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Published: May 27, 2008 at 05:00 AM GMT
Last Updated: June 9, 2008 at 05:00 AM GMT
Today, even as both large media corporations and emerging entrepreneurial enterprises are challenged to identify revenue-generating strategies that can achieve aggressive investor demands, and lip-service is paid to the demands of changing market conditions, most executives remain committed to outdated and dangerous mass-media-dependent economic models. Media companies today - even the largest digital media companies - are in danger of following the railroad industry model and becoming Industrial Age mass distribution vehicles rather than Relationship Age™ interactive brand and human connectors.
Digital media enable ubiquitous access to TV programs that were historically available on a limited basis at a scheduled time on a single channel. But even with content now available 24/7 365 days-a-year, the fundamental business models remain locked into very traditional patterns, as witnessed by the surprisingly traditional Upfront network TV advertising buying and selling season that opens today. TV and advertising agency executives are accustomed to holding on for dear life to old-school business relationships. They celebrate small shifts in strategies and issue press releases almost daily that focus on small steps toward innovation, such as branded entertainment, while clinging to organizational structures that reward consistency, continuity and even failure.
I have been studying relationships among media companies, marketers and agencies for three decades. For most of these years, I've been pointing to the inevitable shift in relationships away from supply/demand market forces that drive commoditized pricing pressures. In my 1997 research study, Media 2005: Connecting to the 21st Century, I wrote: "The challenge for media companies and for marketers is to understand the new realities of the television marketplace. Erosion is not simply a matter of shifting realities. The market is totally and irrevocably altered, with completely new realities replacing the traditional mass media mentality. Media buyers and media sellers are coping with a market of more than 250 Nielsen recognized networks competing for audiences, and every viewer forming individualized viewing patterns. The challenge is to restructure strategies to complement the restructured market."
The message was generally ignored, as managers focused on day-to-day realities and short-term economic pressures rather than long-term possibilities. Still today, that same short-term focus remains a dominant reality in the media industry.
Visit the advertising sales organizations within the top 200 media companies in the U.S., including television, print, online, out-of-home and radio and you will discover virtually interchangeable structures, core messages, research measures, and strategic priorities. In 1997, 74 percent of 320 major national marketers I interviewed for my Media 2005 report said cost efficiency was their primary consideration in the advertising buying and planning decision-making process. Only 26 percent said innovative marketing opportunities and return-on-investment were the key factors. Those same marketers predicted that, by 2005, the dynamic would flip, with only 43 percent of advertising purchase decisions based on cost efficiency and 57 percent based on R-O-I and value-based opportunities. Further, they projected that cost efficiency would be the primary force for only 26 percent of advertising purchases by 2015.
But in 2008 I estimate more than 70 percent of all advertising purchases remain dependent on cost negotiations and that an overwhelming percentage of advertising sales executives are performing the same fundamental tasks they performed in 1997, sometimes with the added - but secondary -- responsibility of layering in multiple media and idea-driven relationship building. The industry talks a lot about the need for building R-O-I based marketing partnerships, but these remain a microcosm of the business. Even online media companies have sales organizations that mirror those of broadcast and cable networks, with primary focus on agency media buyers and pricing negotiation. Ideas and innovation are part of the equation, but they represent only a fraction of the business.
In 1997, 49 percent of 320 marketing executives from major national advertisers said "companies such as mine will seek to build longer-term, more marketing oriented relationships with media companies, with less emphasis on pricing-based media decisions." Thirty-three percent answered "no," and 18 percent said they didn't know. Sixty-eight percent of these executives said "integration of direct response, sales promotion and advertising is a positive trend, and I will place greater value on media opportunities that integrate them and organizations that can coordinate and service them." Only 18 percent responded "no."
Here we are more than a decade later with marketers, agencies and media sellers voicing the same beliefs and future-looking expectations. Yet, the industry remains locked in supply-demand business models that drive toward commoditization with pricing negotiations as the primary focus of relationships. If you disagree, assess what percent of your sales organization is devoted to "negotiation based on audience delivery and pricing models" vs. "organizational commitment to custom marketing platforms and long-term strategic relationships that reward your brand value and connect your brand to your partners' brands." Agencies and marketers can make similar assessments of their actual financial and organizational commitments to determine where they are on the relationship spectrum.
On the surface, it appears progress is being made toward the overly-ambitious hopes and expectations of marketers in 1997 and that media companies are responding to the changing marketplace realities. But the industry cannot afford to wait another ten years - or even five -- to ambitiously move toward restructuring organizational priorities and to shift the emphasis away from a traditional and increasingly outdated price-centric model.
While day-today business realities make this seem unrealistic and naïve, rapid restructuring of sales organization structures without losing marketplace presence and revenues is not only possible, it is an imperative for companies that hope to grow in the digital age.
In my 1997 study, I wrote "The younger the age group, the less loyalty they have to traditional broadcasters. The television season, audience "flow" and network exclusivity are outdated concepts. They are vestiges of 30 year-old network programming strategies that are no longer relevant, and that have become destructive to the broadcast network television business. To remain competitive, networks must develop innovative year-long and multi-network original programming strategies. They must adapt to the reality that every half-hour, every night, every program has its own set of coordinates on the media map." That was written before Google, before TiVo, before YouTube. It was written years before Fox and now NBC introduced year-long programming development strategies. But even now, as networks talk about embracing these ideas as if they are radically creative and innovative, they remain locked into the traditions that have drained viewers to more accommodating and friendly environments. Sure the top programs continue to perform well, but audience erosion is a never ending truth and new models must be quickly developed before the economics of the media business collapse.
For more information on JackMyers Media Business Services and Future of Media and Advertising Advisory, contact Jack Myers at firstname.lastname@example.org. "Relationship Age" is a trademark for JackMyers research, reports and Relationship Engine services.
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