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How To Find Value in Local Broadcast Media

The most important thing to realize in advertising is no media is perfect for every business, and each media (newspaper, radio, TV, direct mail, digital, social etc.) has its strengths and its flaws.   

When a business can serve an entire city or metro area (e.g., service company like HVAC, Plumbing, home improvement like Windows) or is a destination type business which can draw customers from a large area (e.g., car dealership, furniture store), the efficiency, reach, and creative influence of broadcast media are still hard to beat if your goal is growth and customer acquisition.   

My belief grew stronger as a media director at Ivie & Associates, a Dallas-based marketing services firm who works with regional and national retailers.  A media director is kind of like being an investment manager in charge of allocating other people’s money. Instead of dividends and capital gains, media directors seek results such as customer traffic, web traffic, gross sales etc.  

Our clients were increasingly influenced by hype from trade publications, digital salespeople, and the growing number of digital “experts” in their industry.  Some of our largest clients were grocery chains whose primary media tactic is a weekly printed circular distributed by the newspaper and often supported with radio.  Coming from a broadcast background I dismissed circulars as a complete waste of money and paper.  I developed a limiting belief – partly because I did not use circulars – and assumed print no longer worked, and something like a circular should be digitized and emailed.   

What’s great about the grocery business is they track everything.  Reams and reams of data about their customers and transactions.  And without fail, when one of our grocery clients tried going without a circular and/or radio they would see a decline in store traffic and sales.  And I’m not remembering this from many years ago, this is as recent as 2017.  

In late 2017 I joined the NBC station in Indianapolis, IN – WTHR Channel 13.  They had just concluded negotiations with DIRECTV over re-transmissions fees.  These are the fees paid by the distributor (DIRECTV is a distributor of television content through satellites) for the right to carry WTHR’s programming (WTHR licenses the NBC network’s content and produces their own local news programming).  DIRECTV must pay fees to every content provider whether they’re a cable network like ESPN, CNN, or a local broadcaster like WTHR.  

Contract negotiations happen every few years, and it can be very contentious.  In this instance DIRECTV pulled WTHR off their system because of a disagreement over the what DIRECTV would pay for WTHR’s content.  DIRECTV is especially popular in Indianapolis, partly driven by their NFL package – about 25% of the market subscribes and many were desirable upper income viewers.

The dispute lasted more than a month and WTHR was eventually restored to the DIRECTV lineup.  WTHR wanted to reimburse advertisers for their loss of audience incurred during this dispute.  An often overlooked or unknown aspect of broadcast advertising is that stations like WTHR guarantee their ratings and bonus clients by giving them additional commercials until those ratings are delivered.  

I sat in on several conversations with clients to discuss the blackout, and without fail every single advertiser described an immediate and measurable loss in leads, web traffic, and sales because their ads could not be seen by the DIRECTV subscribers.  Thousands of subscribers cancelled their DIRECTV subscriptions, and thousands more purchased antennas just so they could continue to access WTHR.  This dispute was covered daily by the local newspapers, business journals, and trade publications, and I couldn’t go anywhere without hearing people complain about the loss of their beloved broadcast station.  

I’m telling you with 100% certainty that if CNN, ESPN, MSNBC or FOX News were pulled from the DIRECTV lineup there would be no similar outcry from the public, nor would advertisers have felt a similar impact on their business.  

I often asked myself, what would Warren Buffett, the smartest investor in the world buy, if he were allocating media dollars instead of investment dollars today? As a legendary value investor, always zigging when everyone else is zagging, I think Mr. Buffett would roundly ignore most of the digital hype and plow his advertising investments into television and radio. In fact, he does so indirectly through many of his subsidiaries, such as GEICO. 

GEICO spends over a billion dollars on advertising, and much of it on broadcast or network television. The company has ascended from a little-known specialty insurer for government employees to one of the top automobile insurers in the United States.

When it comes to reaching numerous potential customers and doing so in an efficient, brand-safe, and transparent manner – boring traditional broadcast media are still unmatched in their distribution and influence. 

Unmatched Distribution

By unmatched distribution, I mean an antenna (costing under $20) is the only device anybody needs to tune into the top local broadcast TV networks and dozens of other channels.  Broadcast television is like a public utility because it’s government-controlled and generally available to anybody in any city, except it’s FREE. This is often forgotten, but do not underestimate the power of FREE.

Although the number of Internet users has exploded, and continues to grow, the world wide web still doesn’t have the kind of distribution TV or radio does. Not everyone can afford a broadband connection, laptop, smartphone, or tablet. Many elderly people – a huge portion of our population with enormous spending power – have never been and will never be online.  Generally, it costs money to access the Internet whether it’s on your phone or with your laptop.  

Most people have a TV in their home, often multiple TV’s, and technology has enabled most of our TV’s to be supersized and thin.  Consider this, the national broadcast networks, CBS, NBC, FOX, and ABC will typically reach 90 percent or more of a city’s adult population in any given month – and often in any given week.  A study by Pivotal Research Group in November 2017 concluded the networks reached 98% of the population for at least one minute in any month.  Pivotal provides proprietary research to hedge funds and institutional investors – so there is no bias – they’re just seeking value.  

Brian Wieser, a senior research executive with Pivotal who focuses on advertising related stocks wrote:  “While it’s true that viewing of individual networks on traditional TV are losing reach – and it is also true that digital media owners such as Google’s YouTube, have almost as much reach among younger audiences if we consider all of the content consumed there, the platform of (broadcast) TV as a whole is holding up better than many people think.”

Amazing right?  Even in this fragmented world of digital, social and traditional media – these four dinosaurs still reach most of the adults in any given city.  Radio is the only other media who can match this kind of reach – but it would take ten or more radio stations to reach this many people – and several hundred if not thousands of individual websites to do so.  

Or think of it this way: If you were a manufacturer of a product and wanted a to maximize your retail distribution, you’d want Walmart, Target, and Amazon.  These 3 retailers would put your product in front of most buyers in any city.

This is exactly what the major broadcast networks are – they are the largest distributors of entertainment, sports and news in the United States.    

A Brand Safe Environment

On April 16th, 2014 a South Korean ferry boat capsized and sank off the southwestern tip of South Korea.  The ship went under while passengers trapped inside sent text messages, shot videos, and cried for help and said goodbye to their families on their smartphones.  More than 300 passengers drowned, and tragically, many were teenagers on a school trip.  There were 324 students on board, 250 drowned.  
I remember watching video clips recovered from survivor’s phones showing footage of passengers screaming for their lives.  It was disturbing to watch, and if I knew how disturbing the video was going to be, I would have chosen not to view it.  Unfortunately, this kind of viral video is becoming an all too common thing in our online world.  The first time I watched it was on the New York Times website, and immediately before and after the video I was shown an Allstate Insurance ad.  These are the ads you are forced to watch before an internet publisher allows you to see their video content.  I thought afterwards, here’s a clip of dying teenagers, brought to you by Allstate.  

This same video was also shown by the networks on broadcast TV, but a news anchor was there to put it into context, warn me of the explicit nature of video, and encourage those who didn’t want to watch to turn away.  And when the video was over, more context and updates about the accident.  The commercials airing immediately before and after the news segment did not appear to exploit the content, instead, the commercials supported the news program and the journalistic effort.  It is this difference in environments which makes advertising on broadcast television so unique and valuable. 

 Broadcast networks license their airwaves from the government and as part of deal they must provide independent journalistic programming and serve the public at large.  Cable and Internet news providers are not held to this standard and can provide content with indecent language, graphic violence, nudity, and political bias.  In this case the publisher was the New York Times, one of the most respected journalistic institutions in world.  But even with publishers like the New York Times, no matter the source, you are taking a greater risk of appearing near objectionable content when you sponsor videos on the internet. 

Creative Influence

The combination of sight, sound, and motion increases the chance of eliciting an emotional response and is the most creatively influential method of telling a story to the masses.  If you don’t believe me consider amount of money spent on movies and television entertainment compared to printed entertainment.  It’s trillions vs. billions.  And while a local advertiser won’t be able to produce their own movie or TV show, they can produce the most creatively influential tactic in advertising history – a thirty second TV commercial.  

Adding more influence to a thirty second TV commercial is reaching people within a credible programming environment, ensconced in the comfort of their favorite chair or sofa, viewing your commercials on their giant flat-screen TV, which is often the centerpiece of their living rooms.     

An Agreed-Upon Advertising Environment

It’s true nobody likes to get stuck watching commercials, and certainly most of them are not as good as what we see in the Super Bowl every year, and people are increasingly using digital video recorders (DVR’s) to avoid commercials. I know people who even record live sporting events to skip commercials (myself included).  On the other hand, it’s also true commercials on broadcast television are a widely accepted part of a long-standing agreement between networks and viewers. Networks need to sell ads to fund what we all hope are great television shows, news and live sports. Viewers aren’t required to pay a cable operator or satellite company for these programs; they are available free over the air anytime. 

What people generally don’t like is being forced to watch commercials, which happens in many cases on the Internet (e.g., YouTube, or any other site providing video) or through certain streaming services (e.g., Hulu, unless you pay for their no commercials plan). These commercials (called pre-roll ads) tend to appear before – or after (post-roll) you can watch a program or clip, and people shun them for two reasons: the content they are waiting to see is often not worth the trade-off, and they have no control over the ads—and viewers hate not having control.  There’s no way to just turn the channel, like you can while watching TV or listening to the radio.  

Most of the popular social media sites were developed without advertising, and partly because of this, they flourished. The best current example is Facebook, and now that advertising is taking over this sacred personal space, many people don’t like it.  The most successful advertisers using social media seem to be creative start-ups disrupting established businesses who have compelling stories to tell – like The Dollar Shave Club.  Over time, the resentment to advertising in these new medias will fade; however, commercials are already an accepted part of the broadcast experience, another benefit to this media.

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