots. He did admit that sales were up nicely but felt something was wrong.
Well. The moral here is not to lose contact with your target audience and respect them as well. According to the latest government data, the median household income in the US is $51,914. Remember what a median is? Statistically, it is the 50th percentile so approximately half of America earns below that benchmark and the other half above it.
Here are some other quick facts that show how far you may be from the average American:
22% of Americans have a passport. Well, then 78% do not. I bet virtually all of you and your friends have a valid passport.
30% of Americans have no credit card
18% are completely unbanked
17% are functionally illiterate
8% live in mobile homes. In some counties, the figure is 26%
3% use a library each year even though the library has free books and movies
20% at the bottom have an effective net worth of zero. The next 20% are worth about $15,000
Can you, as a marketer, relate to all this? If you want to be effective as a marketer, you do not have to live as your customers do, but you need to know a lot about them.
Sam Walton was the most successful retailer of the 20th century. Shortly before his death and suffering from bone cancer, Mr. Sam, as he liked to be called by associates, would still fly in for every new Wal-Mart store opening. When he met with the manager just prior to the ribbon cutting, it was not uncommon for him to observe that he had visited the grocery store down the street and that Wal-Mart was charging 2 cents more for a half gallon of milk. The smile would disappear as he told the manager to get the price below the competition. Walton, by then a billionaire, was said to live on $200 a day, wear clothes sold at Wal-Mart and spent his free time tooling around Bentonville, Arkansas in an aging pickup truck. How much of that is truth or folklore is irrelevant. What he did do was constantly talk to and LISTEN to his customers. He may have been the wealthiest man on earth for a few months in the late 1980’s but he never forgot who put him there.
Several years ago, my CEO told all of us to visit one of our client’s retail locations every couple of weeks at a minimum. Few did it but I was a good soldier and always complied. Once, I entered the fast food restaurant on a Sunday, bought a cup of coffee, and sat in the back of the dining area and watched and listened. I was reading a copy of the New York Times Book Review but kept the cover page concealed. At one point, I saw a lady arrive with three children. As they were eating she raised her voice to one of the children and said, “Finish your sandwich. If you don’t, next month we are going to McDonald’s.” What a wake-up call that was for me. This was a special and expensive treat in her eyes. The next day I told a few colleagues about it. Most got the point, one’s eyes filled up, but one young fellow said, “Who cares about those people.”
Tonight when many of you open a nice bottle of cabernet or pour yourself a single malt scotch, remember who is giving you that pleasant lifestyle. They buy fast food, beer, Coke and Pepsi, cigarettes, pickup trucks, soap, razor blades, and Kraft macaroni and cheese while you grill the swordfish. Don’t lose touch with the Real American Consumer. They deserve your respect and understanding.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
After this event, I turned my annoyance into action. I put together a presentation that I dubbed “The Real American Consumer” that tried to impress upon clients and prospects that everyone in the U.S (and now the world) does not live as all of us do. I update it every year and it holds up well.
The presentation is built on the premise that people who work in marketing, advertising, broadcasting, cable, and publishing tend to lead comfortable lives. As we get older, unless we have very bad habits or get married and divorced too often, we tend to become affluent and, a few, wealthy. Yet, as we grow in wealth, we get more detached from the people who have bought our products and gave us our pleasant lifestyles.
Each year, the Gallup organization does a survey of American opinion. And, the results almost always indicate that some 89% of Americans view themselves as middle class. That is fine but for a marketer it can be a deadly assumption. If senior executives see themselves as “everyman”, then some bad decisions are often made. Once a client rejected a creative campaign because he said that his golf buddies at the club did not like the storyboards that he presented. Another client, a fast food maven worth millions with many stores owned outright, told me that my media buy was no good because he was “not seeing the commercials.” I told him that was good as he was not the target. His response was that he was just a regular guy and he should see his spots. He did admit that sales were up nicely but felt something was wrong.
Well. The moral here is not to lose contact with your target audience and respect them as well. According to the latest government data, the median household income in the US is $51,914. Remember what a median is? Statistically, it is the 50th percentile so approximately half of America earns below that benchmark and the other half above it.
Here are some other quick facts that show how far you may be from the average American:
22% of Americans have a passport. Well, then 78% do not. I bet virtually all of you and your friends have a valid passport.
30% of Americans have no credit card
18% are completely unbanked
17% are functionally illiterate
8% live in mobile homes. In some counties, the figure is 26%
3% use a library each year even though the library has free books and movies
20% at the bottom have an effective net worth of zero. The next 20% are worth about $15,000
Can you, as a marketer, relate to all this? If you want to be effective as a marketer, you do not have to live as your customers do, but you need to know a lot about them.
Sam Walton was the most successful retailer of the 20th century. Shortly before his death and suffering from bone cancer, Mr. Sam, as he liked to be called by associates, would still fly in for every new Wal-Mart store opening. When he met with the manager just prior to the ribbon cutting, it was not uncommon for him to observe that he had visited the grocery store down the street and that Wal-Mart was charging 2 cents more for a half gallon of milk. The smile would disappear as he told the manager to get the price below the competition. Walton, by then a billionaire, was said to live on $200 a day, wear clothes sold at Wal-Mart and spent his free time tooling around Bentonville, Arkansas in an aging pickup truck. How much of that is truth or folklore is irrelevant. What he did do was constantly talk to and LISTEN to his customers. He may have been the wealthiest man on earth for a few months in the late 1980’s but he never forgot who put him there.
Several years ago, my CEO told all of us to visit one of our client’s retail locations every couple of weeks at a minimum. Few did it but I was a good soldier and always complied. Once, I entered the fast food restaurant on a Sunday, bought a cup of coffee, and sat in the back of the dining area and watched and listened. I was reading a copy of the New York Times Book Review but kept the cover page concealed. At one point, I saw a lady arrive with three children. As they were eating she raised her voice to one of the children and said, “Finish your sandwich. If you don’t, next month we are going to McDonald’s.” What a wake-up call that was for me. This was a special and expensive treat in her eyes. The next day I told a few colleagues about it. Most got the point, one’s eyes filled up, but one young fellow said, “Who cares about those people.”
Tonight when many of you open a nice bottle of cabernet or pour yourself a single malt scotch, remember who is giving you that pleasant lifestyle. They buy fast food, beer, Coke and Pepsi, cigarettes, pickup trucks, soap, razor blades, and Kraft macaroni and cheese while you grill the swordfish. Don’t lose touch with the Real American Consumer. They deserve your respect and understanding.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Monday, March 19, 2012
Shifting Gears in 2012 Media
A number of years ago someone whom I know very well was diagnosed with a very aggressive form of cancer. He visited some doctors, read widely and came away a bit confused. It seemed that surgeons all recommended surgery and radiologists all recommended radiation treatment. The surgeons essentially said that with radiation you might not get all of the cancer or that it could come back. The radiologists to a man stated that invasive and delicate surgery could have terrible side effects. He finally made a decision and it worked out well for him.
Each group of doctors was not really being defensive. They were working in their area of expertise and their comfort zone. As our new world of media evolves, I see the same thing happening with agency and corporate media strategists.
Despite protestations to the contrary, most of us do not really like change. So media staffers over the age of 45 or so nod and smile when digital is discussed and they can navigate their way through the buzzwords with growing fluency. Off the record, many tell me that their heart is not in it. One fellow whom I do not personally but who is an active reader of this blog writes, “I am a TV guy. The young kids just want to recommend online, Facebook, and soon mobile on their plans. They treat me like a dinosaur. Maybe I should just take early retirement.” At the other extreme, a young reader hit me with “why do you bother talking about spot broadcast in your blog. It is so 20th century.”
Well. With respect, I feel that they are both wrong. When I look back on my career, it is clear that I am/was a spot TV guy as well. I probably placed more money there than all other media put together. But, it is no longer 1982 or 1992. We have to work in the present. At the same time, TV, radio, magazines have not dried up and blown away yet. So, some sort of balance is required.
Over the last few years, I have stressed the need for constant testing and experimentation with emerging media. With each passing year money will move away from conventional media and in to less conventional venues. This trend is as certain as the sunrise. The trick will be how to manage the withdrawal from legacy media into our emerging world. For example, I personally believe that mobile is perfectly positioned to be the big thing over the next several years. Right now it is underutilized and more people should be testing in that space. Soon, however, people will begin piling in to mobile much as they did online or Facebook a few years ago. Some will be disgruntled as they misallocated their budgets and placed either way too much or do little in mobile early on in the game. With careful planning a smart strategist can avoid getting caught up in the cavalry charge into mobile that is sure to come (we will discuss mobile in detail in upcoming Media Realism posts).
There is another issue out there that is slowly getting traction. It is the growth of Integrated Marketing Communications (IMC). Big companies have been involved for some time; medium size players tend to pay lip service to it but are learning and the small fry tends to say, “What’s that.”
Simply put, IMC, is the coordination of all marketing and communications activities. The academics say that there are seven pillars to IMC: advertising, promotion, direct marketing, public relations, publicity, interactive, and personal selling. At every touch point, your message and your look are similar and working in tandem with all other pillars.
As IMC grows, advertising is going to decline as part of the overall marketing mix. Right now, advertising may still be 80% of the action for many brands. With each passing year, the number continues to decline a bit. In package goods, promotion has overtaken advertising in a big way. Please keep in mind that just as every company has a different media mix, each will have a different path and different mix of variables as they go down the IMC road.
So, to my mature media strategists out there, learn to shift gears. You need to adapt or die. To the young firebrands, may I suggest that many of your customers do not yet share your media habits? So, keep pushing the envelope on emerging media but remember you still need a foot or at least a few toes in legacy media.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Each group of doctors was not really being defensive. They were working in their area of expertise and their comfort zone. As our new world of media evolves, I see the same thing happening with agency and corporate media strategists.
Despite protestations to the contrary, most of us do not really like change. So media staffers over the age of 45 or so nod and smile when digital is discussed and they can navigate their way through the buzzwords with growing fluency. Off the record, many tell me that their heart is not in it. One fellow whom I do not personally but who is an active reader of this blog writes, “I am a TV guy. The young kids just want to recommend online, Facebook, and soon mobile on their plans. They treat me like a dinosaur. Maybe I should just take early retirement.” At the other extreme, a young reader hit me with “why do you bother talking about spot broadcast in your blog. It is so 20th century.”
Well. With respect, I feel that they are both wrong. When I look back on my career, it is clear that I am/was a spot TV guy as well. I probably placed more money there than all other media put together. But, it is no longer 1982 or 1992. We have to work in the present. At the same time, TV, radio, magazines have not dried up and blown away yet. So, some sort of balance is required.
Over the last few years, I have stressed the need for constant testing and experimentation with emerging media. With each passing year money will move away from conventional media and in to less conventional venues. This trend is as certain as the sunrise. The trick will be how to manage the withdrawal from legacy media into our emerging world. For example, I personally believe that mobile is perfectly positioned to be the big thing over the next several years. Right now it is underutilized and more people should be testing in that space. Soon, however, people will begin piling in to mobile much as they did online or Facebook a few years ago. Some will be disgruntled as they misallocated their budgets and placed either way too much or do little in mobile early on in the game. With careful planning a smart strategist can avoid getting caught up in the cavalry charge into mobile that is sure to come (we will discuss mobile in detail in upcoming Media Realism posts).
There is another issue out there that is slowly getting traction. It is the growth of Integrated Marketing Communications (IMC). Big companies have been involved for some time; medium size players tend to pay lip service to it but are learning and the small fry tends to say, “What’s that.”
Simply put, IMC, is the coordination of all marketing and communications activities. The academics say that there are seven pillars to IMC: advertising, promotion, direct marketing, public relations, publicity, interactive, and personal selling. At every touch point, your message and your look are similar and working in tandem with all other pillars.
As IMC grows, advertising is going to decline as part of the overall marketing mix. Right now, advertising may still be 80% of the action for many brands. With each passing year, the number continues to decline a bit. In package goods, promotion has overtaken advertising in a big way. Please keep in mind that just as every company has a different media mix, each will have a different path and different mix of variables as they go down the IMC road.
So, to my mature media strategists out there, learn to shift gears. You need to adapt or die. To the young firebrands, may I suggest that many of your customers do not yet share your media habits? So, keep pushing the envelope on emerging media but remember you still need a foot or at least a few toes in legacy media.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Tuesday, March 13, 2012
The Truth About Deficit Spending
You hear a great deal these days about the annual USA budget deficit and the long term US debt. My take is a bit different than that of many so I thought that I would try to articulate it. What does this have to do with Media Realism? Well, I do not think the mainstream media really wants to face to up to it so they paint people as Cassandras if they tell the absolute truth about it. Admittedly, it is a hard topic to face head on and still maintain the sense of optimism that many of us still have for the future.
As I write, the US national debt is about $16 trillion and rising fast. Last month alone, our deficit was a record breaking $220 billion. Most project that we will add $1.3-1.6 trillion to the national debt this year and maybe slightly less next year. The gloom and doomers say that we face disaster within 18 months while others say that we have a decade or more to maneuver. Few deny that there really is a problem.
The issue, as it often is in Media Realism posts, is demographics. We have 90+ million baby boomers (born between 1946 and 1964) retiring over the next dozen years. This will put record-breaking strain on government programs such as Social Security, Medicare, and Medicaid. All of these programs need structural reform or they alone will bankrupt the US as some point in the future.
Most people nod and smile when someone raises the issue but not 1 in a 1000 seems to understand the enormity of the problem. Recently, someone whom I had just met was telling me that if we get rid of President Obama and elect any Republican we could get a balanced budget in several years and pay off the national debt in about 15. I kept a straight face and asked how it would work mathematically. His response was that there was so much waste in government that a good manager could right the ship without changing programs or raising taxes.
Okay, think for a moment. Have you ever considered what a trillion is? Do you know what it is? It is 1,000 billion.
Last year, Rep. Paul Ryan of Wisconsin presented a plan to balance the budget and reform Medicare. It left Social Security alone and did not raise income taxes. Ryan stressed that it was just a starting point for discussion. If you read the Ryan plan (few did) you will see that his plan would balance the Federal budget in the year 2041 some thirty years after he presented it. If by some miracle the Ryan plan was passed, how much more water (i.e., additional debt) would we take on over the next 29 years? Would it go from the current $16 trillion to $30 trillion or maybe $40 trillion?
Now, think about that. Let us say that we did balance the budget in 2041 but now had a national debt of $40 trillion. The first year out we would have a surplus of $100 billion. Excellent! But, if we continued to produce surpluses at that pace, we could pay off the debt in 400 years. Not a typo, my friends. Some 400 years. Do you think the world will stand still that long? Do you think politicians would say that “we owe it to ourselves” or get involved in foreign wars or be tempted to deficit spend again in a weak economy to “prime the pump” of economic activity? Of course they would!
So, with all respect to my new acquaintance, the Federal debt WILL NEVER BE REPAID. Never! That is not the end of the world. All countries, even the very solvent ones, have some national debt. What is a government bond except a loan to a sovereign nation? The problem in the US is that we are borrowing 33-40% of every dollar that we spend in recent years. Sooner or later, despite our global stature, we will hit our national credit card limit with international lenders. When that happens, interest rates on US bonds will rise and maybe soar.
That is an issue few Americans have come to grips with at all. Right now, we have artificially low interest rates. America’s shirt is dirty but many other nations, particularly those in the European Union (EU) are filthy. So the US dollar remains a safe haven and the world’s reserve currency. People are willing to park vast amounts of money in US debt, as many other nations look even weaker. The return is at record lows. But, for the moment, it is deemed safe. The majority of our debt is now short term and at low interest rates. What would happen if interest rates rose smartly due to a lack of confidence in the dollar or the global perception that we are unwilling to face our problems with real solutions? Interest rates would jump and the interest on our national debt would make the current huge deficits look mild by comparison.
You have heard the term ad nauseum lately but politicians keep “kicking the can down the road.” Perhaps after the election this fall, whoever wins will put a bi-partisan team of adults together and really address the issue. The longer we wait, the higher taxes will have to go up.
Many now say simply “soak the rich.” And it is true that many who earn fabulous sums of money each year only pay about 15% in Federal income taxes as a percentage of their total income. But, there are not enough of them. If we put a minimum tax of say 25% for those earning over $1.5 million per year, it would raise some revenue and we would all feel that the system was more just. However, it would not put an appreciable dent in the annual deficit. And, if we took all the wealth of American billionaires, we would still not make a meaningful reduction in the $16 trillion dollar national debt.
So, something has to give. The only rational approach appears to be entitlement reform (meaning cutting some benefits), cutting defense spending not defense, and raising taxes. If we do those things we can move to a balanced budget over a period of years.
Even then, we still remain between a rock and a hard place. A couple of years ago, the Simpson-Bowles Commission made recommendations that would trim $4.5 trillion from the deficit over a 10-year period. It was shelved but it would be an excellent starting point for a SERIOUS approach to reining in government spending.
The demographics are really against the status quo. If we want to maintain the social safety net that Social Security, Medicare, and Medicaid provide we need to reform all three systems and do it soon. Also, unless we cut spending and moved toward a balanced budget, interest on the national debt will drown all other line items in the government expenditure.
Years ago, political humorist P.J. O’Roarke wrote that “giving politicians the power to spend money is like giving whiskey and car keys to teen age boys.” I am for giving Congress all the whiskey that its members want. The car keys, however, are not negotiable.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
As I write, the US national debt is about $16 trillion and rising fast. Last month alone, our deficit was a record breaking $220 billion. Most project that we will add $1.3-1.6 trillion to the national debt this year and maybe slightly less next year. The gloom and doomers say that we face disaster within 18 months while others say that we have a decade or more to maneuver. Few deny that there really is a problem.
The issue, as it often is in Media Realism posts, is demographics. We have 90+ million baby boomers (born between 1946 and 1964) retiring over the next dozen years. This will put record-breaking strain on government programs such as Social Security, Medicare, and Medicaid. All of these programs need structural reform or they alone will bankrupt the US as some point in the future.
Most people nod and smile when someone raises the issue but not 1 in a 1000 seems to understand the enormity of the problem. Recently, someone whom I had just met was telling me that if we get rid of President Obama and elect any Republican we could get a balanced budget in several years and pay off the national debt in about 15. I kept a straight face and asked how it would work mathematically. His response was that there was so much waste in government that a good manager could right the ship without changing programs or raising taxes.
Okay, think for a moment. Have you ever considered what a trillion is? Do you know what it is? It is 1,000 billion.
Last year, Rep. Paul Ryan of Wisconsin presented a plan to balance the budget and reform Medicare. It left Social Security alone and did not raise income taxes. Ryan stressed that it was just a starting point for discussion. If you read the Ryan plan (few did) you will see that his plan would balance the Federal budget in the year 2041 some thirty years after he presented it. If by some miracle the Ryan plan was passed, how much more water (i.e., additional debt) would we take on over the next 29 years? Would it go from the current $16 trillion to $30 trillion or maybe $40 trillion?
Now, think about that. Let us say that we did balance the budget in 2041 but now had a national debt of $40 trillion. The first year out we would have a surplus of $100 billion. Excellent! But, if we continued to produce surpluses at that pace, we could pay off the debt in 400 years. Not a typo, my friends. Some 400 years. Do you think the world will stand still that long? Do you think politicians would say that “we owe it to ourselves” or get involved in foreign wars or be tempted to deficit spend again in a weak economy to “prime the pump” of economic activity? Of course they would!
So, with all respect to my new acquaintance, the Federal debt WILL NEVER BE REPAID. Never! That is not the end of the world. All countries, even the very solvent ones, have some national debt. What is a government bond except a loan to a sovereign nation? The problem in the US is that we are borrowing 33-40% of every dollar that we spend in recent years. Sooner or later, despite our global stature, we will hit our national credit card limit with international lenders. When that happens, interest rates on US bonds will rise and maybe soar.
That is an issue few Americans have come to grips with at all. Right now, we have artificially low interest rates. America’s shirt is dirty but many other nations, particularly those in the European Union (EU) are filthy. So the US dollar remains a safe haven and the world’s reserve currency. People are willing to park vast amounts of money in US debt, as many other nations look even weaker. The return is at record lows. But, for the moment, it is deemed safe. The majority of our debt is now short term and at low interest rates. What would happen if interest rates rose smartly due to a lack of confidence in the dollar or the global perception that we are unwilling to face our problems with real solutions? Interest rates would jump and the interest on our national debt would make the current huge deficits look mild by comparison.
You have heard the term ad nauseum lately but politicians keep “kicking the can down the road.” Perhaps after the election this fall, whoever wins will put a bi-partisan team of adults together and really address the issue. The longer we wait, the higher taxes will have to go up.
Many now say simply “soak the rich.” And it is true that many who earn fabulous sums of money each year only pay about 15% in Federal income taxes as a percentage of their total income. But, there are not enough of them. If we put a minimum tax of say 25% for those earning over $1.5 million per year, it would raise some revenue and we would all feel that the system was more just. However, it would not put an appreciable dent in the annual deficit. And, if we took all the wealth of American billionaires, we would still not make a meaningful reduction in the $16 trillion dollar national debt.
So, something has to give. The only rational approach appears to be entitlement reform (meaning cutting some benefits), cutting defense spending not defense, and raising taxes. If we do those things we can move to a balanced budget over a period of years.
Even then, we still remain between a rock and a hard place. A couple of years ago, the Simpson-Bowles Commission made recommendations that would trim $4.5 trillion from the deficit over a 10-year period. It was shelved but it would be an excellent starting point for a SERIOUS approach to reining in government spending.
The demographics are really against the status quo. If we want to maintain the social safety net that Social Security, Medicare, and Medicaid provide we need to reform all three systems and do it soon. Also, unless we cut spending and moved toward a balanced budget, interest on the national debt will drown all other line items in the government expenditure.
Years ago, political humorist P.J. O’Roarke wrote that “giving politicians the power to spend money is like giving whiskey and car keys to teen age boys.” I am for giving Congress all the whiskey that its members want. The car keys, however, are not negotiable.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Sunday, March 4, 2012
NPR
NPR, formerly National Public Radio, is a national syndicator, which distributes programming to over 900 public radio stations across the U.S. It is a privately and publicly funded non-profit organization, which gets its money from a mix of contributions, grants and indirect government subsidies.
Basically, they distribute news and cultural programming to public radio stations. A huge misperception about NPR is that programming is consistent everywhere. If you spend all your time in a single market listening to a single NPR affiliate, you might have that idea. Actually, the common thread across the stations tends to be that they carry the two highest rated flagship programs “Morning Edition” and “All Things Considered.” After that, programming varies wildly. Some stations run wall-to-wall classical music outside of those two drive-time shows, while others are largely talk. On long road trips it can be amusing or annoying to go from budgets deficits to Beethoven as you shift from one station’s coverage area to another. Also, they distribute programming from other syndicators. My two favorite programs on the stations are “Marketplace” from American Public Media and “This American Life” from Public Radio International.
The audience is a blue chip one financially and extremely well educated. Agree with it or not, the stories do make you think. And, they cover issues that are hard to find anywhere else. A danger that they face in the future is that they are skewing increasingly older. Unless you are a graduate of an elite school, it is unlikely that you listen to NPR if you are under 35.
Those on the right often attack NPR for having a strong liberal bias. After close observation, I would say that is not entirely fair. Some years back, it struck me as being far more pronounced. Now, the interviewers are sometimes more friendly to those left of center, but they work hard to provide contrasting points of view on most issues. The weekly sessions summing up the week in politics with David Brooks of the New York Times (conservative) paired with E.J. Dionne of the Washington Post (liberal) are a good example of such efforts for authentic balance.
Interestingly, when I questioned people across the country about NPR, the knee jerk reaction from several was summed up by one panel member who said “NPR, forget it. They are way too liberal. It is like listening to MSNBC.” Later most admitted that it had been close to a decade since they listened to anything on NPR.
Advertising is sticky issue. They do accept 15-second spots just about everywhere. The problem to us as marketers is that you cannot extol the product or have a clear “call to action” in the spot. That limits creative minds. And, it is not called advertising. It is underwriting. ☺ Yet a long time radio hand that I have known forever says he has had success selling an NPR member to local advertisers. His pitch, and it is intriguing, is that his station can reach people who do not like and who generally avoid advertising. Raising name identification and association with a desirable broadcast property appear to cancel out the ability to have a rousing call to action that is possible on commercial radio.
The big controversy ahead will continue to be the partial funding of NPR by government both federal and state. As any thinking person knows we face a budget crisis. If we are to continue entitlements such as Social Security and Medicare/Medicaid going forward we are going to have to reform the systems and cut spending in many areas as the demographic tidal wave of 92 million baby boomers retiring will bankrupt these programs in their present form. So, some representatives raise the issue of cutting all expenditure to public broadcast through the Corporation for Public Broadcasting, which helps fund PBS on TV and NPR.
Some of the congressmen say it will someday be a financial imperative. Others are more blatant and say why fund something which touts a philosophy different than their own? When I polled people about this, the answers surprised me. A few well educated and politically astute people in their 20’s said in essence, “Don’t worry. If congress pulls the rug out, wealthy individuals and foundations will pass the hat and NPR will be saved.” I checked this out with others who agreed quickly with the young analysts. All felt PBS would have a harder time in the future as money gets tighter.
A West Coast lawyer told me “I think that the NPR on-air people are full of themselves. But I love their stories." I tend to agree. NPR has been and will be an integral part of my life. And no one has ever called me a liberal.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Basically, they distribute news and cultural programming to public radio stations. A huge misperception about NPR is that programming is consistent everywhere. If you spend all your time in a single market listening to a single NPR affiliate, you might have that idea. Actually, the common thread across the stations tends to be that they carry the two highest rated flagship programs “Morning Edition” and “All Things Considered.” After that, programming varies wildly. Some stations run wall-to-wall classical music outside of those two drive-time shows, while others are largely talk. On long road trips it can be amusing or annoying to go from budgets deficits to Beethoven as you shift from one station’s coverage area to another. Also, they distribute programming from other syndicators. My two favorite programs on the stations are “Marketplace” from American Public Media and “This American Life” from Public Radio International.
The audience is a blue chip one financially and extremely well educated. Agree with it or not, the stories do make you think. And, they cover issues that are hard to find anywhere else. A danger that they face in the future is that they are skewing increasingly older. Unless you are a graduate of an elite school, it is unlikely that you listen to NPR if you are under 35.
Those on the right often attack NPR for having a strong liberal bias. After close observation, I would say that is not entirely fair. Some years back, it struck me as being far more pronounced. Now, the interviewers are sometimes more friendly to those left of center, but they work hard to provide contrasting points of view on most issues. The weekly sessions summing up the week in politics with David Brooks of the New York Times (conservative) paired with E.J. Dionne of the Washington Post (liberal) are a good example of such efforts for authentic balance.
Interestingly, when I questioned people across the country about NPR, the knee jerk reaction from several was summed up by one panel member who said “NPR, forget it. They are way too liberal. It is like listening to MSNBC.” Later most admitted that it had been close to a decade since they listened to anything on NPR.
Advertising is sticky issue. They do accept 15-second spots just about everywhere. The problem to us as marketers is that you cannot extol the product or have a clear “call to action” in the spot. That limits creative minds. And, it is not called advertising. It is underwriting. ☺ Yet a long time radio hand that I have known forever says he has had success selling an NPR member to local advertisers. His pitch, and it is intriguing, is that his station can reach people who do not like and who generally avoid advertising. Raising name identification and association with a desirable broadcast property appear to cancel out the ability to have a rousing call to action that is possible on commercial radio.
The big controversy ahead will continue to be the partial funding of NPR by government both federal and state. As any thinking person knows we face a budget crisis. If we are to continue entitlements such as Social Security and Medicare/Medicaid going forward we are going to have to reform the systems and cut spending in many areas as the demographic tidal wave of 92 million baby boomers retiring will bankrupt these programs in their present form. So, some representatives raise the issue of cutting all expenditure to public broadcast through the Corporation for Public Broadcasting, which helps fund PBS on TV and NPR.
Some of the congressmen say it will someday be a financial imperative. Others are more blatant and say why fund something which touts a philosophy different than their own? When I polled people about this, the answers surprised me. A few well educated and politically astute people in their 20’s said in essence, “Don’t worry. If congress pulls the rug out, wealthy individuals and foundations will pass the hat and NPR will be saved.” I checked this out with others who agreed quickly with the young analysts. All felt PBS would have a harder time in the future as money gets tighter.
A West Coast lawyer told me “I think that the NPR on-air people are full of themselves. But I love their stories." I tend to agree. NPR has been and will be an integral part of my life. And no one has ever called me a liberal.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
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