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WINTER Template THE FASHION CHANNEL 01. WINTER Template 01 The Executives Jared Thomas: founder and CEO Dana Wheeler: senior vice president of marketing.

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Presentation on theme: "WINTER Template THE FASHION CHANNEL 01. WINTER Template 01 The Executives Jared Thomas: founder and CEO Dana Wheeler: senior vice president of marketing."— Presentation transcript:

1 WINTER Template THE FASHION CHANNEL 01

2 WINTER Template 01 The Executives Jared Thomas: founder and CEO Dana Wheeler: senior vice president of marketing –Background in marketing packaged consumer products and in the advertising industry Norm Frazier: senior vice president of Advertising Sales

3 WINTER Template 01 TFC Basics, Revenues TFC: successful cable TV network –Dedicated solely to fashion –Up-to-date and entertaining features –Broadcast 24 hours per day, 7 days per week Founded in 1996 by two entrepreneurs –Constant revenue and profit growth above industry average since founding –Example: 2006 forecast at $310.6 million Resources: $60 million for national and affiliate advertising, promotion and public relations in 2007 –Increase of $15 million over 2006 spending

4 WINTER Template 01 Viewers and Message Viewers –Niche network –Reaches 80 million U.S. households who subscribe to cable and satellite –Avid viewer: women between 35 and 54 (source: demographic survey) TFC had no additional information about its viewers beyond basic demographics Message: meant to appeal to as broad a group as possible – Fashion for Everyone –Popular 2005 series: Look Great on Saturday Night for Under $100 TFC grew without segmentation, branding, or positioning strategies

5 WINTER Template 01 Competition Creates New Strategy Lifetime and CNN launch fashion-specific programming blocks –Receive notable ratings June 2006: Thomas changes his tune – Its time for us to build a modern brand strategy and secure The Fashion Channels position as the market leader. I want to use marketing to lay a foundation for future growth.

6 WINTER Template 01 Advertising Concerns Frazier warns that TFC may have to drop price per unit of advertising by 10% –Due to performance issues To hold or increase price TFC must attract critical mass of viewer attractive to advertisers Warning: TFC must still maintain overall ratings with cable consumers and the cable affiliate distribution network –Risk: loss of distribution support due to disappointed consumers

7 WINTER Template 01 Cable Affiliate Fees Cable Affiliate Fees are the second source of revenue for TFC –TFC on track to generate $80 million in 2006 Consumers pay monthly fee for basic lineup of cable channels –Incremental fees for premium channels and on-demand programming –TFC is a basic channel Multi-system operators (MSO) sign multi-year contracts with networks for a specified fee that the network receives for each household with the channel –TFC average: $1.00 per subscriber per year – fairly low for industry standards due to niche content –Fee does not change as viewership changes MSOs and affiliate carefully monitor customer satisfaction –Threaten to drop unpopular channels due to viewer outcry Not much change to increase affiliate revenue due to full penetration –Goal: maintain good equilibrium

8 02 TFCs Advertising Revenue Model 2006 advertising: on target to generate $230.6 million Business model: based on a mix of male and female viewers measured by ratings –Percentage of television households watching on average during measured periods TFCs average rating: 1.0 –Which means that out of 110 million households 1,100,000 were watching at any point in time

9 02 Revenue Model Cont. Ad Sales team sells advertising spots of 30 or 60 seconds –6 minutes of national ad time per half hour –Totals 2,016 minutes in 24 hours U.S. consumer advertisers spent almost $20 billion on such spots in 2006 –Fierce competition for ad dollars and revenue Advantage: TFC is the only 24/7 fashion programming Advertisers buy ratings and demographics, not programming subjects –Lifetime and CNN offer strong programming blocks that may skim more viewers and ad dollars from TFC –Fixed supply of advertising makes competition fierce

10 02 Revenue Model Cont. Ad unit prices based on several factors: –Number of viewers (ratings) –Audiences characteristics (age, demographics, lifestyle) –General competitive trends Formula =(Households x Ratings)/1,000 x CPM Prices: expressed as CPM: cost per thousand –Price an advertiser will pay for a moment of viewing Networks evaluated based on ability to deliver specific target groups – Premium CPM group: –Men of all ages –Women from Increasing targeted group can increase CPM from 25% to 75%

11 03 Competitive Threats CNN: Delivering great numbers on men Lifetime: Taking lots of ad buys from TFC [due to] younger female demographics Alpha Research Study – Used by operators to: –Determine how much to pay for each network –Determine whether to include network in cable offerings –TFC generally scored above the midpoint Consumer InterestAwarenessPerceived Value TFC CNN Lifetime

12 Exhibit 1: Demographics 03

13 GFE National Consumer Field Study National panel of consumers Sophisticated statistical correlation program by a well-regarded market research firm

14 03 Wheelers Theories Not wise to target Basics cluster – least likely to be engaged with TFC content TFC segmentation and positioning should be targeted at women between 18 and 34 years of age Ad Sales forecasts a 10% drop in CPM to $1.80 if current audience mix remains the same Option 1: Investing in broad appeal to Fashionistas, Planner & Shoppers, and Situationalists –Ratings boost of 20% from 1.0 to 1.2 –Might not deliver the audience needed to keep CPM the same Option 2: Target the Fashionistas –Rating decrease of 20% from 1.0 to 0.8 –CPM would increase to about $3.50 (Ad Sales forecast) –Requires an additional $15 million per year in programming Option 3: Target the Fashionistas and Planners & Shoppers –Ratings increase 20% from 1.0 to 1.2 –CPM would increase to $2.50 –Requires an additional $20 million in programming

15 04 Objectives Strengthen competitive position Build foundation for future growth Secure TFCs position as the market leader Segmentation strategy to reach target consumers: basis of all marketing tools –Traditional and internet advertising –Public relations and promotions Key levers to drive revenue growth –Increased viewership (ratings) –Increased advertising prices –Differentiation from competitors Find and market to a core group willing to become loyal to TFC –Concern: focus on fickle consumers and lose some viewers in the process

16 Current2007 BaseScenario 1Scenario 2Scenario 3 TV HH110,000,000 Average Rating1.00%1%1.20%0.80%1.20% Average Viewers (Thousands)1, Average CPM*a$2.00$1.80 $3.50$2.50 Average Revenue / Ad Minute*b$2,200$1,980$2,376$3,080$3,300 Ad Minutes / Week2,016 Weeks / Year52 Ad Revenue / Year$230,630,400$207,567,360$249,080,832$322,882,560$345,945,600 Incremental Programming Expense 0015,000,00020,000, Ad Revenue

17 RevenueCurrent2007 BaseScenario 1Scenario 2Scenario 3 Ad Sales$230,630,400$207,567,360$249,080,832$322,882,560$345,945,600 Affiliate Fees$80,000,000$81,600,000 Total Revenue$310,630,400$289,167,360$330,680,832$404,482,560$427,545,600 Expenses Cost of Operations$70,000,000$72,100,000 Cost of Programming$55,000,000 $70,000,000$75,000,000 Ad Sales Commissions$6,918,912$6,227,020.80$7,472,424.96$9,686,476.80$10,378, Marketing & Advertising$45,000,00060,000,000 SGA$40,000,000$41,200,000 Total Expense$216,918,912$234,527,021$235,772,425$252,986,477$258,678,368 Net Income$93,711,488$54,640,339$94,908,407$151,496,083$168,867,232 Margin30%18.90%28.70%37.45%39.50% 05 Net Income from Scenarios

18 05 Conclusions Target the Fashionistas and Planners & Shoppers –Both participate in fashion on a regular basis –The majority are females –Between 25 and 50% of each group are ages –Both stay up to date on fashion and enjoy shopping

19 05 Slide layout copyright References


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