Four People Who Will Move the Upfront

Billions of dollars in ad commitments will be made at this year’s upfront, but B&C’s 2010 Market Movers will largely determine just how big those spends will be—and how they’ll be divvied up.

By Claire Atkinson -- Broadcasting & Cable, 4/5/2010 12:00:00 AM

Upfront presentations are already underway, and hopes are high that with a little more stability, the 2010-11 TV upfront market will make 2009’s troubled upfront seem like just a bad dream. But whether a better upfront does emerge this year is largely up to the members of the first annual class of B&C Market Movers: OMD’s Chris Geraci, Magna’s Elizabeth Herbst- Brady, GroupM North America’s Rino Scanzoni and MediaVest USA’s Donna Speciale.

B&C's Business Editor Claire Atkinson talked with this quartet of industry leaders about what factors really matter in their decision-making and how they expect the market to shake out. Edited transcripts of the interviews follow. The 2010 class will also be saluted at a B&C event on April 6 at the Roosevelt Hotel in New York.

Chris Geraci, Managing Director, National Broadcast Investment, OMD
Billings: $4.5 billion

Chris Geraci took charge of all TV buying for OMD in March 2008, when colleague Debbie Richman left to join Lifetime. The 20-year veteran of the agency and its holding company, Omnicom, now negotiates TV investment decisions for Apple, Mc- Donald’s and Universal Pictures, among many other clients.

What do you consider when assessing the health of the upfront marketplace?

CG Obviously, you start with the macro picture and isolate certain aspects of that. We’re dealing with an economy that, outside of the stock market and the Dow Jones and other indexes, is really not that healthy. We’re seeing fairly dismal consumer confidence and significant unemployment.

Contrast that with ad demand for TV; that’s been healthy since last year’s upfront, and once that negotiating window closed down, the dollars began to come into the marketplace from all categories. Advertiser demand is something we assess category by category.

So, your expectation is for a strong upfront? Will we be in the positive or negative column?

CG It will be a stronger marketplace than last year. I don’t know whether it will be positive or negative; it depends on who you are and your positioning. It’s natural that sellers would expect price increases given the scatter, but you have to look at scatter and upfront as being two different animals. Advertisers are cautious about long-term commitments, even if they are spending month to month. A strong marketplace doesn’t translate into strong upfront demand.

How did last year’s upfront change things?

CG There weren’t any fundamental changes, but we got things built into deals that were reflective of other negotiating points besides price. We partnered on research and we got things we hadn’t had in the past. We built in flexibility and cancellation options. Thankfully, we’ve got a client base that is very healthy and we didn’t need those provisions.

What role do procurement people play in the upfront process?

CG It’s not different from the marketplace in general. They’re looking for more rigorous quantitative metrics in everything we do. Most of them understand that it should be advantageous to do long-term deals and there should be some advantages from a price standpoint.

They are involved more; we have internal procurement people here now [at the agency], and they help us look at things in a different way. It’s a benefit because we have many procurement- focused individuals on the client side, and that impacts how our media clients deal. They are our interface with clients, and they have worked with me just in terms of ideas and different approaches to negotiating. They offer a different perspective and a more quantitativebased approach.

What can TV executives do to stop TV ad dollars moving to digital?

CG The death of TV is greatly exaggerated. I don’t think anybody five years ago would have thought there would still be this much money in the marketplace. Look at what’s happening with retrans. It might benefit TV to have that different revenue stream; as long as the TV-based media owners can put on excellent programming, there will be advertiser interest in it.

It’s very important to note that the average consumer has a profoundly better TV viewing experience than they did even just a few years ago, with the penetration of better technology [such as] HD programming. TV watching got better as other things advanced. Sure, everybody’s fighting for ratings, but you don’t see a dramatic loss of TV usage because there’s more stuff to watch.

The Internet is great, but look at the way it’s being used to support TV viewership. If you are a fan of Lost, chances are you enhance it by reading the blogs about theories on the show.

It’s really up to the media owners to decide whether they want to invest in TV or not. It’s very important to be involved in online, but I think search is something completely different. It’s two different ends of the marketing spectrum. One won’t take the place of the other.

What did last year’s broadcast network upfront number finish on, around $8 billion?

CG That number would have been very high for just primetime. We counted the primetime network [upfront] being down 20%.

What was your most memorable upfront?

CG One year, we jumped all over a show in its first year and bought so much that the network complained the next year. I remember that back in the day, when ER came on [NBC] and I got my hands on so much of it, the network was trying their best to get us out of it. But when you bet on the right show….

Then there was the year we converted to commercial ratings, and there was more math involved than there ever should have been. You had to have a negotiation before you could negotiate.

Elizabeth Herbst-Brady, President, Magna
Billings: $12 billion

Since September 2008, Elizabeth Herbst-Brady has been president of Magna, a unit of Interpublic Group’s Mediabrands division that aggregates and analyzes market intelligence across the media business for the company’s agencies and clients. She joined Magna from News Corp.’s Twentieth Television syndication unit, where she was general sales manager and senior VP of syndication ad sales. She was previously senior VP and director of national broadcast at Starcom’s Chicago headquarters, and spent almost a decade at Barry Diller’s Universal Television. As noted in this interview, Herbst-Brady changed her approach to this year’s upfront based on last year’s market.

What are the factors affecting the TV upfront and the year-round marketplace?

EH-B The one thing everyone gets hyper-focused on is the next three or four months, and they forget that we all function in annual cycles. Clients plan and budget for TV. They have annual activity. Upfront is a moment, or several extended moments, around a part of the overall process; that’s really important to remember. One of the first things we try to understand is what has happened in aggregate in the upfront and scatter. In terms of the macro picture, we’ve been able to determine that industrial production and personal consumption, from a regression perspective, tie most closely to the ad economy. As opposed to lagging and leading, it’s concurrent. As personal consumption rises, so do advertising expenditures. Is it perfect? No, but it’s a very important factor. Other factors in the economy that would contribute: The overall emotional state of the economy; how people are feeling in terms of spending habits; confi dence; all of that brings psychology that factors into demand. We do spend a fair amount of time ascertaining short-term and long-term demand. The most important factor is demand: what money shows up.

Given that you are looking at those things, what is the verdict?

EH-B Compared to a year ago, it is better; that’s not a surprise. As for the TV upfront, it’s too soon to tell. If I sat in a vendor’s shoes, the scatter market is strong and there’s going to be a big increase, but that’s not happening. What happened last year cataclysmically changed how we approach things. We have a very locked-down and measured approach, one that is really customized to make sure what we are doing is in the best interests of the client—and they don’t get dragged into a frenzy. Every client has a specific strategy regardless of what the marketplace is dictating high and low. If it doesn’t make sense, we’ll walk away from it. My expectation for the next six months is that it will be measured and careful; nobody wants the extreme swings.

Will there be rollbacks?

EH-B We want to make the marketplace simple. Even the strongest platforms can compromise pricing in the weakest years. There are things you can do to create advantage, but it is too soon to tell. Do I expect big rollbacks? No, but individual clients will say this doesn’t work as well for me, [but they will] reward the media owners that are building our strategic initiatives.

What do TV folks need to be doing to stop money from moving to other media such as paid search or online, or more ROI-oriented media?

EH-B Growth online is coming from paid search, and from small to medium-size endemic advertisers. The traditional suppliers have been willing to engage in a dialogue about the impact of their TV schedule. Certainly, the advent of the TiVo/Quantcast partnership is helping to create a single-source sample that looks at TV and online. Is that the Holy Grail? Too soon to tell.

Some of the TV ad sales folks seem to believe that losing money to digital outlets is a real threat. Is it?

EH-B I can’t speak to the public posture; “threat” isn’t the right word. It’s the first time I’ve been in the business that I see a willingness to engage in dialogue about introducing non-traditional metrics. People have done a lot of stuff with IAG; there’s TiVo/Quantcast. I’ve talked to vendors trying to do something with that data, and we did a lot of agreements that included some special studies as part of upfronts. We have more than 12 different research studies going as part of our upfront. I would love to know when a spot airs whether I sold more.

What did the upfront end on last year? Was it less than $8 billion, as some agencies suggest?

EH-B It’s important to understand how relative volume impacts the pricing, whether at the end of the day, the networks ended up booking more than $8 billion or whether it showed up in July. It was probably less.

Which was your most memorable upfront?

EH-B What I love is that no two upfronts are ever the same. The clients aren’t the same, and the businesses aren’t the same. That doesn’t mean you can’t learn. There is an opportunity to do things more effectively and efficiently; no marketplace is ever the same. That is the beauty of the business; that’s what allows for change. Last year, was it exceedingly challenging and difficult? Yes! But again, I’ve sat on both sides of the fence, and other upfronts were equally difficult and strident, and not so fun.

Rino Scanzoni, Chief Investment Officer, GroupM North America
Billings: $25.8 billion

Rino Scanzoni is perhaps best known around town as a “numbers guy.” He is a consummate dealmaker who enjoys the science behind the decision-making. Scanzoni worked hard to coalesce the industry around a gigantic currency change that shifted the business off program ratings to trades made on commercial ratings. He oversees all trading for GroupM agencies, which include Maxus, MediaCom, Mediaedge:cia and Mindshare. Scanzoni joined the company from MediaVest.

What’s your most memorable upfront?

RS It was probably the 1999-2000 upfront, when I was still at MediaVest. It was memorable because one network chose not to do business with us and then four weeks later they came back, cap in hand. It think the statute of limitations may have run out on this one since it was with ABC [then-head of sales Marvin Goldsmith].

What was last year’s primetime broadcast network upfront final figure?

RS It was probably a little under $6.2 billion. It was down around 18%. The public figure that comes out in the press, those numbers generally can’t be relied on. We utilize them as directional, not as a hard-and-fast, factbased number. We spend a lot of time doing our own estimations.

What is the overall health of the TV ad marketplace?

RS The media marketplace this year has clearly stabilized from the free fall we experienced through 2008-2009. We still have, however, underlying weakness in 2009-2010, and will experience moderate revenue contraction versus last year. In television, the broadcast networks will still see mid-single-digit declines while cable will see some minimal growth. We expect this trend to continue into early next year.

The upfront television marketplace is never a good predictor of overall marketplace potential. For 2009-2010, the upfront market was down 18%, yet we will see only a total marketplace contraction of about 4%. The reason it is a poor predictor is because clients and agencies base their upfront investment on their market experience in the months leading up to it rather than its total future potential. As with the financial markets, if you buy on recent historical trends, you are pretty much guaranteed you will miss the next buying opportunity. I would not be surprised if you see growth in upfront TV spending for 2010-2011. To that I say, so what?

What role is procurement playing in the upfront?

RS I can’t answer that except in a general way; it depends on the company, and different companies operate differently. My experience is as long as you can lay out the marketplace dynamics and show them what is going to happen over the next three months and the next 12 months and make your case, they’ll look to invest in a way that will save money. You have to approach them in a scientific and analytical way to support the position. Most clients have extended procurement to cover their positions in media. It’s beyond buying the raw materials.

Are TV’s return on investment metrics adequate?

RS We can make a lot of modeling work that agencies do as well as consulting fi rms. We can model how different media can deliver in terms of sales or a visibility index for the campaign. Problem is, you have to look very hard at any specific vendor and what that vendor’s contribution is. You can model TV for clients that have good sales data, and you can do regression analysis; you can model based on different gross ratings point levels in terms of what that does to sales. The systems have gotten better, but to sit there and try to determine what a network or a daypart or a show [can do] is difficult. You can model it, and TV has proved to have a very strong ROI metric.

You can always make the case for your medium. Most sales executives argue for their specific company, not the medium, and that becomes much more emotional than scientific.

Is the upfront a good indicator of the overall health of the TV ad economy?

RS I’d love to hear a lot less about the upfront. There is so much coverage on it; it’s a very misleading barometer in history. There’s way too much focus on it.

Many of the commitments are made with options to cancel; 60% of the money can easily move off the books very quickly. The upfront never really tells you the health of the market.

Donna Speciale, President, Investment & Activation and Agency Ops, MediaVest USA
Billings: $7.8 billion

Donna Speciale is one of the most infl uential ad executives around, not least because she makes decisions that see billions of ad dollars allocated across the media business. As Speciale says in this interview, she likes to “push the marketplace” and try new things. At MediaVest, Speciale works on behalf of clients such as Kraft, Procter & Gamble and Coca-Cola. She joined MediaVest in 2003 to run the agency’s broadcast investment unit.

What are the factors affecting the upfront marketplace this year? What do you look at to help you figure out the size and strength of the market?

DS You’re looking at analyzing the different categories: automotive and pharmaceuticals and all the regulations. Are there fastfood wars happening? Are telecoms going against each other? We look at different categories and all the economic indicators. It’s all related. Obviously, scatter is an indicator of how the marketplace is shaping up; we knew scatter was going to be big. There was too much money that came out of the [upfront] market; it was inevitable it would come back. We’d be in a bad situation if it didn’t.

What are the expectations for this year’s upfront? Do you think it’s going to be stronger?

DS It’s still early. The past couple of years, clients are taking a longer period of time to determine budgets, and they’re [finalizing] budgets a lot closer to when they need to release them. The [agency] analysts’ work will be a lot more delayed; that’s what changed last year. Clients did like the opportunity of determining how to spend their total upfront budgets a lot later.

Might the market be delayed this year?

DS I don’t think it will be delayed. Everybody will be going to play the market when they feel it’s appropriate; last year was too crazy. There will be more money in the upfront than last year; how could there not be? But everybody’s trying to figure out how much. It won’t go back to where it was two years ago. If our budgets are up versus last year, then last year is not a great indicator.

Last year was known as the “Jay Leno” upfront because of the wide effect the new show was expected to have on overall primetime ratings. What programming change will define this year’s upfront?

DS I do think Oprah’s last year in syndication will change things. [With] Jay Leno going back to late night, there’s a little supply change that happens. We’ll have to watch what happens in late night and in NBC primetime. We have some new cable networks, with [Discovery and Harpo’s] OWN in January. Scripps Networks is coming out with another food channel [The Cooking Channel]. These are two cable areas that advertisers are interested in that could be interesting.

The other thing I think, based on last year, people are taking a much more holistic view. When people are talking upfront, they’re not just thinking linear TV—we’re looking at the holistic video marketplace, and broadband is looked on as part of that analysis. Then there’s the local market; we’re looking at where national and local are going. The upfront is the trigger, but we have to look at the entire landscape of ad spending in all categories. Even though we are buying in linear and video, we have to look at what’s happening in print and with the Apple iPad. It has an effect on clients’ budgets; it’s not just about the TV upfront.

What is your most memorable upfront?

DS They all have a unique characteristic. There was the C3 [commercial ratings] story; then there was the double-digitdecline story, and the procurement story. The funny one I remember is getting mentored by Jon Mandel [former MediaCom chief]. We used to sit around the offi ce and listen to him do his negotiations. He got so mad once, he threw a pencil and it hit someone.

As for memorable deals? We did the first Viacom Plus deal with Procter & Gamble. We did the first deal with The CW when we bought a whole time period for the year and did some new messaging. Each year, we try to do something unique and push the marketplace and the industry. Last year, we did some deals with [media measurement firm] TRA and Discovery Communications, so we might try to push that a little bit.