Scanzoni: Cable May Rise Despite Weak Upfront

Top media buyer does not see digital video as a substitute for television yet among marketers
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Despite a disappointing upfront, cable networks might still see ad revenue growth in the 2014-15 season.

Rino Scanzoni, who as chief investment officer of ad giant GroupM, oversees nearly a quarter of all TV buying, says he expects ad spending to increase 3% to 4%. That would be less than in recent years, but better than the estimated 5% drop in upfront commitments. Broadcast spending, also down in the upfront, is likely to finish the year lower, he adds.

In this year’s upfront, “the volume levels weren’t as strong as the vendors would have liked, so they had to probably do some recalibration, which took a little bit longer, but I think we’re all in a good place now,” Scanzoni says. Scanzoni is optimistic the commitments made in the upfront, known as “holds,” will turn into orders before the season starts. “Hopefully, everything will stay on the table and there won’t be too much breakage going into the fourth quarter.”

He also notes that it’s important to look beyond the upfront and focus on the buying and selling activity that goes on all year.

“The upfront market is driven by recent events, as opposed to any kind of forwardlooking view,” Scanzoni says. “We’ve had a relatively soft scatter market for the last three or four quarters and you have a lot of companies that are dealing with a lot of unknowns as it relates to their business. If they can maintain a certain level of flexibility, that is becoming increasingly important.”

With scatter prices so close to upfront rates, clients are taking their chances with scatter. “TV is still 60% or 70% of their media plan, in most cases,” Scanzoni says.

Network sales execs note that the first budgets registered by media agencies called for very big cuts. Over the course of negotiations the dollars rose, though still below last year’s spending level. Scanzoni says the agencies weren’t playing a game to spook the networks into lowering prices. “I think it was really more the cards they had and how that changed over time,” he says. “When people are anticipating a strong market, it goes the other way. It starts off high. When everyone expects a weak market, they’re pretty conservative.”

One place a lot of TV money won’t be going this year is digital video. “I don’t think digital has ever taken any significant amount of money from TV at this point,” he says. Digital video still has some bugs to work out before it becomes more important to advertisers.

“Outside of the whole fraud and viewability thing, which there are tools to manage, I think the big challenge is the fact that there is no scale in digital right now,” Scanzoni adds. He points to Nielsen Online Campaign Ratings data showing that 85% of the digital views come from 12% of the population. “If you spend more than 5% of your TV budget [on digital video], you wind up just building frequency.”

And for premium video, costs are high compared to cable.

“You can play in that arena but it’s very difficult,” Scanzoni says. “That’s going to change over time but as far as we’ve seen there’s a limit on how much you can spend. It’s not a matter of monies going to online video.”

C7: ‘SOMEBODY’S GOT TO LEAD’

Rino Scanzoni expects C7 to take over as the TV buying currency within a year or two.

As chief investment officer for GroupM, Scanzoni in 2007 cut the first major deal using C3—commercial ratings including three days of delayed viewing—and early in this upfront, he agreed to use C7—which takes in seven days of delayed viewing—with each of the big broadcast networks. “I know there were some other agency people criticizing us. They are saying: ‘Why do it in a soft market?’ You do it in a soft market because you extract the maximum benefit, compared with doing it in a strong market,” Scanzoni says.

Market sources say GroupM clients will pay smaller price increases over multiple years in return for using the C7 metric preferred by the networks. “I think we struck a pretty advantageous scenario,” is all Scanzoni will say. “Somebody’s got to lead and I think we took the market a little bit by surprise. People weren’t quite prepared and I don’t think they really thought it through. Obviously, in a weaker market, they’re not forced to do it by the suppliers, because they didn’t have the leverage to be able to do it.”

Scanzoni says the market will move toward C7 because it’s important to count all viewing, and that increases supply. “If you’re increasing supply you’re basically either reducing or at least maintaining prices,” he says.

But that’s not the endgame. “What’s more important to us is cross-platform measurement to include viewing on tablets, not just linear viewing to a TV screen. And if you’re going to do that, C3 doesn’t work because you need a longer time frame,” Scanzoni says. “So from our view it was the right thing to do and all of our clients agreed.”

Despite a disappointing upfront, cable networks might still see ad revenue growth in the 2014-15 season.

Rino Scanzoni, who as chief investment officer of ad giant GroupM, oversees nearly a quarter of all TV buying, says he expects ad spending to increase 3% to 4%. That would be less than in recent years, but better than the estimated 5% drop in upfront commitments. Broadcast spending, also down in the upfront, is likely to finish the year lower, he adds.

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