December 19, 2007

Network TV “CashBacks”Pull the Rug Out From Under Advertisers & Doom the Upfront

A new age of media discontinuity may be dawning as the television networks, in giving cash to advertisers in lieu of promised audience or ratings, have pulled the rug out from under the foundation of trust that underlies the selling and buying of TV ad time. In giving cash instead of advertising to buyers of ad time, the networks are taking back time sold at one price in the past and reselling it to higher paying advertisers today. It’s “bait and switch” without the switch; the marketer who needs the ad time to sell goods is left with a bag or cash and no ad support.

Pre-emptions of previously purchased ad positions have long been a bane and ethical conundrum for local spot television ad sellers. Neither the media buyer nor the advertiser has ever been able to count on local stations to honor their media sales contracts. The ‘custom of the country’ for local TV stations in the U.S. has simply been to sell each spot to the last highest priced offer, reselling the same spot over and over until the last, highest paying offer is executed in the form of a telecast.

In this process, each of the early buyers of the same ad unit for ever increasing amounts, is “pre-empted” by the seller and offered a replacement spot or makegood, often in an inferior time period. As a result, one of the most expensive components of spot buying is the scheduling and rescheduling of makegoods. However, even in this swamp of reneged promises and towers of paperwork, one has usually been able to count on some sort of ad schedule airing approximately during the desired time periods.

However, the new network cash-back formula makes it impossible to count on the seller to ever deliver the promised goods. Any time ad rates increase over time, a network can now pre-empt an early ad buyer for a higher-paying latecomer. This situation makes much of the discussion about the Writers’ strike’s possible effects on the Upfront moot. In the “Cash Back Age” there really is no basis for an upfront, which is after all supposed to be at core a guarantee of audience at some future date. Let the buyer beware. A new, more risky media age is dawning.

I predict that the next few months will represent the most tumultuous period ever in the history of television. It is time for our industry---media sellers, ad buyers and advertisers---to sit down and to address the need for a new and reliable basis for doing business in the future, nothing less than a new foundation for television advertising commerce.


lewis8 said...

Do TV executives understand or care about trust and credibility? Shouldn't marketing, including advertising, be about meeting the client's needs and wants, not the seller's? And at the end of the day, won't meeting those wants and needs result in greater revenues, not less?

Lewis Green, bizsolutionsplus

Gene DeWitt said...

The commercial television business has always been about money (or if you prefer another five letter word, greed). That aside, the networks have usually worked hard to help advertisers meet their goals. This, I think, is changing and a new harsher reality may be confronting marketers in the near future.