I believe we're in a buyer's market for scatter right now due to two factors. The first involves new revelations about pricing and makegoods from Standard Media Index (SMI). Thanks to a new modeling technique we have applied to the data we can now reveal highly accurate cost level data at the day, daypart and network level. We also have terrific intelligence on individual advertisers, their vertical and the different buying strategies being executed by brands across the TV ecosystem.
Secondly, Nielsen's TAM (Total Audience Measurement) data is still being refined and tested and until this is released we believe the market is undervaluing national TV and great opportunities exist for buying high performing television advertising at a discount based on true audience numbers.
SMI's new second-quarter data underscores what has already been perceived: We've come to the end of a digital growth spurt that shifted revenue away from network TV. In the Q2 results, cable networks saw a wave of new business return to TV; the recent study we presented at the ARF conference with Bill Harvey proved a lot of this money is returning from digital. Agencies were drawn to the real audience and ratings that TV delivers and CPM pricing that continues to be good value for the money.
At the "big picture" level, national TV ad unit prices jumped 3.3% in the second quarter versus the same period in 2015. But drilling down into the numbers, the spending patterns of different advertising sectors are dramatically different, as are the results for cable networks versus the Big 4 broadcasters (ABC, CBS, Fox and NBC).
First, let's take a look at gross ad spend, rolling up cable and broadcast together. The top-four-ranked categories showed a mixed bag of results for the second quarter 2016 period versus same time in 2015:
- Auto manufacturers and dealerships spent 25% less on TV networks as a whole (to $286.9 million).
- Pharmaceutical prescription advertisers increased their spending by 15% (to $238.0 million).
- There was a 4% increase among entertainment companies, which includes movies, online ticketing sites, pre-recorded content and live sporting and entertainment events (to $204.4 million).
- Telecommunications spending was pretty much flat, at -1% (to $200.2 million).
A network unit cost analysis shows the differences being experienced by the broadcast and cable networks. On average, the cable networks' average price rose over 10% in prime and over 8% in daytime (to $8,370 and $1,413, respectively).
Broadcast networks experienced an average 5% drop in primetime unit rates (to $114,100). That percentage matches the broadcasters' Nielsen-reported audience decline in prime in the same quarter. (Of course, this is most likely an artefactual audience decrease; the audience probably really moved to OTT which is not Nielsen-measured until TAM is up.) Their late fringe unit pricing dropped 10% (to $26,400) off the back of several large shows not delivering the audiences they did in 2015.
A clearer picture emerges when SMI drills down to results for individual ad sectors. Here's Q2 unit cost info on the top four ad categories during primetime versus same time last year:
- Auto was up 4% for cable networks (to $7,654) but was off 13% for broadcast networks (to $98,061).
- Entertainment rose 10% for cable (to $9,155) and dropped a hair -- just 1% -- for broadcasters (to $134,326).
- The pharma prescription sector rose a very healthy 16% for cable (to $4,833), and it was anemic for broadcast, off 6% (to $76,649).
- Telecom rang up 19% more for cable (to $9,110) and declined 10% for broadcasters (to $91,630).
Studying the network business from the standpoint of makegoods -- also known as audience deficiency units (ADUs) -- provides a different perspective. For broadcasters, the results were varied when analyzed by daypart. For example, in late fringe, underperforming talk shows caused an increase in the percent of broadcast network units for makegoods in Q2 2016 (22%) versus 15% same time last year. But in prime, the percentage was steady, at 16% versus 15% last year, comparing the same two quarters.
Cable did a better job in managing ratings guarantees. For cable networks, prime ADUs dropped from 19% in the second quarter last year to 12% this year. And daytime declined from 18% to 11%.
Here's a primetime comparison of ADUs for the top ad categories, comparing Q2 2015 to Q2 2016:
- Auto increased from 17% to 20% for the broadcast networks. For cable services, the sector declined from 21% to 14%.
- Entertainment jumped from 14% to 19% for broadcast. Among cable networks, the sector dropped from 23% to 19%.
- Prescription pharma increased to 17% from 15% for broadcast. For cable, it sunk from 17% to 12%.
- Telecommunications stayed rock steady at 7% for broadcast. Cable networks saw a slight drop, from 15% to 13%.
In considering all this information, remember that lower unit prices imply a higher ROI, because it lowers the "I." Now's the time for agencies and brands to do some shopping among some very choice real estate before Nielsen's TAM has a major impact on our ability to capitalize on bargains like these.
The opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaVillage.com/MyersBizNet, Inc. management or associated bloggers.