A Seat at the Table1 May, 2009 By: Thomas Haire Response
Broadcast, satellite and cable network ad sales leaders Stephen Appel, Michael Finn and Jeff Lucas discuss the growing role and influence of direct response on their overall businesses.
Today's Topsy-Turvy Market
As the economy continues to put pressure on marketing budgets, more and more often, it is the hot direct response advertiser that has been at the top of the game. As a matter of fact, there were rumblings last fall from some in the cable network market that DR media sales may account for up to half of all ad revenue in what was expected to be a very difficult fourth quarter. This is not hard to believe, considering a recent Nielsen Co. report that indicated that total U.S. ad spending was off 2.6 percent in 2008 — yet direct response spending was up 9.2 percent.
Coming from the other direction at Dish, where DR has always had a major presence, Finn says, "Despite Dish media sales having a much stronger street presence with general market advertisers recently, DR still accounts for well over 50 percent of our media dollars — and will continue to do so."
However, both Appel and Lucas say that DR hasn't yet reached that point for them, even though growth was strong in 4Q 2008 and looks positive for first-quarter 2009. Asked about the late-2008 rumors, Lucas says, "I wouldn't characterize our business that way. That's not the case we're in. DR was important to us in the fourth quarter, and it's always important. What I would say is that DR's bar has risen so dramatically that it has achieved a new status within the company as an integral part of the business and planning process. We have 13 networks, and I see DR now as a sort of 14th network. It has a seat at the table. It now has the size, mass and importance."
Appel says DR's slice of the pie at ION definitely has grown recently. "First quarter was a little heavier on the general ad side, but that's because fourth-quarter 2008 was light," he contends. "That's just the way it broke out upfront. For us, the split [between DR and general] was quite high in first-quarter 2009, and it's definitely on an accelerated growth curve in the past six months."
Another rumor making the rounds recently was that fewer spots are being made available to DR media buyers, keeping spot pricing stable. In a column in Response's April issue, Dick Wechsler of DR media agency Lockard & Wechsler, presented the results of a compelling internal study showing that overall TV ad time was off 20 percent in January compared to the same time in 2008.
While Wechsler's study did not accuse the networks of holding out on airtime in order to artificially inflate prices, you can imagine the conspiracy theories flying around inside leading media agencies after the column appeared. Lucas, Finn and Appel were not quite so moved when asked about the rumors.
"Pricing is always the issue in DR," Appel says. "I'm not restricting air time — it's not what we do. If we have inventory, we'll price it accordingly and ads will run at appropriate rates. I haven't heard of other networks doing it. One thing that doesn't get talked about often, though is how pricing for DR is a real frustration for low-end cable networks. They cannot do certain CPM business, because the DR rate creates higher profitability, but it also becomes the floor. If that floor is set, then an ad run on a CPM basis has to be above that floor. Agencies on the general side are having a hard time hitting CPMs that work in those cases."
Lucas is equally strident in his response. "We don't manipulate our time at all. There's no reason to create scarcity. While I wouldn't put it past some other places, I don't think artificial scarcity works."
Finn points to an expanding market and the economic disaster. "With recent marketplace and economic developments, there are many more outlets available to DR as reduced general market demand has opened up opportunities like broadcast prime and other high-profile inventory. What this means is that Dish must work even harder for our DR dollars and continuously ask how we can serve our clients better," he says.
Lucas believes that the expanding channel universe makes such rumors even sillier. "There are too many places to go — no one is a 'must buy' anymore," he contends. "If you manufacture scarcity in one place, there are just too many other places to go."
Lucas says he sees improvement as 2009 goes along, pointing again to the importance of the DR team in helping push forward. "Pricing, overall, is not as high as it was a year ago. However, we don't really compare to a year ago, especially in DR. It's a quarter-to-quarter business," he adds. "Is pricing as strong as we'd like? No, but it's reflective of general economy and the consumer. Second quarter is looking stronger than first quarter. For us, that's important. That's why the DR team having input in the process all along is so important. It can reinforce factors that impact the marketplace."
Stephen P. Appel
President of Sales & Marketing, ION Media Networks, New York
Appel joined ION in 1999 as senior vice president of national sales. He is a member of the ION Media Networks Executive Team and was the key architect in the development of the company's program consulting agreement with NBC Studios and NBC Entertainment for the 2004-05 season. He also served as vice president/director of sales for Seltel Television Sales and director of sales for ABC Radio Group/WABC-AM in New York.
Vice President of Media Sales, Dish Network, Englewood, Colo.
Finn has built an ad sales division during the past one-and-a-half years, and recently opened a 22-person office in New York with a focus on direct response, interactive television, Hispanic, international and viewer measurement/set-top box data. Previously, he was director of ad sales at MTV Networks for 11 years.
Executive Vice President, Ad Sales, MTV Networks Entertainment Group, New York
Lucas oversees all sales and marketing for Comedy Central, Spike, TV Land and CMT. He joined the company in 2005 and was promoted to his current position in 2007. Lucas spent three years as president of advertising sales, marketing and cross-platform initiatives for the Universal Television Group, overseeing advertising sales and marketing for USA Network, Bravo, SCI FI Channel and others. Prior to that, he spent 20 years in sales at NBC.