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Is Television in Dire Straits?

November 16, 2014

by Bart Brassil

I was recently listening to Marc Knopfler’s iconic guitar riff for Dire Straight’s, “Money for Nothing,” and it made me think about the changing landscape of TV. The song’s MTV video aired in a time when cable was pretty cheap - almost free - since the impressions and CPMs were so low. As the very first computer-generated music video, it was groundbreaking; even though Marc Knopfler was anti-video, Warner Brothers insisted on using computer-animated characters, and it ultimately went on to win MTV’s Video of the Year.

Times have changed since then. Music videos have largely become a thing of the past, and CPMs are significantly higher across the board. The TV landscape is changing, and regardless of what Knopfler wants you to believe, nothing in this world is free.  

A new industry trend, developing over the last two years, is the move to monetize impressions that traditionally have been “free.”  With the convergence of the linear television and digital inventories, content owners are finding creative ways to save precious inventory and increase the value of previously cheaper inventory. The national broadcasters’ deals go by many different names: CW uses the term “convergence” deals; ABC calls its offerings “Unified”, CBS uses “Fluidity”, and NBC has “Flex ADUs” (“Flexible Audience Deficiency Units”). And the cable networks are just around the corner, getting ready to offer similar deals.

What’s at stake here?  A fundamental change to how guaranteed deals are met by the vendors. Previously, when a deal did not meet the agreed-upon guaranteed CPM level for their target, the vendors had to offer free linear units as makegoods.  This caused a potential waste of linear inventory.  For example, if the network had to make up 5 rating points to achieve the guarantee, the audience deficiency units (ADUs) offered may actually deliver above the 5 rating points, thereby wasting the limited supply of units (and impressions) available for sale. 

This is where digital inventory becomes very useful.  The networks can literally deliver the exact number of impressions (GRPs) missed by serving them online, and, once met, immediately stop serving commercials for that advertiser/brand.  Not only do they achieve the guarantee of the deal using previously less expensive inventory priced at higher CPMs, but they also retain those perishable linear units for sale in the scatter market.  The networks have extended their initial foray into online makegoods and have begun to create annual deals based on this model.  For example, an ABC “Unified” deal will provide “an annual guarantee on a single demographic against the total number of demo impressions purchased by an advertiser, across all screens/platforms, at a contract level.  Guarantees are not offered at the brand, flight or platform level.”  

Some networks essentially say that if a certain percentage of impressions can be delivered online outright, or if the linear part of the deal does not meet the guarantee, those impressions go straight to the digital inventory to provide delivery.  They embed the “Flex ADUs” right from the start, knowing they will under-deliver.  Less expensive impressions just became more valuable from the vendor’s point of view.

Given all this, the question remains: is television in “dire straits”?  According to Nielsen, television viewership is still increasing, with over 60 hours watched per week in a household.  Yes, there have been some decreases in age groups like teens and 18-24 year olds, the latter having either cut the cord or only using OTT (over the top) to receive their content, but the vast majority still watch linear content instead of digital or mobile.  Yes, there is fragmentation, but with the networks adapting to these changes to make sure they follow the viewer wherever they go, and monetizing these impressions at linear prices, television is not in “dire straits”. 

However, this leaves a challenge for the linear buyers: they now have to adapt to the digital world and manage online video throughout the entire buy workflow and report that back to their advertisers.  This is where Mediaocean steps in to meet that challenge. We develop the proper workflow tools that meet the needs of these converged deals, so our users can flex their muscles seamlessly across platforms.