Exposing the Emperor

I see the Emperor still has everyone convinced his clothes are the most beautiful ever seen. The strength of the recently completed annual upfront market, in which advertisers buy advertising time for broadcast’s fall prime-time season, proves that media buyers are still quick to believe the yarn broadcast executives are spinning.

You may remember my column “Fluffing the Numbers,” which appeared a few months ago. In it I discussed the techniques broadcast networks use to inflate their ratings and skew their demographic profiles in an attempt to drive increases in their advertising sales. Now that the upfront period is over, it’s clear the broadcast networks achieved their objectives. After initially estimating that upfront ad sales would show a single-digit percentage increase over the $8.2 billion garnered in 2002, broadcast networks are now reporting a 13 percent increase to a dizzying $9.3 billion. NBC led the pack, with commitments of approximately $3.0 billion, followed by CBS ($2.2 billion), ABC ($1.7 billion), and Fox ($1.6 billion).

As a further indicator of just how strong the upfront market was this year, when upfront began in May, The Wall Street Journal reported it was moving more quickly than expected, saying though the dealmaking can last for weeks in a soft ad market, this year the upfront was expected to conclude in just a few days. Seemed media buyers were anxious to make sure the Emperor knew how beautiful his clothes really were.

What I find difficult to understand is all this hoopla and hard cash is surrounding a media sector, broadcast television, which has consistently lost market share over the last decade. It is well documented cable television has been eating away at broadcast television ratings since the early 1990s and the rise of the Internet has led consumers to shift leisure time from the tube to the monitor. In fact, the Journal noted the total audience watching broadcast networks was flat this year, after declining in previous years. So media buyers are increasing their broadcast television spending 13 percent while viewership remains flat? Is flat viewership really something at which to throw gobs of money?

And to what does the Journal attribute the reversal of the downward trend in broadcast television ratings? Our good friends the reality shows get the credit, and television executives openly admitted the ploy. In fact, the television programs that drew the top three television audiences so far this year, according to the Journal, were the Super Bowl, the finale of “Joe Millionaire,” and the finale of “American Idol.” Reality shows such as “Joe Millionaire” and “American Idol” not only draw huge audiences but also hoards of viewers in the 18 to 49 age bracket so coveted by advertisers. So we’re back to fluffing the numbers.

Broadcast television has managed to keep its viewership flat and make its demographics more attractive by spawning short-term reality shows that provide bursts of the right audiences. Media buyers respond by filling the coffers of advertising sales executives to the rim with $9.3 billion. The Emperor’s clothes are made of an extraordinary fabric; he looks wonderful in his suit, doesn’t he?

Broadcast television’s gains have come at the expense of other media sectors. In other words, this is not a rising tide that is lifting all boats. Instead, this appears to be a zero-sum game where money is moved to broadcast from other media entities. The New York Times made the point succinctly last week, saying:

Some advertising executives say they believe that marketers, having agreed to spend more than they had budgeted for TV, will have to cut back on spending in other realms like print, radio, direct marketing, the Internet, and outdoor advertising.

My apocalyptic view notwithstanding, online media properties shouldn’t give up hope. Although the Interactive Advertising Bureau (IAB) says online advertising revenue declined to 2.5 percent of total advertising spending in 2002 from 3.1 percent in 2001, some marketers’ interest in online advertising is increasing. A Nielsen//NetRatings study released earlier this year noted although traditional Web advertisers only spent 2 to 2.5 percent of their advertising budgets online, some were increasing those percentages up to 10 percent for 2003. Charles Buchwalter, vice president for client analytics for Nielsen//NetRatings said, “The lion’s share of the cautious optimism that’s being felt through the online space is due largely to the traditional advertisers who are learning to reach critical segments who spend their time online.” Just last week Goldman Sachs revised its projection for total online advertising expenditure upwards by nearly 10 percent, based on positive comments made by online media companies at one of the banker’s conferences.

Maybe some media buyers are beginning to recognize the value offered by online advertising. How much longer will it take until a media buyer announces the broadcast networks are naked? And more important, once the secret is out of the closet, will other media buyers repeat the cry? As far as online advertising is concerned, the sooner the better.