Take The Long View On Local Ad Spending

Through cross-media initiatives such as C7 ratings, mobile DTV and increasing online access to local broadcast content, TV stations are clearly aware and responding to the many rapid shifts in media consumption. That’s with good reason. Anticipating change is the best way to avoid some of the painful lessons in the history of media.

As Simulmedia’s 2013 State of Digital Video Audiences report observes, “this is not your grandparents’ or even your parents’ TV…. Audiences are still watching plenty of TV but are shifting how they watch in ways that advertisers can no longer ignore.”

Since, by all accounts, we are coming off an amazing year for television advertising, it’s easy to take the Scarlett O’Hara approach and put off concerns about the potential impact changes in viewing habits will have on our advertising business until “tomorrow.” Nielsen reported earlier this week that ad spending rose 3.3% from January to September last year, with TV advertising up 4.3% during the period. Its analysts say that, thanks to Olympic and political advertising, the industry enjoyed high double-digit growth — 13.6% in the third quarter.

The news for local television was even better. Matrix’s quarterly local TV sales report for TVNewsCheck found that advertising revenue for the year rose 19.3% over 2011. “Even with the political advertising factored out, ‘core’ revenue was up 4.6% year-over-year.”  TVB separately reported that TV stations took in $2.9 billion in political advertising in 2012, representing 80% of political ad spend on TV overall and 85% of the money spent on local TV (broadcast and cable).

It’s important to note that these increases in ad spending occurred while the television audience exposed to those ads is experiencing greater fragmentation. As the Simulmedia report observes, “Primetime, when ad rates (cost-per-thousand, CPMs) are highest, still garners the lion’s share of ad spending but does not deliver a proportionate amount of viewing from audiences. In a given two-week period of TV, 54% of all ad spending (more than $91 million) went to primetime but only translated into 34% of all impressions during that time.”

For Simulmedia, “television is no longer a device, tied to a single room in the house via a roof antenna or even a single cable provider. Today, TV is far more fluid, moving away from appointment-based viewing and revolving more around watching great content on the best available device possible rather than on a single device or platform. Audiences are still watching plenty of ‘TV’ but are shifting how they watch in ways that advertisers can no longer ignore.”

The firm, which works with media agencies and advertisers to find and reach specific customer segments on TV, points to the following drivers for greater audience fragmentation:


  • The average person watches more than 31 hours of television a week. While most people still watch TV in primetime, it’s clear that there is a lot of viewing going on outside of 8 p.m. to midnight.
  • According to the U.S. Bureau of Labor Statistics’ Employee Benefits Survey, the percentage of people working flexible schedules has doubled since 1984. Flexible work schedules mean that people no longer can be expected to gather at the same time of the day to watch leisure-time television. Viewers have and are taking advantage of more viewing choices.
  • Americans watch more TV across more channels every year — niche channel offerings have increased more than tenfold over the past 15 years and the aggregated reach of cable surpasses that of the broadcast networks:
    • A growing number of cable networks are producing original high-quality, award-winning TV shows that rival content on broadcast networks, and online content companies are making visible, strategic investments in original content as well.
    • Falling laptop prices and the proliferation of mobile devices and tablets now enable viewers to watch TV whenever and wherever they choose.
    • Viewers are increasingly able to stream video content on their TV sets via video-game consoles, streaming media devices or increasingly, Internet connectivity built directly into TV sets. By the end of 2012, there were an estimated 78 million TVs in the U.S. connected to the Web, with penetration expected to grow to 147 million sets over the next five years.

The Simulmedia report concludes: “The power of choice that video audiences now have in terms of what to watch and when to watch is a Pandora’s Box that will not be closed in the coming years. Rather, we are just seeing the beginning of the Age of Fragmentation, where video audiences will continue to expand what and how they watch in ways that will only make the jobs of advertisers and their agencies harder.”

Through cross-media initiatives such as C7 ratings, mobile DTV and increasing online access to local broadcast content, TV stations are clearly aware and responding to these shifts in media consumption. That’s with good reason. Anticipating change is the best way to avoid some of the painful lessons in the history of media.

While we can say that the latest media technologies identified by Simulmedia haven’t replaced traditional media, we cannot deny that emerging forms of media can have a dramatic effect on the business model of industry incumbents over time.

For example, advertisers spent $454 million on broadcast television in 1952, representing 6% of total media spending, according to data maintained by the FCC. That same year, the newspaper industry’s take was $2.4 billion and represented over 37% of advertising spending.

I wonder how many industry professionals looking forward in the early 1950’s foresaw that newspaper’s ad share would continue to decline at that same time that their share of total ad spending would continue to climb to a peak of more than $48 million by 2000 before dropping to $24 billion in 2011. Taking the long view from here, from 2013, the prediction is that newspapers will follow the same path as that taken by local radio. According to Borrell & Associates’ Gordon Borrell, “Radio ad sales plummeted in the 1950s due to the new medium of TV. Then in 1962, it flattened out and remained a consistent 7% share of advertising ever since

So, what does the future hold for local TV?  For that matter, what does this increase in fragmentation mean to the future of all media? The industry’s senior financial executives will be looking for that same long view on media when they assemble for MFM’s upcoming CFO Summit, which will be held at The Atlantic Hotel in Fort Lauderdale, Fla., on Feb. 21-22. We have an outstanding lineup of experts whose perspectives to help us to bring that view into focus including:

  • Former FCC Chair Richard “Dick” Wiley, managing partner, Wiley Rein LLP
  • Mark Huffstetler, managing director and head of capital markets origination, SunTrust Robinson Humphrey
  • Randall Beard, Nielsen’s global head of advertiser solutions
  • Adam J. Kovach, senior partner in the financial officer and technology, communications and media practice at Spencer Stuart
  • Accenture’s Michael Chapman and Todd Beilis
  • Talent development and succession planning expert Grace Killelea  
  • Lisa Ryder, senior claims officer and supervisor of media, cyber and lawyers claims at Chubb Specialty Insurance

Of course the right path to media’s financial future isn’t going to be decided by a group of men and women meeting in Fort Lauderdale. So, I hope you’ll share your ideas on how television stations can ensure they maintain a healthy share of ad spending well into the future. What’s apparent to me is that the days of being order-takers are truly part of our past.

Do you agree that growing local advertising businesses in today’s media world requires a consultative sales process? Please let me know by either responding below or following the conversation on MFM’s LinkedIn group. If we have enough response, I will use the comments in a future article.

Mary M. Collins is president and CEO of the Media Financial Management Association and its BCCA subsidiary. She can be reached at [email protected]. Her column appears in TVNewsCheck every other week. You can read her earlier columns here.

Comments (2)

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Matthew Castonguay says:

February 1, 2013 at 9:05 am

The long term key for local media outlets (labels like “TV” will become increasingly meaningless) is to have a broad client base. For players who are now TV-based, that means more advertisers, smaller advertisers (on average), and more sales people.

Don Richards says:

February 5, 2013 at 8:38 am

Agreed. Local business (and, more specifically, local direct) will continue to grow as national and agency-based business migrates to the “flavor-of-the-day” media. With 70% of the local businesses falling into the services category, we have to learn how to serve that sector. We will have to teach those services how to use us in a way that generates tangible results for them (if we hope to have long-term customers). That means our sellers and production staffs will have to learn that services require a different solution. Simply offering :30 spots that spotlight price and item will not work for services. As was pointed out in the article, the way people consume media has changed dramatically in the last 20/15/10/5/2 years. We have to recognize that and approach potential advertisers with new solutions that speak to the new and continually-changing ways that media is being consumed. Submitting avails to the ad agency is a formula for long term disaster.

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