At the Justice Department last Friday, broadcasters were joined by Facebook and Comcast Cable in arguing that they all compete with each other for local advertising dollars. Winning that argument is the first step in convincing the DOJ to stop blocking duopolies of network affiliates. “There’s a really high overlap between these media types,” said Marcien Jenckes of Comcast. “Advertisers have shifted focus from this type of media or that type media. They think instead about their overall return on their media spend.”
Broadcasters, cable operators and digital media are often at odds in the advertising marketplace, but on Friday at a Department of Justice workshop on Competition In Television and Digital Advertising, they were in agreement on one important point: They see themselves as equal competitors for local ad dollars, in direct contradiction to the current Justice Department view that broadcasters only compete with each other.
Speaking on the first of two panels, Rick Kaplan, NAB EVP of legal and regulatory affairs, framed it this way: Few issues are as vexing to television broadcasters as how narrowly the Department of Justice defines the video advertising marketplace.
“DOJ has the same view of the broadcast TV marketplace today as it did in the 1970s, ’80s and ’90s. Never mind that cable and satellite providers now offer hundreds of channels of high-quality content. Never mind that the internet has thoroughly upended the way consumers access and engage with video offerings.
“And never mind that, if we polled the first 100 people walking past this building as to whether they could distinguish between broadcast TV and cable, satellite or OTT video, we’d be lucky to find even just one.”
Broadcasters have been trying to convince the DOJ that they compete with other media so that it stops blocking common ownership of network affiliates in the same market on antitrust grounds.
Panel moderator Lee Berger of the DOJ’s antitrust division’s first question was whether cable and digital advertising are a good substitute for broadcast advertising.
Ty Ahmad-Taylor, Facebook’s VP of business product marketing, who has worked at the New York Times, Viacom, Comcast and Samsung, said, in essence, that they are. Advertisers want three things: to make consumer aware of their product, consider it and then buy it, and all the companies represented on the panel competing “on an equal basis.” Some formats work better at one of the three, but “we view that we are a likely substitute or a swap for television, print and other types of advertising.”
The panel’s MVPD representative was Marcien Jenckes, president of advertising at Comcast Cable’s Comcast Spotlight, which sells local, national and regional advertising and is also a rep. Spotlight also sells “as lot of digital,” Jenckes said. “There isn’t such a thing as digital over here and television over there, but rather we sell them both to a great degree as substitutes for each other and as complements to each other.
“There’s a really high overlap between these media types. Advertisers have shifted focus from this type of media or that type media. They think instead about their overall return on their media spend.” Media shouldn’t be viewed in silos, there needs to be a more wholistic approach, Jenckes said. “I encourage the Antitrust Division to consider seriously this more realistic view of the marketplace.”
Kaplan took on the DOJ assertion that ads on cable, telco and DBS are different from those on broadcast TV because TV stations have a greater reach than these other platforms.
“The term ‘reach,’ however, in this context is tricky,” he said. “DOJ is not saying that the entire market watches broadcast TV; rather, ‘reach’ describes how many people can theoretically watch broadcast TV. The relevance of this metric escapes me, because theoretical viewers don’t sell spots or earn ad revenues; only actual viewers do.
“In fact, MVPDs also ‘reach’ nearly 100% of homes in most DMAs. You can subscribe anywhere you live, just like you can purchase an antenna in most areas of the country and receive broadcast TV. So, ‘reach’ isn’t really the issue.”
Also putting forth the broadcast proposition that it shouldn’t be treated differently from other media was Dave Lougee, president-CEO of Tegna. “As the broadcast and other communications industries experience unprecedented, rapid change, a proper understanding of the market dynamics in spot advertising is essential. An overly restrictive antitrust view continues to impede broadcast transactions, even as broadcast’s competitors — for viewers and advertisers — are rapidly increasing their already massive scale, unimpeded by regulation.
“Simply put, high-speed broadband to the home … and high-speed broadband to the phone … has changed everything in the video marketplace. With the onset of ubiquitous high-speed internet service, there’s been an explosion of platforms and applications with video advertising capabilities that consumers have flocked to …. with more being added every week.
“To the point of this hearing, none of that would matter if all this valuable video content was not available to the local advertiser to reach their target customers … with the same exact ads. But that’s the critical change I want to emphasize to the department. Today they are available, and local advertisers are buying them en masse. As a result, there’s no longer a question that these digital options aren’t just complements, but substitutes for local advertisers.
“Advertisers over digital platforms now show ads that look exactly like traditional TV ads, over platforms that are growing viewership rapidly and enjoy extremely broad reach, along with the ability to focus on particular locations or other characteristics. These ads are powerfully competitive with over-the-air broadcast ads in the local ad market. And this competition will only grow.”
Jenkins noted that DMA-wide spots from broadcasters and local-zone spots offered by MVPDs “of course are substitutes. Advertisers travel back and forth between them.”
The panel took exception to the most of the issues framed by moderater Berger, including DOJ’s focus on the term “reach” as a metric, saying it can be unclear. Lougee noted that all of the TV stations in Washington don’t reach as many homes as Comcast’s interconnect in the market.
“The advertiser will assess the relative price offered for their video ad from each of broadcast, cable and digital, and buy any combination of all three, two or one,” Lougee said. “It is one highly interchangeable video market. So in other words, if broadcasters raise their prices, advertisers can, will and do take their dollars elsewhere. Their customers are on all three of these platforms, and can be reached on each, but they’re now all reachable on digital, with the small exception of a small percentage Americans over the age of 55, like myself, who advertisers don’t covet.”
Kaplan continued the digital theme, saying it takes things to a whole new level: it’s ubiquitous, targeted, has low barriers to entry, and it runs the same advertisements broadcasters do. “So far,” he said, “DOJ has failed to recognize what droves of advertisers have: digital advertising can provide quality impressions less expensively because the targeting and tracking capabilities of digital ads make them more cost effective. After all, advertisers have limited and finite ad budgets and today can spend them on digital platforms targeting the consumers they really want to reach.”
Kaplan concluded: “There is a very high cost to the American public if DOJ fails to update its broadcast TV market analysis. We can no longer operate in a bubble. With the dramatic decline of newspapers, broadcasters are one of the primary investors in local communities. Broadcasters take their public interest responsibilities seriously. But local stations must compete successfully for ad revenue to meet their obligations and commitments to cities and towns across the nation.”
And as the panel drew to a close, moderator Berger was asked if he knew going in that everyone on the panel would agree with each other. After laughing, he said he suspected that might be the case.
The day’s other panel, The Future of Advertising, featured a lineup from academia, digital, TV advertising, research and broadcasting discussing the effect changes in technology and in consumer viewing behavior have had on advertising and where the industry is headed. It was moderated by Erica Mintzer of the DOJ’s antitrust division.
The broadcasting panelist, Chris Ripley, CEO of Sinclair Broadcast Group, picked up the sentiment of the earlier panel, saying “there are very few things more important to us than the antitrust division of the Department of Justice understanding the dynamics of our marketplace and its real important that the rules of the road be set up to foster innovation and competition.”
Broadcast TV, he said, faces more challenges than ever, competing for content, audience and advertising — all three have steadily lost to cable. “Over the last four decades, broadcast TV has lost close to 75% of its audience to cable. As a result, the TV audience has become highly fragmented. No single broadcast or cable channel has more than 10% audience share and this would be even further diminished if we added premium digital video services.”
Over the last decade over-the-top and digital video streaming services have emerged as a new competitor in the local video ad market, Ripley said, emphasizing that digital video ads are expected to double from 2016 to 2021, reaching over $22 billion, “which is more than all the local ad revenues of the TV broadcast industry combined.”
He continued: “Despite ample competition, restrictive government regulations make broadcast station groups pigmies in a land of giants. Without scale we will not be able to innovate and bring new and relevant experiences to consumers.”
Ripley described some of Sinclair’s efforts to “stay relevant” — we’re improving our broadcast news and entertainment programming; we’re making it available on multiple platforms; ATSC 3.0 is rolling out … this will make us more competitive with cable and digital video marketplaces;” it bought the Tennis Channel and is expanding into regional sports networks and into digital with the free, OTT, ad-supported video streaming service Stirr that includes a wide range of programming including local news; and is also using its local sales force to sell third-party OTT video streaming ads to its advertisers.
The last, he said “happens to be the fastest growing digital service in Sinclair’s history. Why? It’s easy for the sales force to sell the same ads from the same advertisers by just putting them on a different platform. And to me, that example demonstrates just how fungible these markets have become.”
Broadcaster’s hopes at levelling the playing field somewhat, Ripley said, is the adoption of ATSC 3.0, which will give broadcasters the ability to offer targeted ads among other advantages. “3.0 will be a game-changer,” he said. “There are five key benefits”:
- It is a mobile-first standard.
- It’s IP end to end so it will support a hybrid environment where you can bring high-bandwidth content over the air and integrate it with public internet content to a seemless user experience.
- It will allow for targeted advertising that is something that traditional broadcast television is in need of if it’s to compete in the digital landscape.
- It will allow for subscription-based services to natively be on the platform so if you want to have a paywall, if you want something that looks like Netflix you can do that.
- It will dramatically increase the capacity we all have to send content to consumers. 3.0 will increase a station’s capacity to offer multicast channels by four to five times what there is today.
In response to a question on how Sinclair is adapting to the digital challenges, Ripley said “we’re trying to spread our content to as many platforms as possible so that we can actually compete for the advertising dollar on those platforms.”
Christina Beaumier, VP of product, TV platform at AT&T’s Xandr described how it has deals with Altice USA and Frontier Communications to aggregate and sell their national addressable TV advertising inventory. This initial step starts to create the foundation of a national TV marketplace for advertisers and premium content publishers, she said. By aggregating this video inventory from multiple MVPDs, AT&T’s addressable TV offering starts to provide advertisers with a one-stop shop.
“We power more than 170 million unique direct-to-consumer relationships across wireless, video and broadband businesses,” Beaumier added. “We closed in August our acquisition of AppNexus, which was the largest independent digital ad platform in the industry. By bringing together these two companies … we have accelerated the launch of a technology platform that will serve as the foundation of a premium advertising marketplace.
“We are also building a next-generation advertising platform to apply the same power and precision of targeting in digital to television and premium video.”
David Morgan, CEO of advanced advertising firm Simulmedia, tries to “bring a digital approach to linear TV.” TV advertising is very robust, he said, citing the example of Judge Judy. The daily double-run of the half-hour syndicated show delivers 85%-plus of YouTube’s ad load all day. “There are reasons that TV will be around for a while … but that doesn’t mean all the TV companies will be competitive because of all the challenges. Television advertising’s biggest problem is waste. A lot of people believe the future of television will be fewer, more relevant ads. ATSC 3.0 will help.”
He listed three problems that TV (broadcasting and cable) faces:
- Extraordinary and relentless competition for viewers in advertising.
- Global ad agencies that drive a lot of national spend favor digital.
- Digital platforms taking the high-precision direct response space and also in the local space where prices have been high.
Howard Shimmel, president of research consultancy Janus Strategy and Insights, focused on the state of audience measurement in the U.S. and the challenges it faces as it addresses this digital addressable, connected TV world. “Fifteen years ago … we were totally dependent on Nielsen audience data on TV. It was a totally transparent market, we knew each other’s shares. Fast-forward to the digital world where there’s no need for a company like Nielsen because any digital company had an accurate census measure of the number of ads it served to each advertiser.
“How do we integrate these two worlds, the world of linear TV which is going to be around for a while — it’s not going away — with the world of digital?”
He suggested that ATSC 3.0 may be at least part of the answer. “Netflix has an inherent advantage over any TV programmer — they have first-party data on every user. They can use that to drive recommendations, to drive building new content. ATSC 3.0 will give [TV stations] Netflix-like census data to make better programming, marketing out of the customer relationship.”
A second challenge Morgan identified is that in the era of Netflix, “because it realized it didn’t need to play with Nielsen, suddenly our ability to have insights into the market was dramatically limited. How do we enable programmers and local stations and national networks to have good insights so they can actually develop smart programming strategies and have programs with good ratings.
The U.S., Morgan said, “needs a better mechanism for insuring that developments of suppliers like Nielsen and Comscore meet exactly what the industry needs.”
Catharine Hays, co-founder of the Wharton Future of Advertising program, talked about working on research that “rather than trying to predict the future, we said what’s the best that the future could/should be? And secondly, what should we do now to get ready for that more desirable future?