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Media Buying: Negotiating Network Upfront. Buying media the communication plan Client Marketing Objectives Media Objectives & Strategies Media Mix Media.

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Presentation on theme: "Media Buying: Negotiating Network Upfront. Buying media the communication plan Client Marketing Objectives Media Objectives & Strategies Media Mix Media."— Presentation transcript:

1 Media Buying: Negotiating Network Upfront

2 Buying media the communication plan Client Marketing Objectives Media Objectives & Strategies Media Mix Media Plan Media Investment

3 National TV National TV divided into three primary vehicles: –Network –Cable –Syndication

4 Network TV divided into dayparts –Early Morning –Daytime –Evening News –Primetime –Late Night –Kids –Sports All national commercial time is sold in packages by daypart Network TV: Dayparts Most EfficientLeast Efficient

5 Two Ways To Buy: Long-Term & Short-Term UPFRONT (Q4 through Q3) Long-term purchase, 3 to 4 quarters at a time Negotiated in May/June Inventory airs in upcoming broadcast year Typically best pricing Best program/network availability Audience delivery guarantees Cancellation options can be negotiated for outer quarters SCATTER (as needed) Short-term purchase, typically done in quarterly increments Negotiated anytime prior to air date Inventory airs in upcoming weeks/days Typically more expensive than the upfront Risk of limited program/network availabilities No audience delivery guarantees Inventory is firm upon order

6 Frequent complaints Negotiations too far in advance –May ’04 purchases of September ’05 inventory Inventory purchased isn’t what runs –Program failures; reality programming Sellers have an advantage –Can stall, pool all inventory requests to gauge market –Agencies can’t do same thing Late nights lead to mistakes –Do you really want your agency spending your $200MM budget at 2 a.m.? CPMs and ratings going in opposite directions

7 Early Morning $5.50 A25-54 CPM $11.50 A25-54 CPM Nielsen 2003

8 Daytime $5.30 W18-49 CPM $9.00 W18-49 CPM Nielsen 2003

9 Pricing Gap Growing 3.6x 2.2x

10 Old client habits can be hard to break Bulk of spending still goes to network Network$12.1B Prime $9.3B Late $710MM Day $895MM News $430MM Early Morn $785MM Cable $5.5B Syndication $2.3B 03/04 Upfront Reported Spending

11 The network upfront marketplace: How does it work?

12 A true supply & demand marketplace (Unlike print, cannot add more supply if demand increases) A few scenarios... Demand Advertiser Budgets Commodity Rating Points Supply Vendor Avails Supply DownDemand UpCPM Increases Supply UpDemand DownCPM Decreases Supply UpDemand UpCPM Flat-ish

13 Beating The Market No one has perfect knowledge –Agencies do not and cannot talk to each other –Networks not supposed to talk to each other –Everyone tells the side of the story that best suits them Good buyers collect as much info as possible –Draw upon all available resources for educated predictions SupplyDemand Look at historical ratings performanceReview general economy Review new programsStudy how advertising typically reacts Determine potential winners/losersTalk to investors about category predictions Develop projections for futureExtrapolate internal budgets Talk to vendors

14 Beating The Market Everything is negotiable –Typically judged on CPM premium vs year ago And how that compares to results of other agencies Accurate knowledge of future supply and demand is important –Called “Reading the Market” –Supply typically does not fluctuate dramatically –Demand sometime does Timing is critical in securing best price –If spending up significantly, usually smartest to buy early –If down, we may wait until vendors get nervous Diversified scale also a driving force –Not just lots of money, but the right kinds of money

15 Upfront Timeline: Macro View Mar Apr May Jun Jul Aug Market Review Final Budgets/ Preliminary Buying Strategy Negotiations Go to “Hold” Place Orders

16 Upfront Process: Micro View Gather client needs Analyze supply/ demand Evaluate networks’ schedules, strengths Form strategies & plan investments Submit needs & request plans Evaluate & request revisions Place inventory on hold Evaluate networks’ schedules, strengths Form strategies & plan investments Evaluate & request revisions

17 Evaluating networks’ schedules Overall ratings trends: leaders vs. laggards Which series are aging vs. growing? How many holes must be filled? Position of strength Position of weakness Neutral

18 Investment Strategies Seek out vendors’ “pulse points”: –Cross-daypart help FOX weakness –Corporate synergies NBC linkages –Weaker vs. stronger players Creating winners & losers –Client assets - partnerships Packaging, in-store, other real estate Determine approximate share of buy for each player –Subject to change throughout negotiation

19 Submit needs & request plans What you submit varies by network Play your cards carefully –Specify rating point needs OR total budget—not both! –Submission to each network should be a FRACTION of total needs Give them enough info to do their jobs…but not enough to see the total picture –Knowledge is power

20 Evaluate plans and revisions Compare mix and pricing to year-ago benchmarks –Primetime the most labor-intensive analysis: Day of week % of units/TRPs in movies/newsmagazines/reality % in best, worst shows on each network Quarterly presence in each show –Avoid having all of best units in summer –Look at sweeps presence: first-run episodes are best Competitive counter-programming –Is your only unit in The Simpsons running against the Super Bowl? % new shows vs. returning shows –70% failure rate, on average

21 You be the buyer: The Friday Night Dilemma Show A: Genre action-comedy Proven male lead –Cult following Generous production budget All-family fun; likely male skew 7pm airtime (Central) Show B: Genre action-drama Unknown talent in front of & behind the camera Reasonable production budget Adult, conspiracy-driven plot; likely male skew 8pm airtime (Central) Which would you buy?

22 What I did The client: McDonald’s The network: Fox The year: 1992 Chose to heavy-up in show A, based on all- family appeal and proven male lead –Split units roughly 70/30 between the two, hedging bets in case show B proved the winner

23 The Shows Show A Show B

24 Example #2 Show X Sitcom Concept derived from show already proven successful Thursday night time slot on NBC Six attractive NY singles –No “name” talent in front of the camera Show Y Sitcom Concept derived from show already proven successful Thursday night time slot on NBC Six attractive NY singles –No “name” talent in front of the camera Which would you buy?

25 The Shows Show X: Friends Show Y: Coupling

26 Our overall goal: Invest the client’s dollars wisely Similar to a financial advisor Identify opportunities –Undervalued properties –“The next big thing” Manage risk Maximize ROI Build for the future

27 Getting what you need: Negotiation as life skill “You catch more flies with honey…” Respect person on the other side of the desk Discussions based on fact rather than emotion… –…but recognizing the value of emotional “hot buttons” Always recognize the value of long-term relationships over short-term “victories” Remember during a buyers’ market… that it will eventually be a sellers’ market!

28 Once you’re done…be ready to revise Approved plans go to “hold” pending client approval Recommended purchases are presented to client –Subject to input, revision Approved buys are then ordered –But still subject to cancellation options for quarters 1- 3 (two to four quarters out from buy) –Allows client ongoing budget flexibility Additional needs can be purchased in short-term market - try to take advantage of opportunities

29 The network upfront marketplace: What does the future hold?

30 Serious Challenges Personal Video Recorders (PVRs) Video on demand Shifting of power to consumers Lowest-common-denominator programming My own viewing habits

31 The PVR Personal Video Recorders (TiVo, RePlay) allow impressive consumer control over TV viewing –Live pausing –Show title/performer searching –Commercial zapping Up to 77% of viewers zapped commercials during replay Networks’ once closely monitored schedules could soon become a thing of the past - Counter-programming? –Retrieve programs you want and view them when you want Now can do so easily at home with TiVo or Replay Soon will be able to do so remotely on the internet –Does not bode well for the “Suddenly Susan”s of the world Protected time slots no longer relevant

32 The PVR PVR and similar technology will have a massive effect on how planners and buyers behave –Penetration currently very small But growing quickly –Solutions to combat this increased control Content integration Program sponsorship Vignettes Video-on-demand (VOD) testing Tickers Interactive commercial creative

33 Interactive TV: Consumers in control No more couch potatoes –Idea that television is a passive medium is finally shifting Superbowl now fully interactive experience ABC’s version of Who Wants to Be A Millionaire and its Internet companion site early example Viewers determined which contestant on CBS’ Big Brother walked out with $500,000 Game Show Network leading pack in development American Idol still dominating the ratings –TV holds power to motivate viewers to crave more information - tremendous latent power Just the ability to put a website address on an advertiser’s television creative has resulted in immediate sales growth for some categories previously thought stagnant

34 Is the upfront still relevant? Entire network programming model is threatened –Syndication back-end disappearing as reality thrives –More difficult to launch new shows as time-shifting increases Year-round programming cycle increases uncertainty …But consumers still connect passionately with their favorite programs –Need to be smarter about tapping into that passion –Passionate followings aren’t just in primetime…or even exclusive to TV - ex. Gawker Media Group “Old-school” upfront less relevant, but still serves purpose of mapping availabilities and market needs –Will converge with other media (e.g. online) in the near future

35 The bottom line Upfront needs to evolve along with the industry –Take steps now to align buying for the future Discussions need to focus on the real issues –Arbitrary rules of engagement can and will be subverted by cleaver buyers and sellers Ongoing client education is a must –Buyers are the expert advisors…but it’s their money

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