Generating Value for Media Brands

October 2008

Recent trends in the U.S. and global media industry point to a downward spiral of advertising costs. This is a boon for advertisers and agencies that equate value with cost efficiency.

But the media industry is setting a low-cost standard that companies will be stuck with for decades to come. With costs spiraling downward, there will inevitably be consolidation, and both buyers and sellers will become increasingly dependent on technology—removing the personal equation from the process. A growing dependence on aggregating eyeballs in a cost-efficient manner, along with technology-based buying and selling solutions, changes the traditional co-dependence between buyers and sellers—it creates a new model that disenfranchises personal relationships. While this enables profitability in a low-media-cost model, it also creates long-term challenges for those media companies who have valued brands and who seek to generate enhanced value for those brands.

A recent study conducted by Myers Publishing among 350 advertising and agency executives reports that fully 94 percent consider it “extremely important” or “very important” that sales reps be responsive to the needs and interests of their clients. Professional interaction between buyer and seller is the highest priority.

In the cable-television industry’s earliest days, the fledgling medium was valued for its targeted content. As cable network distribution expanded and the number of networks grew exponentially, cable TV ad inventory supply quickly exceeded demand. Buyers responded by driving down prices and commoditizing the business. For years, cable costs-per-thousand averaged less than 50 percent of broadcast network CPMs.

Today, even as cable programming quality and ratings are comparable to broadcast ratings (often surpassing broadcast in both program quality and audience size), broadcast networks still receive a pricing premium over most cable inventory. While cable and broadcast are increasingly interchangeable, media buyers still differentiate and separate them as distinct components of a media mix. Cable’s efforts to emphasize quality of audience and targeted-reach opportunities often fall on deaf ears.

The low, low, low costs of online banner advertising today will fuel downward pricing across all media for years to come, except for those few media companies that implement enhanced service offerings and innovative marketing opportunities, with branded entertainment and content integration being at the forefront of this strategy.

Sports network ESPN effectively packages content sponsorships, multiple platforms, offers associations with major sports leagues and delivers a wide variety of promotional and merchandising opportunities that empower advertisers to pay higher costs. These capabilities and services would not be possible without an experienced sales team skilled in describing and selling them through, as well as a team to service and support them. Most importantly, ESPN and sports leagues have established powerful and relevant brands that marketers are eager to use as the “environment” for their ad messages.

Turner Broadcasting’s entertainment, sports and CNN teams also have made content sponsorships, enhanced services and marketing initiatives a priority for the past decade, realizing the long-term imperative of selling outside the box. Again, at the foundation of Turner’s and CNN’s successes has been the evolution of relevant brand positions: TBS is “Funny,” TNT is “Drama” and CNN is, of course, CNN. Disney is the master at generating premium value for brand association.

Myers Publishing’s Emotional Connections research studies on the brand equity value of TV networks and programs validate that viewers are more likely to be responsive to and persuaded by advertising in programs they find relevant to them. All media companies must ask if their brand equity is positioned to generate premium relationships with advertisers.

While most media sellers and buyers today are focused almost exclusively on targeted audience reach and aggregation, they will be well-served if they avoid the trap of reducing their emphasis on personal relationships and the brand equity of their content. Technological capabilities will continue to be a critical asset as the industry evolves, but those media companies that expect to be long-term winners need to invest today in branded content, sales organizations, sales training and the development of innovative, nontraditional offerings, or they will find themselves commoditized as the industry evolves to technology-based buying-and-selling systems.

Jack Myers is a leading media industry analyst who runs Myers Publishing LLC. He can be reached at jm@jackmyers.com, and his reports can be found at www.jackmyers.com.