TV Groups Guilty Of Collusion? Bullshit
This week’s news about a class action lawsuit against six of the largest TV groups for price fixing on advertising prices is just about the biggest piece of crap I have ever read.
I know the group heads and many of the station sales leaders at all of these companies. I’ve been part of the TV business for more than 40 years. And I am positive that it is absolutely not the case.
Not a single one of those people is stupid enough to engage in any conversation that could be construed as collusive. These are smart leaders and they would never do that. That these six companies would agree on anything is laughable.
Even when they do meet together at NAB meetings, there’s always a lawyer in the room to guarantee that nothing gets done that is anticompetitive.
So, this will get a lot of publicity, probably increase the Maalox usage of several group heads, enrich the lawyers, but in the end be determined to be total absolute garbage
Can you tell I am offended?
And by the way, if the industry was engaging in collusion, you have to say they have done a really horrible job since our business continues to decline. In fact, the news article about the class action suit by the law firm in Alabama suggests local TV revenue is going to be up this year. If that’s the case, it’s because of political spending and no other reason since most of the stations I know are having real challenges in core.
There are two separate issues. The first is the Alabama suit.
The second is the Department of Justice inquiry based on their examination of the Sinclair-Tribune merger. From reading the news articles, it appears they are concerned about our industry practice of sharing quarterly revenue reports with Hungerford and Miller Kaplan.
This information is assembled after a quarter ends so it can’t be collusive. It only shows how the market did retrospectively. It’s history — much like the retail market share trends that food producers get from Nielsen scanners in the grocery stores or the monthly sales of SUVs that auto manufacturers get.
And I believe the quarterly share reports actually do more to reduce ad prices than to raise them.
Here’s what I mean. As a TV sales manager I live in fear of the day the share reports come in. My corporate bosses are getting them at the same time and their opinion of me will be somewhat determined by how well I did last quarter.
If I have a bad quarter, if I lost share of the market’s revenue, I’ll be on the hot seat. I can guarantee you that I will do anything I can to make sure that doesn’t happen again. And how do I do that? An easy way is to lower the rates. That allows me to increase my share to get back in the good graces of my corporate bosses.
A personal example: Just a few years ago I was a partner in a station that was kicking butt. During that time, we actually stopped reporting our numbers. We did not want our competitors to know how well we were doing because if they knew their likely response would be to cut their rates. We believed that not sharing information would keep our prices higher. That’s the total opposite of collusion.
It’s even worse than you think. Some companies place too much emphasis on share growth as a determinant of management effectiveness. So, I’ve seen literally dozens of situations where sales managers of dominant stations are reducing rates to increase share and actually damaging the market.
Ask any TV sales manager if they have ever been frustrated by the pricing weakness of a market leader. I can reel off 20 markets off the top of my head where the market leader doesn’t price like the market leader and damages the revenue potential of the entire market.
I am convinced that the DOJ inquiry will go nowhere because there’s nowhere to go. But in the meantime, we’ll waste a whole lot of energy, money and time on an absolutely bogus claim.
When I speak to GM and sales management groups there’s a line I sometime use that always gets a laugh. I’ll say, “The TV industry is the only business that can take a 5% reduction in demand and successfully negotiate into a 10% reduction in our business.”
It gets a huge laugh because all the sales managers know it’s true. The price dive for share is one of the biggest challenges facing our business. That sure as hell doesn’t sound like collusion to me.
Jim Doyle is the founder of Jim Doyle & Associates, a national sales training and marketing consulting firm that partners with broadcast and cable television companies.