Seven Founding Principles of the Future Media Industry

Marketers Will Continue to Desire Premium High Quality TV and Video Content BelowtheLine Promotional Budgets are the Future of AbovetheLine Media CompaniesPerformanceBased Metrics Will Gain in Importance but Very Slowly and SelectivelyProcurementBased Pricing will Gain Importance and Very Quickly and Widely Marketers will Invest in Innovative Native Content and CauseBased Marketing SolutionsSuccess Depends on Rapid Deployment of Visionary Distribution Organizational and Business Models A Gender Diverse and MultiCultural Workforce is Essential to Future SuccessThe Future Media Industry amp8211 Founding Principle 1Marketers Will Continue to Desire Premium High Quality TV and Video Content Differentiated professionally produced sustainable networked video content with high sponsorship value will be desired by marketers to support their tentpole promotional and marketing platforms Led by sports and high visibility entertainment events network television will continue into the foreseeable future to be the engine that pulls the advertising train But the continued growth and sustainability of TV networks and studios depend on their ability to increase the profitmargins of highquality highengagement marketerfriendly video content The business models of primetime network television have historically relied on packaging of inventory across highdemand and lowdemand inventory and relying on overall demand equaling or exceeding overall available supply Expensive primetime content is essentially a lossleader pulling customers into the network quotstorequot and requiring them to load their carts with a spectrum of inventory enabling the networks to package highmargin inventory with the lossleadersThere are four problems with this model First we know supply is increasing while demand is stable or decliningSecond marketers are shifting aggressively toward procurementbased pricing that will drive down costs wherever there is competitive oversupply The supply of TV and video inventory is growing and demand is declining so the ability of networks to offset the costs of their premium content will diminish as marketers and agencies force a more unitspecific pricing model Advances in programmatic and automated trading will accelerate this new realityThird marketers have more opportunities to align themselves with premium content from a growing base of alternative suppliers and TV networks are no longer their only option Amazon Apple Netflix Hulu Yahoo AOL and a growing cacophony of distribution partners are investing in a diverse range of programs available to meet marketers39 tentpole promotional interests ad messaging requirements and enhanced returnoninvestment needs Even sports sponsorship and advertising opportunities are expandingFourth while the demand for premium high quality professionally produced video content will be one of the few sectors of the media marketplace where demand will intensify the rights fees talent costs and production demands will increase exponentially The traditional deficit financing and packaging models on which networks and studios have relied will no longer work New revenue models must be developed implemented and provenThe Future Media Industry amp8211 Founding Principle 2What is the Future of Media Buyers ampamp SellersEvery major media company agency and leading national advertiser is seeking solutions for emerging and very serious threats as underlined by the dire economic forecasts published last week by MyersBizNet In times of accelerating change and marketplace chaos companies that fail to aggressively adapt are likely to be passed by competitors who respond forcefully to meet the challenges of the future Rather than buying and selling impressions and Nielsen rating points agencies and media sellers need to define a clear and immediate strategy for reinventing their business development and marketing communications They must identify advance implement and effectively communicate business development programs to generate incremental and scalable revenuesLegacy media companies are under attack as new business models built on expanded supply programmatic systems procurement requirements and new metrics are gaining traction and critical mass With varying degrees of bravado investment and reorganization they are advancing into an unknown future with shields raised and swords unsheathed They are charging forward blinded by a digital sun in their eyes hoping to sustain their traditional hold on the future and slay whatever dragons may appear To date this has been an effective strategy audiences marketers and Wall St are following behind Ahead in the not too distant future however are unseen heights to scale turbulence to survive and perilous cliffs from which a fall could be fatalAre media companies content producers agencies research providers and marketers responding with sufficient speed and vision to the changing media ecosystem Media companies are trying building and reacting But are they truly preparing for the collapse of foundational business models that have served the media industry for more than half a century and are no longer reliable for sustainable growth While several media companies agencies and marketers are responding aggressively to the growing reality of these threats few if any are prepared for the probability of a freefall collapse of legacy business models While corporate leaders from the big media companies agencies and hot digital players introduce innovative business offers tests collaboratives tools and new organizational structures there is no evidence that more than a handful of them are truly prepared to confront and survive the dangers that lie ahead The winners and losers for the next several decades will be decided based on their decisions in the next 48months the aggressiveness and determination with which they make and act upon their decisions and how visionary they prove to beTraditional media investments will be focused on achieving greater cost efficiencies and capitalizing on the shift in supplydemand dynamics Fundamentally the primary purpose of these budgets will remain yesterday39s goals of awareness reach frequency and cost efficiencies with automatedprogrammatic systems being the primary tool for more effective implementation resulting in downward pricing pressure on media suppliersPrinciple 2 of the Seven Founding Principles of the Future Media Industry is that belowtheline promotional budgets are the future of abovetheline media companiesMarketers will shift tomorrow39s budget share to media partners that are most able and willing to develop and implement promotional shopper marketing and brandcentric programs As technology is put in place to manage transactional planning and buying media agencies will shift their creative and human resources to enhanced relationships with those media partners that offer scale quality content valued audiences multiplatform media integration and measurement promotional resources and specialized teams to service and support these initiativesMedia companies marketers and agencies to maintain and grow market share need to invest today in tomorrow39s growth opportunities and business models They need to proactively identify and develop incremental and scalable revenue sources accompanied by a restructuring of their organizations to support these new business modelsThe Future Media Industry amp8211 Founding Principle 3PerformanceBased Metrics Will Gain in Importance but Very SlowlyAmong the MyersBizNet Seven Founding Principles on which media companies agencies marketers and content producers must focus to maintain longterm growth and achieve sustainable success 3 is PerformanceBased Metrics Will Gain in Importance but Very Slowly and SelectivelyThere is a definitive and growing trend in network TV toward increased use of performancebased metrics and toward data driven audience targeting offerings by media companies and agencies Research amp8211 both proprietary and mediafunded amp8211 is influencing the market share of media companies that are engaging in this process providing relevant research and delivering more targeted reach as a result But the shift of dollars based on this research is primarily driving share decisions within the television industry and is not reversing the growing transfer of budgets from TV to digital video The actual influence of qualitative performancebased research on national TV buying decisions is growing impacting an estimated 1 to 5 of total Upfront buying varying by agency and client aggregated Upfront spending influenced by performancebased research data in this year39s Upfront market is unlikely to surpass 3 of the totalAlthough there are studies that question the effectiveness of digital advertising and PampampG is reported to be reallocating budgets back into TV this research is not overcoming marketers39 pressure to capture shareofvoice in digital video media and demand for quality digital video is increasing at a rate faster than supply Of all the advertisers in the national marketplace PampampG is arguably the least appealing to TV nets because of their historically low institutional ratesWhile media sellers can assure themselves a more competitive position in Upfront negotiations if they are delivering performancebased metrics the basic currencies of negotiation agegender demographics reachfrequency GRPs and CPMs are unchanged and there is little evidence that Upfront negotiations will change in a meaningful way in the foreseeable futureFor the 201718 Upfront market we envision 8 to 15 of total network TV investments being impacted by networkfunded performancebased metrics and such data is unlikely to either reverse the flow of dollars to digital video including mobile or attract new budgets to television from other media However larger shares of a specific TV network company39s budget could be influenced for specific clients with as much as 25 of an Upfront budget with a specific network being allocated based on new performancebased metricsOne TV advertiser summed up the consensus view of client executives quotquotWe want to keep as much of our budget as possible in the reach bucket and be judicious in how much inventory goes into engagement amp8211 engagement requires a business plan amp8211 spend KPIs business impact a prior discussion is required when budgets go from reach to engagement or performancequot While investments based on performance metrics will grow such research is unlikely to reverse secular declines in the national TV marketplaceNext in our Report on the Seven Founding Principles of the Future Media Industry ProcurementBased Pricing will Gain Importance and Very Quickly and Widely amp160

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Seven Founding Principles of the Future Media Industry

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