The Long & Short of It1 May, 2011 By: Nicole Urso Reed Response
It’s tough out there, but DR products make it more fun to stay home and wait out the storm.
This time last year, cable DRTV sales executives spoke enthusiastically about short-form pricing increases and were hopeful that long-form would catch up throughout the remainder of 2010. As the year came to a close, media buyers reported that short-form tightened up somewhat as general advertisers trickled back into the marketplace, but long-form still afforded deep discounts if their clients could endure the tepid purchasing power of the economic doldrums.
Networks experienced more of the same heading into 2011, reporting price increases in short-form and marginal improvement in long-form.
“The advertising marketplace throughout 2010 was robust, television in particular, and DR was an important contributor to CNN ad sales overall success,” says Jason Baron, senior vice president of Turner Direct Response, which includes major networks CNN, TBS, truTV and the Cartoon Network. “The fourth-quarter scatter market was active and that has carried over into 1Q 2011. Short-form pricing has continued to increase in all of our divisions. For long-form, the rates continue to fluctuate on a monthly basis.”
Similar trends played out across the Discovery Networks, which includes the Discovery Channel, Animal Planet, TLC and Oprah Winfrey’s new OWN.
“On the cable side, long-form advertising has taken the biggest hit, as there have not been many new advertisers, and the broadcast networks continued to increase the amount of total paid programming on their networks as needed,” says Maria Kennedy, senior vice president at Discovery Communications and a member of the Response Editorial Advisory Board. “Short-form continues to grow and increase its advertiser base.”
Response Magazine’s own research showed third-quarter 2010 long-form media billings rising a slight 0.3 percent to $244,624,200, but the average cost of a half-hour block was the second-lowest ever recorded for that time period. Fourth-quarter results remained mixed, with the cost of a half-hour block off 10 percent from the year before (but up slightly from 3Q 2010) and the quarterly total of $239,730,400 reflecting a 13-percent decline from the same quarter in 2009.
According to Kantar Media, 3Q 2010 short-form billings marked a ninth-consecutive quarter of decline, falling $107.9 million, a 10-percent dip compared to 3Q 2009. Short-form spending peaked at $974,804,300. Things stabilized a bit in 4Q 2010, according to Kantar, with the total of $1.03 billion showing just a 1.9-percent dip from the prior year.
The remainder of 2010 and first quarter of 2011 continued to present challenges for long-form sales. Long-form media was finally divvied out as short-form inventory rather than sold at discounted rates, says Brian Fays, executive vice president of advertising sales at MTV Networks (MTVN) and member of Response’s Editorial Advisory Board.
“That kind of shows you how the marketplace was for long-form,” Fays says. “The networks took back that time and gave it to short-form advertisers so they could monetize it more efficiently.”
This new selling strategy occurs across multiple MTVN properties. For the remaining inventory, Fays contends that prices are climbing back and agencies are starting to commit to long-term deals again.
Kevin Lyons, president of Opportunity Media Inc. and member of Response’s Editorial Advisory Board, manages long-form media for the Lifetime network properties and also sees pickup in both pricing and consumer response.
“Fourth quarter of 2010 and first quarter of 2011 have shown increased demand and correspondingly increased response levels, which have resulted in higher rates,” says Lyons.
The Lifetime networks have seen a “double-digit” percentage increase on pricing due to the improvement in response rates, according to Lyons.
“Traditional categories continue to be the mainstay with categories like exercise continuing to do very well,” he says. “Beauty is another category that does very well, and then household. Really, it’s three categories leading the way.”
Bill Raymond, Los Angeles-based executive vice president and broadcast media director at Cannella Response Television, says that buyers trickle over to broadcast TV as long-form prices increase and inventory diminishes on cable.
“It’s pretty tight right now because the cable (inventory) is shrinking,” says Raymond. “Agencies go to broadcast to get more media to hit each week’s budget. April will be tight, but depending on what works, it’ll be about fire sales.”
Raymond anticipates 3Q rates will be lower than 2Q, but response rates will be weaker as consumers spend more time outdoors in the warm summer months.
Purchasing power shifts with the economy and politics influencing consumer confidence — and the unpredictability leaves DR businesses vulnerable.
“The uncertainty in the world is affecting the cost of manufacturing, fuel and shipping,” says Kennedy. “This could be a concern for advertisers in the future, although the current marketplace remains consistent and robust.”
At MTVN, Fays has seen long-form advertisers hesitant to commit to contracts. “Some of the clients have had concerns with what’s going on in the Middle East and what’s going on in Japan,” says Fays. “They’ve put a clause in some of their deals saying that if there is some catastrophe around the world that affects product or distribution, that they’re going to want to go back to the drawing board on the deal. It’s interesting that politics and what’s gong on in the world is coming into deal points in direct response advertising.”
What’s the Deal?
Products and businesses geared toward discount shopping and do-it-yourself projects have prospered despite the relentless economic slump.
Daily coupon website Groupon, a two-year-old, privately-held startup, which offers deals from local merchants, reportedly earned more than $600 million in revenue last year, according to earnings documents published in TechCrunch. Gilt Groupe, a sample sale website for fashion and
|E-commerce ventures geared toward DIY projects such as Etsy.com, where consumers sell handmade goods, have prospered despite the economic slump.|
travel that launched in 2007, earned an estimated $500 million in annual revenue in 2010. And Etsy, an Amazon-meets-eBay concept, which enables consumers to sell vintage wares and hand-made crafts in its online marketplace, started in 2005 and by the end of last year earned $314 million in annual merchant revenue.
Discounts, limited-time offers and DIY are already core motivations of the direct response shopper, but products and services that speak to the needs of saving money or earning money while also improving the quality of life have an advantage.
“Anything having to do with housewares will do well because people are staying home,” says Scott Kowalchek, president and CEO of Carlsbad, Calif.-based media buying agency Direct Avenue. “Fewer people are eating out and going to the movies. More people are staying at home, cooking at home, and cleaning at home. People are saving a couple hundred dollars a month instead of having a maid come. Maybe they’re buying a new vacuum cleaner, or maybe they’re buying a new set of cookware to help them at home instead of going out to a restaurant.”
Even the rough bicoastal winter weather has contributed to the boost in stay-at-home focused verticals, according to Kowalchek.
According to Kantar Media, “Household, Furniture and Appliances” was the second-highest earning vertical category in 3Q short-form, following “Drug and Toiletry,” bringing in $133,754,600 and $372,836,500, respectively. In long-form media billings for the same time period, “Housewares and Appliances” was also the second-highest earning vertical category, behind “Cosmetics, Hair and Personal Care,” and had the biggest dollar increase — $21,875,400, a 41.2-percent jump.
Popular housewares products topping Jordan Whitney’s Program Rankings include Euro-Pro’s Navigator and Shark 2-in-1 Vac, specialty vacuum cleaners that retail for about $200. There’s also the Nu-Wave Oven from Hearthware Home ($119.97), Total Pillow from Hampton Direct ($19.99) and Chef Basket from TELEBrands ($10).
Self-improvement and educational products are also holding strong. Advertising Profits, a $19.95 book about making money online from Visionary Strategists, was one of the top-10 infomercials in fourth-quarter Jordan Whitney rankings. Another popular product, which also made an appearance in the top 10, was Winning In Cash Flow ($39.95), from Dalbey Education.
“Business opportunity, the work-at-home types of shows, have been stable and I would say relatively stable during the past three years from our perspective,” says Lyons. “We haven’t seen a huge increase in terms of its percentage of our business — an important part but not a massive increase.”
The National Retail Federation (NRF) projected in a February report that retail sales in 2011 would increase 4 percent from 2010.
“People are watching what they spend, but if they really want something, people are impulsive and they’re going to buy (it) — especially for DRTV products,” says Kowalchek.
The same familiar names in the beauty and fitness categories continue to round out the Jordan Whitney Top-10 Program Rankings, such as Beachbody’s P90X and bareMinerals makeup by Bare Escentuals. Some of the newcomers include Wen hair-care products from Guthy-Renker and Max Clarity acne treatment from Stiefel Labs/GSK.
“One of the things that’s definitely helping long-form, that we’ve seen over the last couple of quarters, is a retail therapy phenomenon,” says Lyons. “People have been going through some difficult times and are finally spending a little bit more and buying products that make themselves feel better.”
Nutraceuticals, adult entertainment and, apparently, nutraceuticals made for entertaining adults have also prospered on male-focused MTVN networks. Male enhancement products ExtenZe and EstaMax have been successful, Fays says.
“We have a show called ‘Dancer Next Door.’ It’s basically a 30-minute infomercial, and it’s like a chat room,” says Fays. This runs on Spike and Comedy Central.
There are signs of long-form sales recovering at Discovery Networks as well.
“We are seeing increased demand on the long-form side as agencies are expressing more of a need for long-form inventory,” Kennedy says. “This is a good indication that paid programming is starting to make a comeback.”
Short & Sweet
Cable and broadcast networks maintain positive forecasts as they head through the second and third quarters, with short-form sales leading the way.
“All indications say that it’s going to be strong upfront on the national side this year,” says Fays. “I think that direct response advertisers need to understand that there are going to be significant pricing increases, without question, coming in the fourth quarter.”
Fays expects short-form pricing to be up 15 percent to 20 percent overall.
Turner Networks is also banking on short-form as it heads into the second quarter. “TruTV is Turner’s only network that supports long-from, and we have not seen a resurgence in the long-form marketplace there,” says Baron. “Short-form thrived during the recession and continues to be the more prominent form.”
Ratings at Discovery’s OWN have doubled those of its predecessor, the Discovery Health Channel, with beauty, weight loss, housewares and insurance leading DRTV sales. According to Kennedy, inventory is already tight on many networks for the second quarter.
“Discovery Communications has 13 channels in the U.S. alone and many that have been rebranded in the past year, including OWN. FiTV became Discovery Fit & Health in January, and we have plans for other of our emerging networks to increase their value and viewership,” Kennedy says.
From a planning perspective, there are more opportunities to test distribution channels, seek deals and test audiences.
“There are some cable networks that are a little tighter, and some that are normal, and some that are wide open,” says Kowalchek. “If you were to take all of the cable networks and all of the broadcast networks and put them into a hat, the bottom line is there are so many of the networks out there that if you want to get something for your client as far as a good return on investment you just have to search for it.”
The DR sales team at MTVN has started to tap market research from the general ad sales group to help clients.
“We have a very sophisticated research department for the general side,” says Fays. “So if we have a question or if they’ve already done work for somebody in skincare, we can use that exact same information as market research for Proactiv.”
“I think it’s become more scientific and much more of an educated guess — on the client side and on the agency side — than just throwing spots and dots down,” he adds. “In speaking to clients and in speaking to agencies, I feel like they’ve gotten much more sophisticated in where they can place their money.”