Martin Sorrell's View of the Key Developments Facing Advertisers and Media Firms

Martin Sorrell, who grew up and lives in the UK, is head of WPP, the largest marketing-communication conglomerate. As such it decides which media firms to support around the world. List list is from "Jack Myers’ Think Tank," a newsletter. Meyers evidently got it from a speech Sorrell recently gave.

1. Global Shifts in economic, political, social and cultural power.
2. Continuing Auto Production Capacity and the under-capacity of people/customers. While U.S. auto capacity has declined, the capacity in China and India has expanded. Over capacity of supply and under capacity in the supply of people makes the role of agencies and marketing even more important.
3. The Web. The reason the Consumer Electronics Show is important is that the tech companies are now media owners. The Web disintermediates legacy players and is a more attractive destination for talent.
4. Internal Communications. Communicating strategic and structural change is an internal challenge for organizations as much as -- or more than -- an external challenge.
5. Retail Power. Major retailers are gaining power, especially when there is little inflation. Retail companies put pressure on manufacturers, pushing companies like P&G into direct consumer marketing through websites.
6. Global Centralization. As companies expand and gain global influence, they are integrating their organizations at the center.
7. Procurement and rise of the finance function puts more emphasis on cost management.
8. Governments, as both regulators and as clients.
9. Corporate social responsibility. Doing good is good business.
10. Content. We have to think about content in the context of how business is fundamentally changing. Consumers have to pay for content. There is not enough advertising to finance the business models of all the new media. There needs to be more consolidation for the health and development of the media business. State subsidies have to play a greater role to maintain professional journalism.

- From Jack Meyers, "Sir Martin Sorrell's Ten Priorities for Media, Agencies and Advertisers," From Jack Meyers Think Tank, February 1, 2010.

The Fight Over Google TV

In an important sense, it’s a fight over the future relationship between the internet and the big set in the home. Google is not the first company to try to bring Web video to the TV. Microsoft Media Center can do it, as can Boxee (an Israeli-US startup). Netflix and Apple TV it stream TV shows and movies, but typically for rental or YouTube, though the forthcoming Apple AirPlay will be able to stream all web video into the TV.

Google’s notion, more sophisticated, is to organize the web choices and present them to you via a search engine. That has the networks (typically the content owners) and cable firms particularly concerned. They have been trying to stop Boxee for a number of years. Google has more clout than Boxee but is still boxed in by some forces, at least for now. But Time Warner, which has been trying to put its programming behind paywalls everywhere (and has spun off its cable firm), sees Google TV as an opportunity.

From Jessica Vascellero, "Time Warner Sees Ally in Web," Wall Street Journal, October 6, 2010.

Sam Schechner and Amir Efrati, "Networks Block Web Programs From Being Viewed on Google TV," Wall Street Journal, October 22, 2010.

Beyond TV's 30-Second Commercial

...the whole industry is moving toward a different model where deciding whether something is a hit or not is not just based on how much you charge for 30 seconds of advertising.

Brad Adgate, senior vice president for research at Horizon Media

In Edward Wyatt, "Despite Lower Ratings, Cash Flow Rises for ‘Idol’," New York Times, May 10, 2009

Despite declines in audience ratings over the past few years, the American Idol TV show is still making enormous--and growing--revenues for its owners. But the money is increasingly coming from more than the standard 30 second commercial: "The deals, which include products as disparate as ice cream and trading cards, as well as the more familiar partnerships with iTunes and AT&T, have driven tremendous growth in the profitability of “American Idol,” according to the public financial statements of the parent of 19 Entertainment, the company founded by Simon Fuller, the creator of the show." Fox Television, which broadcasts the show, also makes money by spinning off syndicated versions of it.

The activity is clearly not limited to Idol. Everyone in TV is trying to find "ancillary revenue streams" for their materials as audiences for individual programs decline with channel fragmentation and the amounts networks can charge for commercials consequently decline as well. One gauge sponsors of program deals like to see is audience "engagement" in the material. And Idol certainly still has that: "Last week, viewers cast 64 million votes, the most ever for a nonfinale episode."

The Rise of Microblogging and Marketers' Responses

...cool and frightening at the same time.

- Christopher Hoff, Southwest Airlines passenger and Twitter user

In Rachel King, "How Companies Use Twitter to Bolster Their Brands," Business Week, September 6, 2008

Hoff is referring to his experience getting a message from Southwest the day after he send a used Twitter to circulate to friends a complaint about his flight. The two-year-old Twitter is a new of microblogging, a way for users to keep friends and acquaintances informed of what they are doing or feeling at a particular moment through text messaging that reaches all of them at the same time. Estimates of the number of people using Twitter range from one to three million. It's not that large an audience, but marketers such as Comcast, Dell, General Motors and Whole Foods see individuals who send "tweets" as potential opinion leaders. As King notes, they task employees with "haunting Twitter to do everything from burnish brands to provide customer service." King adds that "the attention to Twitter reflects the power of new social media tools in letting consumers shape public discussion over brands." But it also shows how companies are trying to exploit and even control that discussion. For consumers who receive messages they don't expect, it can all seem a bit creepy.

The Big Challenge Facing Local TV

How much of newspapers' fate are local TV station owners destined to endure? Maybe, too much.

- Diane Mermigas, media columnist

In Diane Memigas, "The Future Of Television: Local TV at Crossroads," Diane Mermigas: On Media, August 25, 2008

Mermigas notes that local television stations are feeling the same long term pressures that are buffeting local newspapers as the media system goes through major changes. She points out that as the February 2009 deadline nears for stations to give up their analog signals and go to fully digital transmissions, questions arise about the directions that station managements will take to place their firms on good economic footing in the new environment. The challenges are many, and not just because of the bad current economy. Ad dollars that used to go almost automatically to local TV stations are now migrating increasingly to websites. Cable TV operators have embarked on a program called Project Canoe that aims to connect cable systems across the United States with the ability to send targeted ads to individual homes. "In a world awash in interactive content distribution options, TV stations have lost their grip. Their sheer numbers exceed what many local markets can economically support..."

What can local stations do? Mermigas suggests that local TV stations may actually have to go out of business. The ones that survive will have to learn to use digital television with other digital media, often working together with Google, Yahoo, local newspapers, and cable operators to gain content and ad support. She says that "Stations able to solidify themselves as the definitive sources of local news and advertising will thrive if they find new ways to translate that online." Finally, she notes that "Local TV station owners could be their own worst enemies in underestimating or failing to properly leverage their local connections to communities, consumers and advertisers in utilizing interactive digital technology to their full advantage. "

Fox Targets Dorms for TV Streams

The light bulb went off -- by simul-streaming 'Fringe' and 'Sarah Connor,' [the college students] get to see the show, and we get the increased fanbase and buzz.

- Peter Liguori, Fox Entertainment chairman

In Michael Schneider, "Fox to Stream Premieres for Dorms," Variety, April 24, 2008

Fox television and internet strategists have come up with a promotion for two new Fox TV series that aims to attract desired young-adult viewers who go online. Fox will stream the broadcast premiere of Fringe and season opener of Terminator: The Sarah Connor Chronicles online at the same time as they bow on TV. However, only people from a .edu domain will be technologically able to watch the stream. Fox figures that most of the .edu viewers will be college students. It knows that they often prefer the web to viewing traditional television. By allowing access, Fox is hoping to short-circuit illegal pirating of the programs as well as to get young people talking about the shows.

The Variety article doesn't point this out, but isolating the streaming audience to the .edu domain has an additional benefit. As Fox executives know, the Nielsen TV ratings do not canvas college campuses except when an individual student comes from a home that is part of the Nielsen national TV sample. If Fox allowed anyone to view the stream online, that might have lowered the national TV rating for the shows. (This is what happened to Gossip Girl on the CW network.) Instead, Fox strategists hope that their approach will raise the shows' profiles among the target audience, short-circuit piracy, build a fan base, and not canibalize its TV ratings--all at the same time.

The Social Dangers of Declining Newspaper Support

With no end of the cyclical woes in sight, at the end of this downturn, who will be left to investigate those who seek to govern?

- Michael B. Nathanson, senior analyst for Bernstein Research

In Michael B. Nathanson, "Weekend Media Blast: So Attention Must Be Paid," Bernstein Research, August 22, 2008

In a recent privately circulated report (therefore no link), respected Bernstein Research analyst Michael B. Nathanson concisely lays out key secular and cyclical trends that are affecting the system, a kind of perfect storm of problems that in his view bode particularly bad news for newspapers and radio. He worries about the newspaper “carnage” both in terms of the impact on employee lives and for its long-term implications for a free press. Two key paragraphs:

…The reasons behind this demise are fairly well-established
and we have called them the 3 Ds – Dollars, Devices,
Digital. This is shorthand for the negative structural factors
facing the content-creative industries, from the growth of
online advertising, which is eating share of traditional
advertising, to the emergence of negative technology trends,
like DVRs and satellite radio that continue to fragment the
consumer while fostering advertising avoidance. While the
trends are certainly not new, the cyclical pressures of a
softening economy are now just emerging in national
advertising.

…As we watch this carnage, that phrase "attention must be
paid" is reverberating in our heads. For starters, faced with
steeply falling demand, industries are massively cutting back
staff. According to Bloomberg, Gannett is cutting 1,000 jobs
in their community newspapers, McClatchy is eliminating
1,400 jobs (10% of total staff), Tribune is eliminating 235
jobs at the Los Angeles Times and 80 more at the Chicago
Tribune and A.H. Belo is firing 500 staffers. Of course,
there is also sadness on a personal level as affected families
struggle with the loss of income. There also should be
broader concern that a critical piece of our democracy – a
free public press – is in such a tattered state. With no end of
the cyclical woes in sight, at the end of this downturn, who
will be left to investigate those who seek to govern?

What Nathanson's trends fundamentally reflect is the power of media-buying firms to define audience trends and where media money should go. When they and their advertisers act based on their understanding of the media economy, the decisions affect the life and death of magazines, newspapers, and other outlets. Wall Street investors also play a big role in shaping a sense of what is taking place in the media world. A recent Variety article traces the reasons behind News Corporation's stock decline. Much of has to do with Murdoch's purchase of Dow Jones and Wall Street's belief that involvement with newspapers is throwing good money after bad. Supporters of Murdoch buy his belief that Dow Jones can serve as a news-and-information engine across media platforms.

Movie Advertisers Target Segments Via the Web, As Newspapers Lose Out

We will select a mix of media that hits all the individual segments with a creative message that breaks through and compels the audience not just to go, but go opening weekend.

-Suzanne Cole, executive vice president of of media for print, TV, online and outdoor at Universal Pictures

In Laurie Sullivan, "Universal's Suzanne Cole On Grabbing Attention," Marketing Daily, July 29, 2008

Promoting movies has become extremely difficult because of the need to have the greatest attendance during the film's first weekend of release. That is because, as Cole notes, "It sets the bar for everything that happens in the life cycle of the film." Even DVD sales are linked to how well the movie did on its opening weekend.

Cole, with many years of experience in the business, notes, "We're trying to figure out how to reach someone who has 10 things going on simultaneously." Studio planners have determined that the best way to solve the problem is to vary the ads and promotions by gender different age categories. Then the challenge turns on speaking directly to the segment in a way that makes them want to see the film on that on weekend. With TV, the question becomes "How do you make the 30 or 60 seconds of time that you have with consumers impactful?"

For Universal, as well as other distributors, broadcast television and cable remain at the center of advertising and promotional campaigns. What is changing is the advertising-and promotion budget allocated to newspapers. Cole says that newspapers don't do well for "the average moviegoers," because they typically find their movie information online. As a result, newspapers are losing movie-advertising money. Will broadcast and cable TV also lose it in coming years, as the new generation finds mobile phones, games and the web more likely places to learn about out of home entertainment?

Comcast's Subsidiary Set to Compete With Comcast

More and more of the best content is going to show up on the Internet. As that happens, cable companies are going to get very nervous.

-James McQuivey, an analyst at Forrester Research

In Nick Wingfield and Vishesh Kumar, "Comcast Unit Cuts Web Deals," Wall Street Journal, July 22, 2008

ThePlatform is a Seattle-based subsidiary of Philadelphia-based Comcast. ThePlatform "provides a service that functions as a management system for converting TV shows into the latest online-video formats, inserting promotions from online-advertising networks and transmitting the content to distribution networks that speed up the delivery of Web video to consumers." Although thePlatform has several competitors--YouTube and Brightcove are two--it is developing a reputation for providing longform videos such as full-length movies for the websites of cable and mobile telephone companies. Some observers believe that full-length television programs and movies will eventually show up on the internet, a circumstance that will erode the popularity of cable systems. Seen from that standpoint, Comcast is positioning its Platform subsidiary to be major player in the growth of internet video, just in case its cable systems suffer.

Protecting Trademarks from Birthday-Party Thefts

But I told her, 'You can't have the real Dora. If you want the real Dora, call Nickelodeon.'

-Elvira Grau, owner of Space Odyssey USA, a party location

In Kathy Roseman, "Why Dora the Explorer Can't Come to Your Kid's Birthday Party," Wall Street Journal, July 22, 2008.

These comments came in response to a parent whose child-partyers were terribly disappointed that Grau's Dora-like costume was not close enough to the real thing. But Grau's semi-Dora-like appearance resulted from a fear of lawsuits. It seems that entertainment companies are increasingly trying to protect their trademarks even in the realm of children's parties. The firms claim they are worried that costumed characters may act badly and hurt the brand, or the free use may dilute the company's right to own the character. As a result, "companies that include Marvel Entertainment Inc., Scholastic Inc., and HIT Entertainment, have sent cease-and-desist letters, threatened lawsuits and in some cases received settlements from companies that market unauthorized character impersonators."

In our brand-saturated society, children often expect not generic clowns but characters that firms have cultivated in their minds for years. "But to sustain live-entertainment and theme-park revenues, most companies that own rights won't offer licensed, authentic costumes that can be worn by professional birthday-party entertainers. That has left parents out of luck." HIT Entertainment, which owns Barneyand Thomas the Tank Engine, says that it regularly monitoring birthday-party planning Web sites and parenting blogs with the aim of making sure that no one steals its trademarks. What if parents don't want to disappoint children who hope the party will be visited by Thomas? According to a company representative, there is still a way: buy paper plates and decorations at Hallmark, which is the authorized provider of paper products featuring Thomas and other of the company's licenced characters.

Gossip Girl's Trend-Making Machine

We tried to launch trends from the get-go.

-Eric Daman, costume designer Gossip Girl

In Ruth La Ferla, "Forget Gossip, Girl; The Buzz is About Clothes," The New York Times, July 8, 2008

The CW Network's Gossip Girl, which centers on the machinations of young ladies in a Manhattan private school, is popular with teenage girls. Although its TV ratings are only middling (though some argue that many more people view it online), the show is having a broad impact on the retail marketplace. "Merchants, designers and trend consultants say that Gossip Girl, which is in summer reruns on the CW network before returning Sept. 1, just in time for back-to-school shopping, is one of the biggest influences on how young women spend. Fans stride into boutiques bearing magazine tear sheets that feature members of the cast and ask for their exact outfits. Or they order scoop-neck tops and hobo bags by following e-commerce links from the show’s Web site." According to Daman, this type of influence--along with the product-placement cash that comes with it--is what the program's creators intended from the start. Daman had worked previously on Sex and the City. Gossip Girls brings a similar materialistic sensibility to its script and screen. The Times writer treats all this quite benignly, quoting someone who tosses it off as "eye candy." But many of the items are quite expensive, and at a time when many US families are suffering financially one wonders what kinds of tensions these induced desires cause. Clearly, too, the program is another example, of the blanket commodification of television programming.

BBC's Non-Worldwide Web

Building on the success of the iPlayer, we want to develop BBC.co.uk to include a broad range of the BBC's broadcast content, as well as new and interactive forms of media that enable audiences to interact with and contribute to the website.

-Mark Thompson, BBC director-general

In Steve Clarke, "BBC Puts More Channels Online," Variety, June 5, 2008

"The BBC is preparing to put all its TV channels online — but the video streams will only be available to users in the U.K." Its youth and digital channels are already online, but the new initiative will include the U.K.'s most popular channel, BBC1. Accessed through the iPlayer, which allows accessing programs from the past week, the already streaming channels help to make the BBC website one of the UK's most popular. The BBC's site was recently criticized by the BBC Trust for overspending. Another already hot issue that is likely to get even more attention involves TV funding in the internet age: "how to force auds that only watch online to pay the TV license fee, which funds all U.K. BBC services to the tune of around $6 billion a year."

McDonald's as Cross-Platform Kung Fu Master

This kind of multifaceted campaign, including a philanthropic tie-in, doesn't just happen. They're masters at integrated, coordinated marketing.

-Robert Passikoff, president of the Brand Keys branding consultancy

Passikoff is talking about McDonald's--specifically, the fast-food restaurant's tie-in with DreamWorks Animation SKG's film Kung Fu Panda. The movie will debut two months before the Olympics in Beijing. McDonald's is McDonald's is the official restaurant/food service sponsor of the games, and it has fine-tuned an international cross-platform extravaganza to push its relationship to the film, and through that to Pandas, and through that, to the China-based games. Ad agency Leo Burnett (famous for its cartoonish brand characters like the Keebler Elves) has created a TV commercial that will appear in 23 languages. It features "two child Kung Fu experts vying for the last Chicken McNugget left from a Happy Meal."

The campaign is international on TV, in-store, and online. and it even ties into public service activities: "From June 6 through July 3 in McDonald's restaurants in North America, and then rolling out across the world, McDonald's Kung Fu Panda Happy Meal program will treat kids with a toy of one of eight animal characters from the film each time they purchase a Happy Meal. In addition to offering Kung Fu master games and related offline activities for kids (like a new hip-hop panda dance), online promotions tying in with the 'Kung Fu Panda Party' promotional theme will encourage kids to learn about pandas and their environment. For instance, the site (www.happymeal.com) will offer a "panda-cam" enabling kids to view real pandas in their natural habitat. All of this ties in with McDonald's support of Conservation International, and specifically its support of CI projects in China aimed at protecting panda habitats.

Decline of the "Upfront" Reflects Major Changes in the TV Business

The upfront is a false indicator. It's a misleading indicator. The economics have changed so radically that you can't use old metrics.

-Jack Myers, president of Jackmyers.com, a media, advertising, and entertainment research firm

For several years, critics of the television upfront have been complaining that it has outlived its usefulness. There is still a nominal upfront but it is dramatically different from the one of the networks’ halcyon days. The writers’ strike pushed the changes forward, but more significant in the transformation are the product-integration strategies of advertisers and the cross-platform strategies of the networks. The decline of the upfront indicates that not only is the meaning of television changing, the traditional TV box is only one piece of “television network” business.

In John Simon, "The Networks' New Advertising Model," Fortune, May 5, 2008

The Big Challenge Facing Cable Firms

[C]able operators are virtually barricading themselves in the home and seemingly ignoring the importance of participating in the wireless explosion.

-Diane Mermigas, Media Daily News columnist

She points out that the "telecoms"--Verizon and ATT--recognize that mobile is the growth area and so are selling a "quadruple play": home-based television, in-home internet service, in-home phone service (via the internet) and outdoor mobile capability. Time Warner Cable, Comcast, and other cable firms at present sell a "triple play," which means that they have not yet positioned themselves to benefit from the advertising money that will stream to the mobile phone. The cable firms are only now realizing that they must act in this direction, Mermigas notes. Even if they get their act together, the competition among these firms around the home and outside it (including in stores) will be intense.

In Diane Mermigas, "Tech Slowdown: Cable Giants Still Wireless," Mediapost's Media Daily News, May 2, 2008.

Television Increasingly Covered With Brands

At some point, it becomes all clutter. We have to be really careful.

-Laura Caraccioli-Davis, executive vice president and entertainment director for Starcom USA.

She was referring to the growth of "branded entertainment" programming. The activity is booming and includes integration of products into program plots as well as crawls at the bottom of screens and even (on the Bravo cable network) L-shaped bars that cover the bottom and side of the TV screen with commercial messages. Participants at an industry meeting on branded entertainment did not express a sense of when viewers would begin to rebel against this in-your-face commercialism. Caraccioli-Davis noted that cable networks seem to do more deals. "They are more apt to shill their shows," she said. "Maybe cable networks are not all that protective of [their programs]."

In Wayne Friedman, "Branded Entertainment Offers TV Ad Bonanza, MediaPost's Media Daily News, April 28, 2008.