Next month is the annual parade of network TV presentations and parties where the networks pre-screen their September TV schedules for the marketing and advertising community. As important as what their upcoming content may be it also signifies the beginning of one of the oddest behaviors from otherwise intelligent people; investing billions of dollars in schedules before marketing plans are developed.
Whose idea was this anyway? It’s no secret that this process favors the sellers more than the buyers for a number of reasons.
1) Let’s start with the macro-economic look; creating demand for a diminishing supply of “goods” only leads to pricing increases. Think about this, who else can take a diminishing commodity—in this case TV GRP’s—and actually drive up the pricing? If TV rating points are decreasing why are CPM’s increasing? Because marketers are addicted to TV. Because many brand managers are evaluated on how well the brand does under their tenure vs. the prior period year ago. If a brand purchased 75 TV GRP’s same week last year they better have a good reason to not buy 75 GRP’s this year. So assuming they needed 30 units last year to achieve 75 GRP’s they need to buy more units this year. Even one more unit creates more demand because everyone needs to buy more units—and there is no incentive for the networks to add more commercial units, if anything they are reducing it thereby creating additional stress on supply. More demand for a diminishing supply means unit price increases.
2) Agencies don’t negotiate pricing of units, they negotiate price increases. Ask any TV buyer what their thoughts are for the upcoming market and they will talk about how much of an increase there will be. What kind of market is framed from the beginning this way? One that is designed to favor the seller.
3) Sellers walk away from this process with a certain amount of guaranteed sold inventory, even if every marketer exercises their options more than half their inventory for the year is committed to. Why does this hurt marketers? Because they cannot allocate resources to other marketing channels. Should a brand’s budget be cut how committed is the budget to radio? To digital? To print? To OOH? These media are the ones to get cut when budgets are reduced because the sellers don’t have a marketplace working to their advantage.
4) It breeds mediocrity in programming and risk taking by marketers. Aside from a few great shows what incentive does a TV network have to create 100% truly groundbreaking programming? They are better off feeding the status quo. Marketers are forced to decide between promising mediocre, estimable results than pushing for innovation.
Why am I bothering. Nothing will change. Marketers will get caught up in the frenzy and this year’s upfront will take in over $9.5 billion dollars.