The current sales process for the television broadcast industry is inefficient due to the many layers of personnel involved making it a prime opportunity for a more efficient online sales mechanism, like a digital dashboard. However, these layers also represent entrenched interests which would likely challenge any migration to a system that excludes them.
What is the “digital dashboard”?
A digital dashboard would give advertisers and agencies one digital platform through which to buy advertising, both online and off (television, radio, mobile, print, etc.) and manage their advertising assets. The platform would be used to better manage, target and measure the traditional media advertising that flowed through the digital dashboard platform. As more advertising becomes digital, advertisers would be able to house and manage all their digital assets through one platform; managing, deploying, targeting, and measuring the effectiveness.
Television Advertising Industry Fundamentals:
Current analog process is inefficient and involves many interests.
Slow movement towards selling ads via online.
Current analog process is inefficient and involves many interests.
Slow movement towards selling ads via online.
Catalysts to Digital Dashboard:
Current system is expensive, involves a lot of people.
Easier-to-use digital platform could attract new advertisers.
Current system is expensive, involves a lot of people.
Easier-to-use digital platform could attract new advertisers.
Challenges to Digital Dashboard:
Entrenched system employing a lot of people vested in keeping it unchanged.
Networks protective of their inventory (especially broadcast primetime).
Entrenched system employing a lot of people vested in keeping it unchanged.
Networks protective of their inventory (especially broadcast primetime).
Television’s Current Advertising Sales Process
The television advertising market includes in-season broadcast primetime programming, out-of-season broadcast primetime programming, other broadcast dayparts, and cable network programming. Advertising is sold by both the networks and, in the case of broadcast television, local stations. The entire television market is expected to generate $74 billion in 2007 revenue or 25% of the entire U.S. advertising market.
The television advertising market includes in-season broadcast primetime programming, out-of-season broadcast primetime programming, other broadcast dayparts, and cable network programming. Advertising is sold by both the networks and, in the case of broadcast television, local stations. The entire television market is expected to generate $74 billion in 2007 revenue or 25% of the entire U.S. advertising market.
Primetime Broadcast
The traditional broadcast primetime television season begins in September of each year and runs into May of the following year. Advertising buying for television season is sold through two processes: premarket sales, referred to as the "upfront," which account for approximately 80% of advertising sales and open market sales, referred to as "scatter," which are sold close to the program air date. The broadcast upfront takes place in the spring of each year, when networks introduce their fall lineups. Network primetime television is primarily sold at the network level.
The traditional broadcast primetime television season begins in September of each year and runs into May of the following year. Advertising buying for television season is sold through two processes: premarket sales, referred to as the "upfront," which account for approximately 80% of advertising sales and open market sales, referred to as "scatter," which are sold close to the program air date. The broadcast upfront takes place in the spring of each year, when networks introduce their fall lineups. Network primetime television is primarily sold at the network level.
Summer Programming & Non-Primetime Dayparts
Out of season network programming (summer months), and other dayparts are sold through a similar process, but by different specialists. Out-of-season is typically sold in the scatter market by the networks while other dayparts are typically sold at the local station level. All upfront segments including primetime, other network dayparts and cable accounts for approximately 25%-30% of total television and cable advertising sales.
Out of season network programming (summer months), and other dayparts are sold through a similar process, but by different specialists. Out-of-season is typically sold in the scatter market by the networks while other dayparts are typically sold at the local station level. All upfront segments including primetime, other network dayparts and cable accounts for approximately 25%-30% of total television and cable advertising sales.
Cable Network Programming
Cable network programming follows a similar process, but is more reliant on the scatter market. Cable networks sell approximately 50% of their inventory during an upfront process with the balance sold in the scatter market. Cable network programming accounts for approximately 36% of total television advertising sales this year.
Cable network programming follows a similar process, but is more reliant on the scatter market. Cable networks sell approximately 50% of their inventory during an upfront process with the balance sold in the scatter market. Cable network programming accounts for approximately 36% of total television advertising sales this year.
Current Process Reveals Potential for Online Television Ad Sales
Currently, an immaterial amount of television advertising sales are done online, with the process generally facilitated by personal relationships. Traditionally, both the upfront and scatter sales processes involve numerous layers of buyers and sellers that pitch programs, negotiate rates and manage inventory. The large degree of human interaction appears unnecessary given the relative commodity status of the final product: viewers. However, this is an entrenched process that would require a significant change in philosophy to see a meaningful shift to an Internet-based process. Local sales and scatter sales would be most likely to shift to on online process, followed by cable network programming with primetime broadcast the last to shift.
Currently, an immaterial amount of television advertising sales are done online, with the process generally facilitated by personal relationships. Traditionally, both the upfront and scatter sales processes involve numerous layers of buyers and sellers that pitch programs, negotiate rates and manage inventory. The large degree of human interaction appears unnecessary given the relative commodity status of the final product: viewers. However, this is an entrenched process that would require a significant change in philosophy to see a meaningful shift to an Internet-based process. Local sales and scatter sales would be most likely to shift to on online process, followed by cable network programming with primetime broadcast the last to shift.
Recent Steps toward Digital Sales are Small, but Significant
Recently, new entrants have looked to online as a way to sell advertising. In April 2007, EchoStar gave Google partial access to its inventory to create an automated system for selling, delivering and measuring impact of TV ads. This deal was not only low-value remnant inventory and included an interactive component. Another current seller of online ads is SpotRunner, which launched an Internet based ad agency in January 2006 that allows local advertisers to digitally create and buy ads to air on cable television. SpotRunner’s focus on cheap local ads highlights another opportunity for a digital dashboard, attracting new advertisers by opening up and simplifying the process. These are early steps toward digital sales of television advertising.
Recently, new entrants have looked to online as a way to sell advertising. In April 2007, EchoStar gave Google partial access to its inventory to create an automated system for selling, delivering and measuring impact of TV ads. This deal was not only low-value remnant inventory and included an interactive component. Another current seller of online ads is SpotRunner, which launched an Internet based ad agency in January 2006 that allows local advertisers to digitally create and buy ads to air on cable television. SpotRunner’s focus on cheap local ads highlights another opportunity for a digital dashboard, attracting new advertisers by opening up and simplifying the process. These are early steps toward digital sales of television advertising.
Economic Opportunity Should Pressure Migration to Digital Sales
A digital dashboard-type sales model for television advertising represents a solid economic opportunity for the broadcasters and cable network, but the migration could take a long time. However, the more aggressive the dashboard facilitators are in showing the economic benefits of online sales, the more pressure there will be on content providers and advertisers to start the transition to a new system.
A digital dashboard-type sales model for television advertising represents a solid economic opportunity for the broadcasters and cable network, but the migration could take a long time. However, the more aggressive the dashboard facilitators are in showing the economic benefits of online sales, the more pressure there will be on content providers and advertisers to start the transition to a new system.
Thanks UBS Research, November 2007
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