22Television

Charles Warner

What Is Television?Close your eyes and say the word “television” out loud.

What image came into you head? Was it your favorite television program, such as “Game of Thrones” or “Survivor” or “Sunday Night Football?” If you do this exercise with a group of, say, 10 people, how many different answers do you think you might get? Some answers might involve broadcast television network programming, such as “NFL Sunday Night Football” that is free and is supported by advertising. Some answers might involve cable television network programming, such as “Game of Thrones,” that is on HBO and for which subscribers pay a fee each month to be able to watch. Some answers might involve a favorite local television station news program, such as “Eyewitness News at 6:00 p.m.,” which is supported by national and local advertisers and political ads at election time. Some answers might involve programming, such as provided by Netflix, that is delivered to television sets via the Internet and that is accessed on a smart TV or by using a ROKU, Google Chromecast, or Apple TV device.

In other words, “television” is not a single visual entity, it is a video experience that is delivered in several different ways – over-the-air broadcast, cable, satellite, IPTV (Internet Protocol Television), and OTT (Over The Top, or streaming) – and is funded in two different ways – advertising or subscription, and sometimes both.1

There are 120,000,000 homes in America with at least one television set. Approximately 58 percent of those homes have a digital 1 See the Glossary in the Appendix for definitions of Satellite TV, IPTV, and OTT.

video recorder, just over 54 percent of those homes have OTT, and 73 percent of those homes have some form of Pay TV, which is simply television that is delivered via cable, satellite, IPTV, or OTT. Figure 22.1 shows the various Pay TV providers that cumulatively reach 87.2 million homes.

Direct TV Now (Internet delivered)Sling TV (Internet delivered)

Altice Cable)AT&T U-verse (IPTV)

Cox (Cable)FiOS (IPTV)

Dish (Satellite)Charter (Cable)

Direct TV (Satellite)Comcast (Cable)

0 5 10 15 20 25

19.216.6

9.94.5

4.03.73.3

2.4

1.6

In the following sections, we will describe the various types of television and provide some insights into how advertising is sold in ad-supported television.

Broadcast Television Networks

Figure 22.1 Pay TV subscribers in the U.S. (in millions)

22.0

Source: Adapted from Statista. Retrieved from https://www.statista.com/chart/6994/pay-tv-providers -in-the-us

When network television first began in 1947 (NBC and DuMont) and 1948 (CBS), telephone lines connected local television stations that had signed an affiliation contract with a network. In return for carrying network programs on the same day and same time as other stations, a network would pay stations a negotiated fee based on the potential size of an audience a station could reach. Thus, stations in New York, Los Angeles, and Chicago were paid a higher affiliation fees that stations in Pittsburgh, Phoenix or Peoria.

In the 1950s and early 1960s, when television was relatively novel and there were only three networks (ABC, CBS, and NBC), top-rated prime-time (8:00-11:00 p.m. EST) programs such as “I Love Lucy” and “Gunsmoke” would often have a 20 rating, meaning that 20 percent of all the households in America were estimated to watch that particular program. This massive reach into consumers’ households gave advertisers an unprecedented opportunity to reach people with highly effective advertising that employed sight, sound, motion, and emotion in order to persuade consumers to buy products and services.

In the decades before the Internet, because of the enormous reach of network television and the effectiveness of television commercials, prime-time network programs were in high demand, and advertisers would wait in line to sponsor top-rated programs, which garnered higher and higher prices each year. In the 1950s and in the 1960s, due to the strong demand and the relative scarcity of highly rated prime-time commercial inventory, the two top-rated television networks, CBS and NBC, sucked up the vast majority of television advertising dollars. To counter this dominance, in 1962, Oliver Treyz, the president of the low-rated ABC Television Network, decided to premiere all of ABC’s programs in the week after Labor Day to appeal to the Big Three Detroit auto manufacturers that made huge investments in television network advertising and that debuted their new car models the week after Labor Day every year.i ABC’s

programming debut strategy was so successful that CBS and NBC soon followed ABC’s lead ii

But the fall debut of ABC’s new programming was not Treyz’s only innovation. In 1962 ABC had to overcome relatively low ratings as compared to CBS and NBC; therefore, Treyz asked the television rating company, Nielsen, to break down its household ratings into demographic segments that included an 18-49 segment that encompassed younger people that advertisers craved and a demographic that ABC’s youth-oriented programming appealed to.iii Treyz also realized that advertisers were more willing to place bets in the spring on a new program in the coming fall if they had a guarantee of a certain level of viewership for that program. ABC’s new pricing structure was based on how much an advertiser would pay to reach a thousand viewers, and thus the cost-per-thousand (CPM) pricing model was established.iv

The clustering of television networks’ premiere programs in the early fall and the high demand for the commercial inventory in those programs led the three networks to require that advertisers commit the majority of their fall prime-time television ad budgets the previous spring. In return for these early commitments, the networks would guarantee audience rating levels and CPMs and give advertisers a 15 to 40 percent discount off the prices they would have to pay if they purchased the same advertising during the same quarter that the advertising was to run. This quarterly ad purchasing process is known as the scatter market. The process of placing prime-time ad buys in the spring for fall programming is called the upfront market, or Upfront, and persists to the present time.

The Upfronts typically occur in the second and third weeks in May each year when all seven broadcast television networks (ABC, CBS, Fox, NBC, the CW, Univision, and Telemundo) and the major cable television networks trot out their biggest stars and hype their fall

programming lineups. Typically, the broadcast networks sell up to 80 percent of their fall prime-time commercial inventory in the Upfront, and the cable networks sell up to 50 percent of their prime-time inventory. In the past several years the broadcast networks have received rate increases of from 5 to 10 percent over previous years, even in the face of steadily declining ratings, and especially among the advertiser-coveted 18-49 demographic, which declined 38 percent in the five years from 2014-2018 inclusive.v

Why do advertisers continue to pay more for steadily diminishing audiences? There are several reasons, three of which were reported in a 2019 Jack Myers Report: (1) Advertisers believe they get relevant audience reach, (2) advertisers buy from trusted media partners, and (3) they buy in a brand-safe environment.vi Another reason for the continued success of the Upfronts is live sports programming.

Because about 58 percent of American homes use a DVR to record television programs so they can be watched later, and the vast majority of DVR users fast forward through commercials.vii However, research has shown that viewers rarely record live sports programming because they want to see the action and know what the score is in real time, and, therefore will not record sports programming and, thus, will watch in-game commercials. Not only do viewers tend to watch commercials in live sports programming, but also eight of the top-ten rated broadcast network programs in 2018 were NFL games, and the top-rated cable television network program is ESPN’s “Monday Night Football.” Therefore, live sports in general and NFL football in particular are the most sought-after programming by advertisers in the Upfront market, and the networks would have a hard time surviving without NFL programming.viii

Another reason major advertisers continue to pay a little more for television ads that reach fewer people each year is because audiences are more fragmented than ever before and there are fewer

and fewer media vehicles that can reach huge audiences simultaneously. According to Edmund Lee of the New York Times, “In the current cultural climate, programs that millions prefer to watch in real time, in campfire moments of togetherness, have become rare and especially valuable. A viral YouTube video may generate billions of views, but they don’t occur at the same time.”ix

Also, advertisers like the impact of 30-second commercials on network television – commercials that are created to appeal to the broadest swath of consumers as possible. Such mass- appeal commercials are less effective on the Internet where video ads are much shorter. However, even though ads on the Internet allow advertisers to target consumers whose purchases are tracked purchase by purchase, many major advertisers that buy digital advertising programmatically are wary of the Internet’s unregulated content, which can place an ad next to hate speech or other inappropriate content.

Broadcast network television provides advertisers with a guaranteed, regulated, brand-safe environment and continues to be attractive to major advertisers who want to reach a mass audience with 30-second commercials.

How broadcast network television is soldFewer than 50 high-ranking, experienced broadcast television network sales executives and high-ranking advertising agency holding company media executives negotiate about $9 billion worth of advertising in the broadcast network Upfront each year. This relatively small, exclusive group of negotiators, primarily women, have developed a close, trusting personal relationship over the years of dealing with each other. Broadcast network salespeople are the royalty of media selling, and they are the quintessential example of service selling

Upfront deals typically involve a guaranteed CPM based on the audience delivery of a program. For example, a 30-second commercial in CBS’s program “Young Sheldon” would be priced at $213,536.x If an advertiser were guaranteed a CPM of $20 for total viewers, that would mean that if the average audience for “Young Sheldon” for 16 episodes were 11,138,000, the CPM guarantee would be met. See Exhibit 22.1 that shows the CPM calculations.

Exhibit 22.1 “Young Sheldon” CPMs

“Young Sheldon”

Average total viewers = 11,138,000Percent Adults 18-49 in U.S. = 42.3%11,138,000 X .423 = Adults 18-49 viewing “Young Sheldon” = 4,822,7544,822,754 ÷1000 = 4,823Cost of 30-second commercial = $213,536$213,536 ÷4,823 = $44.27 CPM Adults 18-49Average viewers = 11,138,00011,138,000 ÷1000 = 11,13830-second commercial cost = $213,536$213,536 ÷ 11,138 = $19.17 CPM Viewers

Source: Viewer information: “TV Series Finale.” 2018. Retrieved from https://tvseriesfinale.com/tv-show/young-sheldon-season-two-ratings/. Population information: “Now Many Millennials Are There In The U.S. Anyway? (Updated). 2018. Retrieved from : https://www.marketingcharts.com/featured-30401. Cost information: Poggi, Jeannie. 2018. “Here’s How Much It Costs To Advertise in TV’s Biggest Shows.” Retrieved from https://adage.com/article/media/tv-pricing-chart/315120.

Normally Upfront CPM or rating guarantees are considered fulfilled if the actual CPM or rating is within 10 percent of the guarantee. Thus, in the example in Exhibit 22.1, if the guarantee was a $20.00 CPM total viewers and the actual CPM was between $18.00 and $22.00, the CPMs would be within the parameters of the guarantee. If, however, the average viewers of “Young Sheldon” for the 16 programs purchased in an Upfront deal were only 9,000,000, then the CPM would be $23.73, and CBS would owe the advertiser makegoods, or enough free ads to make up for the audience shortfall.

Because of the practice of guarantees in the Upfront market, the networks typically guarantee audience levels that are slightly higher than they expect because they would rather underperform and give advertisers makegoods than overperform their audience estimates, which meant they did not charge enough. Also, typically the networks allow agencies to cancel, often referred to as recapture, up to half of a schedule committed for in the Upfront market.

Fighting the digital duopolyIn 2017, in order to try to quell the switching of television dollars to the two digital advertising Goliaths, Google and Facebook, at least two networks – cable network A&E and broadcast network NBCU – offered a limited number of advertisers guaranteed deals based on business outcomes.xi In A&E’s case the initial business outcomes guarantees focused on the number of website visits or in-store foot traffic to an advertiser’s business.xii A&E worked with Data Plus Math, a television attribution company that attributes business outcomes to commercials, as well as estimates cross-screen exposure of those commercials.xiii NBCU made a deal with STX films to guarantee ticket sales for the movie “The Upside,” starring Bryan Cranston and Kevin Hart. And in 2018 AMC, Discovery, and the Turner cable networks joined the group of networks offering business-outcomes guarantees to a small number of advertisers.xiv

This switch in pricing strategy from guaranteed CPMs and ratings to guaranteed business outcomes is in response to the dominance of Google and Facebook in the advertising ecosystem. As digital advertising revenue overtook television advertising revenue and as marketers began shifting budgets from television to digital because they could attribute ROIs and business outcomes to digital advertising, television networks had to adapt. One of the ways media companies

tried to adapt, in addition to guaranteeing business outcomes, was to restructure their sales organizations in order to aggregate their advertising inventory into one sales organization. For example, NBCU used to have separate television and digital sales staffs, but in 2018 it combined them into one sales organization. That same year the Walt Disney Company, that owns ABC, ESPN, and the Disney cable networks, finalized combining all of the separate sales staffs of those organizations into one sales organization, named Disney Advertising Sales, and put it under the leadership of Rita Ferro, formerly head of ABC Television sales.

Another way that the television networks are adapting is to embrace addressable advertising. In 2018 a consortium of NBCU, CBS, Disney Media Networks, Discovery, AMC Networks, Turner, AT&T’s Xander, Hearst TV, and Comcast’s FreeWheel automated planning, buying, and selling platform, cooperated in an attempt to establish the standards for addressable television advertising.xv

“Addressable advertising has long been ballyhooed as the holy grail of television advertising,” according to a 2019 Ad Age article.xvi However, after a decade of talking about the benefits of being able to target individuals the way digital advertising does, the problems of delivering digital-type individual targeting has been elusive, cumbersome, and controversial. Addressable advertising is delivered to smart television sets that are connected to the Internet and through a set-top box provided by a cable system operator such as Comcast, Spectrum (owned by Charter), or Cox Cable.

However of the 120 million television homes in the U.S. only approximately 44 percent of them can be served addressable advertising through a cable set-top box. And of those 120 million homes, only about 60 percent are connected to the Internet via a broadband Internet service provided by a cable system operator. Those connected television homes can be served ads on other devices

such as smartphones while they are watching television. In other words, in a household with a smart, Internet-connected television set, if a person watching an NFL game is also browsing the Internet on their smartphone (76 percent of people check their email while watching TVxvii), that person can be served a relevant ad on their smartphone --- perhaps a BMW ad just after they watched a Mercedes ad in the NFL game. Because both the smart television and the smartphone are connected to the Internet via a WiFi network, a smart chip in the television set can track all devises on that home’s WiFi network.

This tracking ability scares some people who like their privacy, but advertisers love it because it allows them to serve relevant, targeted advertising and, thus, try to compete with the type of accountability for advertising that Google and Facebook provide.

Nevertheless, some of the networks hesitate to embrace addressable advertising because they would be selling off slices of their total audience to advertisers that only want to reach specific segments of that audience, and that slicing involves a great deal of math and technology. Reluctant networks are afraid that they might not be able to sell enough audience slices to make a profit.xviii

Cable Television NetworksThe first cable television network was HBO, which debuted in 1972 and was distributed by microwave relays to local cable systems. In 1975 HBO became the first satellite distributed cable network. HBO was, and still is, a premium channel, which means that it carries no advertising, and subscribers to local cable systems must pay a premium monthly fee over and above the monthly fee they pay for basic cable service, which in 1975 consisted primarily of channels dedicated to local television stations that were affiliated with the three television networks. In 1976 Ted Turner distributed his local Atlanta

independent UHF television station, WTCG via satellite to local cable systems. Turner subsequently changed the WTCG call sign to WTBS (Turner Broadcasting System), and local cable systems that were typically restricted technologically to 20 channels in the 1970s put WTBS on a basic tier that carried advertising supported programming. In 1977 Pat Robertson’s Christian Broadcasting Network (CBN) became the second ad-supported cable network, followed in 1979 by Nickelodeon, C-Span, and ESPN. Ted Turner’s all-news channel, CNN debuted in 1980 as did BET and the USA network, and in 1981 MTV debuted on August 1.

The business model of these early ad-supported cable television networks was to pay a yearly fee to cable systems to carry them based on the number of subscribers a cable system had, and then the cable networks hoped that they sold enough advertising to cover the fees paid to local systems and give them a profit. However, in January 1983, ESPN President and CEO, Bill Grimes, decided that ESPN, which would lose $41 million in 1982, could no longer afford to pay cable systems $.10 a year per subscriber and would instead ask cable systems to pay ESPN $.10 per month per subscriber.xix

Because of ESPN’s immense popularity among sports fans, local cable systems who were originally reluctant to pay ESPN’s fees eventually did so not only because of ESPN’s popularity but also because ESPN accounted for a majority of local cable systems’ ad revenue that was generated by the systems’ ad sales staffs to local advertisers. Soon MTV, CNN, and other cable networks followed Grimes’s and ESPN’s lead and began charging local cable systems for carriage. This new business model gave cable networks two income streams: per-subscriber carriage fees from local cable systems and advertising revenue.xx

Furthermore, as the technology of cable’s coaxial cables improved and the capacity to carry more signals increased, so did the

number of cable networks. Not only did basic ad-supported networks such as Lifetime, Oxygen, and A&E increase in number, but also premium networks such as the Discovery networks, Disney, and the History Channel increased.

With the proliferation of cable networks and cable television’s penetration into a majority of U.S. homes, in the 1990s viewing to cable television overtook viewing to broadcast television. However, because there are over 100 cable networks and only five English-speaking broadcast networks, even though total viewing to cable television is larger than viewing to broadcast television, viewing to the average broadcast television network program is much larger than to the average cable television network program.

Therefore, in the Upfront, the broadcast networks dominate the calendar because of the greater reach of their programming, especially sports programming, and only the highest-rated cable networks, such as A&E networks and the Viacom networks (Country Music Television, or CMT, Logo, MTV, MTV2, Comedy Central, Nickelodeon, Nick at Nite, VH1, and BET) make Upfront presentations.

Some cable networks are included in the Upfront pitches of their parent companies. For example, MSNBC is included in NBCU’s Upfront presentation, ESPN is included in Disney’s Upfront presentation, and CNN, TBS, and TNT, acquired by AT&T early in 2019, are included in Xander’s (AT&T’s media division) Upfront presentation.

How cable network television is soldWhat is evident in the 2019 Upfront calendar of presentations is how the media is consolidating.xxi For example, ESPN, before 2018, even though it was 80 percent owned by the Walt Disney Company, operated separately, had its own sales force, and made a big splash with its Upfront presentations. However, in 2019, ESPN was included in the Disney Upfront presentation, and its sales force had been

integrated into a Disney Advertising Sales division that included ESPN, ABC Television, FX, the Disney Channel, Disney Junior, the National Geographic Network, and the Freeform network (teenage appeal). Another example of consolidation is Xander Media, AT&T’s media unit that was created when AT&T bought Time Warner, which includes the CNN, TBS, and TNT cable networks.

The same small group of experienced executives and agency negotiators that complete broadcast television Upfront deals worth about $9 billion wrapped up about $11 billion for the cable networks in the Upfront in 2019 for a total television Upfront of about $20 billion, or 29 percent of an estimated $70 billion total television advertising marketplace in 2019.

Syndicated TelevisionSyndicated television consists of two types of programs, first-run and off-network, that are sold to individual local television stations to air exclusively in their markets. Examples of first-run syndicated programs are the game shows “Jeopardy” and “Wheel of Fortune.” These first-run programs are produced specifically to sell directly to local stations and not to a national network. Examples of off-network syndicated programs are the sitcoms “Seinfeld” and “Everybody Loves Raymond.”

The most successful syndicated television program of all time was “The Oprah Winfrey Show,” often referred to simply as “Oprah,” that aired nationally for 25 seasons from September 8, 1986, to May 25, 2011. It remains the highest-rated daytime talk show in American television history.xxii

The syndicated first-run game shows “Jeopardy” and “Wheel of Fortune” typically run on network-affiliated local television stations in the Prime Access time period of 7:00-7:30 p.m. (See Exhibit 22.2 for

television daypart definitions.) Off-network syndicated programs such as “Seinfeld” typically run on independent, non-network-affiliated television stations, in prime time or on Fox- or CW-affiliated stations because those networks provide less prime-time programming than ABC, CBS, or NBC does.Exhibit 22.2 Television daypart definitions.

Daypart Name Daypart DefinitionEarly Morning 5:00 – 9:00 a.m.Morning Daytime 9:00 a.m. – 12:00 p.m.Afternoon Daytime (Eastern Time, Pacific Time)

12:00 – 4:00 p.m.

Afternoon Daytime (Central Time, Mountain Time)

12:00 – 3:00 p.m.

Early Fringe (Eastern Time, Pacific Time) 4:00 – 6:00 p.m.Early Fringe (Central Time, Mountain Time)

3:00 – 5:00 p.m.

Early News (Eastern Time, Pacific Time) 6:00 – 7:00 p.m.Early News (Central Time, Mountain Time) 5:00 – 6:00 p.m.Prime Access (Eastern Time, Pacific Time) 7:00 – 8:00 p.m.Prime Access (Central Time, Mountain Time)

6:00 – 7:00 p.m.

Prime Time (Eastern Time, Pacific Time) 8:00 – 11:00 p.m.Prime Time (Central Time, Mountain Time)

7:00 – 10:00 p.m.

Late News (Eastern Time, Pacific Time) 11:00 – 11:30 p.m.Late News (Central Time, Mountain Time) 10:00 – 10:30 p.m.Late Fringe (Eastern Time, Pacific Time) 11:30 p.m. – 1:00 a.m.Late Fringe (Central Time, Mountain Time)

10:30 p.m. – 12:00 a.m.

Overnight (Eastern Time, Pacific Time) 1:00 – 5:00 a.m.Overnight (Central Time, Mountain Time) 12:00 – 5:00 a.m.

How syndicated programs are soldCommercial time on syndicated programming typically has eight minutes per half hour, and in some cases ten minutes per half hour. Of those eight or ten minutes of commercial time, six or eight of those minutes are sold by a local television station’s local or national sales organization and two minutes are typically sold by the syndicator. A television station might give back to a syndicator the two minutes of

commercial time, and, in return, a syndicator will reduce the cost of licensing a syndicated program to that station.

Broadcast National Spot TelevisionWhen television is bought on a market-by-market basis, not on a network basis, this buying strategy is referred to as spot television. When network television is purchased, the same number of commercials generally run on all television stations affiliated with the network on which the commercials appear. However, a national brand such as MacDonald’s does not have equal sales levels in all of the markets in which commercials on a network appear; therefore, MacDonald’s might want to put more commercial weight in markets where sales are lagging. In such a situation, MacDonald’s would instruct its media agency to buy spot television in those markets where it needs the extra advertising weight.

Spot television buys are placed by agencies by contacting representative companies, called “reps.” National reps are sales organizations that represent local television stations outside of their local markets. All of the major television networks own stations, called O&Os, for owned and operated, in the country’s largest markets, and these O&Os have their own rep organizations, often referred to as CBS TV spot sales or ABC TV spot sales, for example. ABC owns eight television stations, CBS owns 28 television stations, Fox owns 17 stations, NBCU and Telemundo own 40 stations in 28 markets, and Univision owns 27 stations, and all of these televisions station groups have their own national rep organizations.

Non-owned-and-operated stations retain one of two national rep firms: the Katz Television Group and Cox Reps. The Katz Television Group, the largest television rep company, represents 800 local television stations and has offices in 15 U.S. cities. These two national

rep firms sell the vast majority of national spot television in the U.S., and that national spot revenue represents anywhere from 30 to 50 percent of a local television station’s revenue, depending on the size of a station’s market. A station in a large market such as San Francisco would have close to 50 percent or more of its total revenue come from national spot, while a station in a smaller market such as Columbia, MO, would have 30 percent or less of its total revenue come from national spot.

How broadcast national spot television is soldThe broadcast national spot television buying and selling process begins when a media agency buyer calls, emails, or uses and automated online platform to send an RFP to a national rep salesperson. Selling spot television for a rep company is strictly a reactive process. Reps do very little prospecting because rep selling is another example of service selling.

Using the example of a client such as McDonalds, here’s how a spot television buy would happen:

1. A television buyer at OMP, McDonald’s media agency, would call her television rep salesperson at Katz Television and give that salesperson the details of an upcoming spot television campaign and the due date for the rep to submit avails (short for availabilities, or available commercial inventory) in, say, 25 markets. The buyer might indicate that McDonald’s primary target audience is Adults 18-34, and secondary target audience is Men 25-54. The buyer wants Early Morning, Prime Access, and Late Fringe avails, she wants to buy 300 ratings points a week, and proposals are due in one week.

2. The rep salesperson knows the buyer, has a relationship with her because of handling several previous McDonald’s spot buys, and repeats all of the information that he’s been given to confirm

that he understands the parameters of the buy, and then he makes an appointment to see the buyer. The rep salesperson tells the buyer that he represents strong stations in all of the 25 markets she’s buying and that he’d like to have the buyer’s first available appointment. It is this initial request by the rep that emphasizes the importance of having a relationship with the buyer. If the rep salesperson has a good, trusting relationship with the buyer, the rep can probably get the buyer’s first available appointment, which is important because the rep knows that the first call will more than likely be the most memorable (remember the concepts of primacy and recency) and it also gives the rep the opportunity to advocate for also being able to come back after other reps have presented in order to adjust the offering to make the buy even better for the buyer.

3. The rep salesperson then submits all the information into automated software programs that are connected to the inventory-control and yield-management software platforms at all of the Katz-represented television stations. These software platforms are essentially SSPs (supply-side platforms) that automatically show what inventory is available, what the ratings are for each avail, and what the suggested price ranges are. The rating information is typically based on Nielsen, although more and more stations are now subscribing to comScore ratings.

4. After the software automatically generates avails and pricing, the rep salesperson typically calls a local television station’s National Sales Manager (NSM), whose job is to interact with a station’s national rep firm and strategize on how to best secure national spot business.

5. The NSM will typically update the rep salesperson on current programming, upcoming special events, and added-value opportunities such as sponsorships or promotions that are

available. The NSM is aware of a station’s current daypart sell-out levels, current demand for each daypart based on outstanding avail requests and proposals, and what pricing levels have the best possibility for clearance. The SSP software reports that the NSM refers to keep track of every local and national proposal that is pending, thus giving the NSM a good barometer on demand on the station’s inventory. The software also analyzes historic demand patterns as well, and, thus, can recommend pricing levels based on past and current demand and current ratings for each avail.

6. Once the rep salesperson has discussed pricing strategy and programming or added-value opportunities with each station’s NSM, if time permits such discussions, the salesperson will input the information into another software platform that generates a specific proposal for the McDonald’s spot buy.

7. Next, the salesperson or a salesperson’s coordinator creates a presentation that includes the proposal and its benefits and advantages to present to the buyer.

8. In the typical 10-minute meeting with the buyer, the rep salesperson uses the presentation as an opening for the negotiating that inevitably follows in subsequent calls.xxiii

Because there is fixed supply of desirable television station commercial inventory, the price of that inventory fluctuates according to demand. Therefore, television rates are highest when demand is highest in the fourth quarter (October, November, and December) and second quarter (April, May, and June) of the year. When demand determines the price of a scarce resource, prices will always be negotiable. In digital advertising, negotiating is typically handled programmatically via real-time bidding (RTB) in which algorithms bid on individual impressions for a specific consumer who is defined by

multiple data points. But in spot television, the buyer is not buying impression by impression, but is buying exposure opportunities to a broad demographic, such as Adults 18-34.

Let’s assume the buyer has a budget for 300 rating points per week per market in 25 markets for a four-week flight. Let’s assume that the cost-per-rating-point (CPP) in one of the Katz Television markets the buyer is buying is $300, which would mean that the buyer’s budget in that market would be $90,000 per week, or a total of $360,000 for four weeks. Let’s also assume that the four weeks are in the high-demand month of June. The rep salesperson’s job is to try to get as high percentage of that $360,000 budget as realistically possible. Therefore, the rep salesperson would price the three proposals offered (remember Chapter 12: Proposing) in such as way as to give to give the buyer a better price for getting a higher share of the budget.

“Realistically” is the key word in the sentence in the above paragraph, “The rep salesperson’s job is to try to get as high percentage of that $360,000 budget as realistically possible.” What is realistic from the buyer’s perspective is different from what is considered realistic from the represented station’s perspective, which is different from the rep salesperson’s perspective of what is realistic.

These dilemmas make rep selling particularly challenging. A rep’s customers are the stations they represent, because the stations give rep companies a commission on all business it sells. A rep’s consumers are the agencies they sell to. A station’s ideal outcome would be to get 100 percent of every national spot television buy at the highest possible rates. An agency buyer’s ideal outcome would be to give a station a share of budget in line with a station’s share of audience in the demo requested and at the lowest possible rates. A rep salesperson’s job is make both the customer (a station) and the consumer (an agency) feel like they got a good deal.

Therefore, a rep salesperson’s challenge is to lower both the expectations of the station’s NSM for getting a 100 percent share of budget and high rates and of the buyer of getting low rates. Trust is the key to success. A station’s NSM must trust the salesperson to get the best deal possible for the station and a buyer must trust the salesperson to get the best rates possible in light of demand in the market.

When negotiating, a rep salesperson must keep in mind the agency buyer’s goals of: (1) getting low rates, (2) getting the favorable first position in a commercial pod, (3) getting added value such as bonus (free) spots or opening or closing billboards for a program or event sponsorship, (4) social media support, (5) station contact with or entertainment of local clients (in the case of a MacDonald’s spot buy, entertaining the owner of one or several local MacDonald’s franchises), and, probably most important, (6) 100 percent posting.2 The rep salesperson must also balance the buyer’s goals with the represented station’s goals: (1) getting a high share of the budget, (2) getting high rates, (3) having maximum flexibility to move and preempt spots, (4) giving no added value such a bonus spots, sponsorships, or local client entertainment.3

2 The term posting refers to a post-buy affidavit that an agency receives from a station that shows the exact dates and times that each commercial in a campaign ran. For example, if the buyer for the MacDonald’s campaign bought 20 spots a week on a station equally distributed in the Early Morning, Early News, Prime Access, and Late News time periods and the affidavit showed that all 20 spots ran equally distributed in all four time periods, the buyer would be pleased because she “posted 100 percent.” Sending the affidavits and checking them against what was purchased are all done electronically.3 Flexibility to move spots anywhere in a pod of commercials, to move spots within programming or in a time period, and to preempt spots is important to television station sales management in order to maximize revenue. Preempting spots means moving them from the program or time period initially purchased to another time period to make way for a spot that has been purchased at a higher rate. For example, a spot purchased in Early News with a 3.0 rating might be preempted for a higher-priced spot and the advertiser given three makegood spots in Early Morning with a 1.0 rating.

Because the experience levels of agency media buyers vary dramatically from highly experienced, tough negotiators to young, relatively inexperienced, underpaid, and overworked, an effective national rep salesperson must be flexible enough to be a tough, effective negotiator as well as a nurturing educator, depending on the situation and how experienced a media buyer is.

Cable National Spot TelevisionThe process for selling cable national spot television is essentially the same as selling broadcast national spot television with one major exception: There is essentially only one cable national spot rep firm – NCC Media. NCC Media was founded as National Cable Communications in 1981 to represent local cable systems, cable interconnects, satellite and telco (FiOS and AT&TU-verse, for example) service on a national level.

The process of buying cable national spot is essentially the same as the process of buying broadcast national spot with the exception that buying spot cable is somewhat more complicated because there opportunities to buy more targeted ads because most cable and satellite (multichannel video program distributors (MVPDs) offer set-top-box addressable advertising which can target ads to homes such as to new car buying intenders or to homes in upscale ZIP codes.

Broadcast Local TelevisionThere are 1,373 commercial television stations in the U.S. – 1006 UHF stations and 367 VHF stations.xxiv UHF stands for ultra high frequency and includes channels 14-69 on the electromagnetic spectrum. VHF stands for very high frequency and includes channels 2-13 on the electromagnetic spectrum. These commercial television stations are located in 210 designated market areas (DMAs) as defined by Nielsen,

which essentially include the population and homes within, roughly, a 75-mile radius of television station transmitters. Of those 210 DMAs, in 56 Nielsen has meters installed in a sample of homes. These meters collect data on who in the home is watching television on what set, on what channel, and for how long they watch. This data is electronically transferred every night to a Nielsen data center in Florida. Nielsen algorithms aggregate the data and next day produce overnight quarter-hour ratings for each station in metered markets.xxv

To learn more about how the Nielsen ratings work, go to the Nielsen Ratings Academy online at http://ratingsacademy.nielsen.com/television-101/.

Markets are typically identified by the largest city, which is usually located in the center of the market region. However, geography and the fact that some metropolitan areas have large cities separated by some distance can make markets have unusual shapes and result in two, three, or more names being used to identify a single region (such as Wichita-Hutchinson, Kansas; Chico-Redding, California; Albany-Schenectady-Troy, New York; and Harrisburg-Lebanon-Lancaster-York, Pennsylvania.xxvi

How broadcast local television is soldBroadcast and cable networks, syndicated television, and national spot television are not the only media that are fighting the digital duopoly. Local television stations are also experiencing revenue declines because more and more local advertisers are switching their advertising budgets to Google and Facebook.

A headline in the April 3, 2019,TV News Check read “Facebook, Google Dominate Local Ad Market.” The TVN article further stated:

Broadcasters wondering where local advertising dollars are going need only to click on Facebook. Since 2012, when the social media giant began offering

simple do-it-yourself ad buying, it has “blossomed into the most popular form of local marketing” with 24 consecutive quarters of 30% growth or more, according to a new report from Borrell Associates, 2019 Benchmarking Local Media’s Digital Revenues.

“Those expecting the social media juggernaut to collapse due to data breaches, fake news and reports of click fraud may have more hope than reality in their expectations,” the report says.xxvii

The article also reports than 74 percent of local ad buyers surveyed said that they felt Facebook was moderately to extremely effective, and that local ad agencies felt even stronger as 85 percent rated Facebook as moderately to extremely effective. The article also reports that digital-only media surged to nearly $60 billion in local revenue in 2018 and that Google and Facebook accounted for more than 70 percent of that total.

What strategies can local television station sales management employ to counteract both steadily declining ad revenue that goes to the duopoly? This is a question I asked Tim Warner (no relation), Director of Sales of WTHR-TV in Indianapolis. The reason I talked to Tim is because when I interviewed Leo MacCourtney, President of the Katz Television Group, I asked MacCourtney which of the 800+ television stations that Katz represented had the best sales management. “WTHR-TV in Indianapolis,” was his immediate answer.

WTHR-TV on channel 13 is the NBC-affiliated station in the country’s number 28 DMA, which has approximately one million television homes.xxviii Reporting to Director of Sales, Tim Warner, are a Research Director, a Local Sales Manager, a National Sales Manager, and a Digital Sales Manager. WTHR-TV has 11 salespeople (six females and five males) and one digital salesperson (the Digital Sales Manger), all of whom account for 55 percent of the station’s revenue (national spot accounts for 45 percent). Seven of the 11 salespeople

call on local advertising agencies and four salespeople focus on calling direct on clients.

The WTHR-TV salespeople are paid a relatively low base salary plus a percent commission on everything they sell. They get three times the base commission percentage for selling new business and three times the base commission percentage for selling digital inventory on the station’s website, on its diginets, and in its weather and its traffic apps.4 The salespeople also receive quarterly and yearly bonuses based on hitting their digital, diginets such as MeTV, new business, and overall station budgets, or revenue goals. I mention how the WTHR-TV salespeople are compensated because it is an example of the principle that sales compensation should reflect the overall sales strategy of an organization, and as the sales strategy changes, such as emphasizing the sale of digital inventory, compensation should be adjusted.

The salespeople use the Matrix CRM software system to manage their interactions and communications with their accounts and the WideOrbit software system that empowers television sales teams to build proposals with a full suite of tools leveraging real-time account information, inventory availability, and audience research and delivery of both linear and digital inventory. xxix

Sales management assigns accounts according to relationships. The WTHR-TV salespeople have developed strong relationships over the yeas with local advertisers, and Director of Sales, Tim Warner, believes that those relationships are the best weapons the station has in fighting the competition from Google and Facebook. The WTHR-TV Account Executives are marketing experts who their accounts trust to get results for them with television and digital ads. Furthermore, the salespeople are also experts in selling special events such as the

4 See the Glossary in the Appendix for a description of a diginet.

Olympics on NBC and locally produced events such as Prince Harry and Meghan Markle’s Royal wedding.5

In my interview of Director of Sales Warner, he gave me his view of the advantages of being a local television salesperson: (1) They do very well financially (low-to-mid six-figures); (2) learn to sell digital as well television ads, because, eventually, all advertising will be digital; (3) not tied to a desk all day; (4) call on a wide variety of accounts and people, thus learning how to deal with and empathize with a diverse range of personalities; (5) can be quite creative in ways to get results for clients; and (6) learn about a wide variety of businesses. This list of advantages is as good a reminder as I know of as to the advantages of being a media salesperson.

Cable Local TelevisionMultiple systems operators (MSOs), typically referred to as MVPDs, also have sales staffs calling on local advertisers. The sales process and the software used for selling cable local television is largely the same as selling broadcast local television.

The cable networks typically give local systems one two-minute break, or pod, per hour to sell locally. Therefore, local cable salespeople are selling ads in Fox News, ESPN, and CNN programming. But because there are up to 500 channels or more on most cable systems, the local cable audience is fragmented and the ratings of all but the most poplar cable networks such as Fox News, MSNBC, HGTV, TNT, USA, ESPN, CNN, Discovery, and Hallmark are so low that there is not much demand for ads in them. Therefore, with the scarcity 5 WTHR-TV sent a crew to London to cover the Royal Wedding in May, 2018. It is unusual for a local television station in the middle of the United States to send a production crew so far away to cover any event, but WTHR-TV has a tradition of covering such special evens and selling coverage to local advertisers. Tim Warner indicated that, even though the coverage was expensive, the station made a profit, which is a tribute to the local sales staff.

principle not applicable, prices for local cable are much lower than those for local broadcast stations. Low ad rates mean less revenue and, thus, low commissions for salespeople.

On the other hand, if you are trying to break into media sales, selling for a local cable system is an excellent place to start, learn the business, and begin to build relationships with local advertisers and agencies.

Test Yourself1. How may television homes are there in the U.S. in 2019?2. What is the Upfront?3. What are three reasons why advertisers pay more for declining

ratings on broadcast network television?4. What percent of U.S. television homes have DVRs?5. Why is NFL football so important to television networks?6. What are makegoods?7. What were the first two networks to guarantee business

outcomes to advertisers?8. What was the first cable television network?9. What are the two types of syndicated television programs?10. What is spot television?11. How many DMAs are there in the U.S.?12. What is a diginet? 13. Give four examples of diginet programming.

ProjectFirst, go to the Research section on the TvB (“Local Media Marketing Solutions”) website (https://www.tvb.org/Research.aspx) and on the

drop-down menu click on the following selections: Purchase Funnel 2019, Media Comparison Study, Seasonal Retail Reports, Competitive Media, and Measurement. Next, from the information in those sections create a PowerPoint presentation to sell a Back-To-School promotion to a department store for a local television station WAAA-TV (fictitious station). Your presentation should be at least ten slides and not more than 20 slides.

ResourcesAd Age (formerly Advertising Age) https://adage.com/

Nielsen Ratings Academy (http://ratingsacademy.nielsen.com/television-

101/)

Nielsen DMAs (https://mediatracks.com/resources/nielsen-dma-rankings-2019/)

Television Bureau of Advertising (TvB) (https://www.tvb.org/default.aspx)

Video Bureau of Advertising (VAB – formerly Cable Television Bureau of

Advertising) https://thevab.com/

Notes

i MediaVillage. 2019. “History’s Moment in Media: How ‘Upfront’ Became a Noun Over Decades of Ad Sales Innovation.” Retrieved from https://www.mediavillage.com/article/historys-moment-in-media-how-upfront-became-a-noun-over-decades-of-ad-sales-innovation/

ii Ibid.iii Ibid. iv Ibid.v Lee, Edmund. 2019. “As TV Industry’s $20 billion Week Starts, Signs That Streaming Isn’t King

Yet.” Retrieved from https://www.nytimes.com/2019/05/12/business/media/network-upfronts-televisio-streaming-advertising.html.

vi Myers, Jack. 2019. “Upfront 2019: Look for This Canary in the Coal Mine.” https://www.mediavillage.com/article/upfront-2019-look-for-this-canary-in-the-coal-mine/

vii eMarketer. 2019. “The Shelf Life of TV Ads, And Now DVRs Might Be Wasting Money.” Retrieved from https://soundcloud.com/behind-the-numbers/the-shelf-life-of-tv-ads-and-how-dvrs-might-be-wasting-money-may-13-2019.

viii Crupi, Anthony. 2019. “Network TV Can’t Survive Without the NFL.” Retrieved from: https://adage.com/article/media/top-50-u-s-broadcasts-2018/316102

ix Lee, Edmund. 2019. “As TB Industry’s $20 billion Week Starts, Signs That Streaming Isn’t King Yet.” Retrieved from https://www.nytimes.com/2019/05/12/business/media/network-upfronts-televisio-streaming-advertising.html.

x “Here’s Now Much It Costs To Advertise in TV’s Biggest Shows.” 2018. Retrieved from https://adage.com/article/media/tv-pricing-chart/315120

xi Friedman, Wayne. 2018. “A&E Offers Limited Guarantee Deals Based on Business Outcomes.” Retrieve from https://www.mediapost.com/publications/article/318976/ae-offers-limited-guarantee-deals-based-on-busine.html.

xii Ibid.xiii Ibid.xiv Poggi, Jeanine. 2018. “How To Navigate TV Attribution.” Retrieved from

https://adage.com/article/media/navigate-tv-attribution/317005xv Poggi, Jeanine. 2019. “TV Net Tackle Addressable Advertising.” Retrieved from

https://adage.com/article/media/tv-networks-partner-standardize-addressable-advertising/316937

xvi Ibid.xvii “Most popular smartphone activities of second screen users in the United States while

watching TV as of January 2019.” Retrieved from https://www.statista.com/statistics/455377/smartphone-usage-while-watching-tv/.

xviii Wolk, Alan. 2018. “The Upfronts: Where Do We Go From Here?” Retrieved from https://www.firbes.com/sites/alanwolk/2018/05/14/the-upfronts-where-do-we-go-from-here/#6a48391f5665.

xix Parsons, Patrick. 2008. Blue Skies: A History of Cable Television. Temple University Press.xx Ibid.xxi “TV Upfront 2019 Calendar: The Latest Updates.” 2019. Retrieved from

https://adage.com/article/special-report-tv-upfront/tv-upfront-digital-newfront-2019-calendar/316640

xxii https://en.wikipedia.org/wiki/The_Oprah_Winfrey_Showxxiii Personal conversation with Leo MacCourtney, President, Katz Television Group, April, 2019.xxiv FCC. “Broadcast Station Totals as of December 31, 2019.” Retrieved from

https://www.fcc.gov/document/broadcast-station-totals-december-31-2018xxv http://en-us.nielsen.com/sitelets/cls/documents/nielsen/Local-Measurement-Methodology-Ex.pdfxxvi https://en.wikipedia.org/wiki/Media_marketxxvii TVN. 2018. “Facebook, Google Dominant In Local Ad Market.” Retrieved from

https://tvnewscheck.com/article/233267/facebook-google-dominate-in-local-ad-market/

xxviii MediaTracks Communications. 2019. “Nielsen DMA Rankings 2019.” Retrieved from https://mediatracks.com/resources/nielsen-dma-rankings-2019/.

xxix https://www.wideorbit.com/products/