Dialogue: Rino Scanzoni
EmptyRino Scanzoni has served as chairman of WPP's Mediaedge:cia North America since March 2007 and as chief investment officer for Group M North America since 2005. A media buyer for over 25 years, Scanzoni is also on the Group M global executive committee and was one of the leading proponents of commercial-plus 3, or C3, ratings. Scanzoni recently spoke to The Hollywood Reporter marketing reporter Gail Schiller about his expectations for the upfronts and the state of the TV ad industry.
The Hollywood Reporter: What are your expectations for the 2008-09 broadcast upfronts? Do you expect spending by TV advertisers to increase or decrease compared to last year's upfronts?
Rino Scanzoni: It's hard to say. I don't really pay much attention to that (upfront spending) because it's really not relevant in terms of what we do from a strategy standpoint. What matters to us more is what the total potential spending is for the year.
The upfront is nothing more than a futures market so it usually significantly misrepresents what the total demand for television time is. If you look at the last 10 years, nine out of 10 times whatever you saw in terms of growth or contraction in the upfront was significantly different than what the total market levels were. I think there's so much attention to it now because the media companies are obviously using it as sort of a barometer for Wall Street but it's probably the worst possible barometer. The total market is really the barometer in terms of the health of the television business, not the upfront. And right now we're obviously doing some analysis there.
THR: So then what are your expectations in terms of spending for the overall broadcast TV market in the 2008-09 season?
Scanzoni: I'm very, very concerned. We're probably expecting at least on the television side that we will actually see some potential contraction in demand for television time given what's happening economically.
THR: How much of a decline do you think we'll see?
SCANZONI: It's hard to say but I would not be surprised if we saw on total television, a contraction of 2-3%.
THR: What are the main factors causing the expected decline in spending for the 2008-09 season?
Scanzoni: The reason is a very simple one: The advertising business, and primarily the television component of the advertising business, is driven primarily by advertisers that are targeting consumers. We believe, and clearly it's happening already, that consumer spending growth is really going to be significantly challenged in the next six to 12 months, if not even beyond that point.
THR: Do you expect any particular advertisers to be reducing their TV ad spending?
Scanzoni: I think you will probably see some declining spending in the automotive category, which is huge. I think you can have some declining spending in the retail category.
THR: Even though you don't focus on the upfronts or think they're an accurate barometer of the TV market, can you tell me what your sense is of how spending will compare to last year's upfront?
Scanzoni: It's hard for me to believe it would be anything greater than what it was last year given the current economic situation. But who knows because most of money that's spent in the upfront, I would say 60% of it, is flexible. The reality is the majority of it can probably be canceled or moved.
THR: Do you think the writers strike will have an impact on media buying in the upfront market?
Scanzoni: I don't think the strike will have any impact on the buying. I think what the strike will have an impact on, which I think might actually be very positive, is how programming is going to be launched next year. I think it's going to be more difficult for the networks to go about launching full schedules in the fall since they're so behind the eight ball on developing programming for the 08-09 season.
So I think it will probably stagger more the introduction of new programs as opposed to having most of these new programs introduced in the last week of September, the first week of October. I think it will maybe force more of a movement for the business to actually become more of a 52-week business and I think that will create a situation where we will hopefully significantly increase the success rate of shows, which is very dismal right now.
THR: Why do you think shows will have more chance of success on a 52-week schedule?
Scanzoni: It allows for more concentrated promotion. And I think If the programming is staggered it will increase the sampling and hopefully create more exposure and I think we will clearly improve the success rate if we do that.
THR: How do you think the strike will impact the actual upfront presentations?
Scanzoni: You might be evaluating concepts; you'll have an idea of future shows that might be in future time periods without necessarily having the ability to sit there and view a pilot and use that as a means of assessing the value of the show.
THR: What about the cable market? Do you think spending will be up or down this television season?
Scanzoni: Spending has continued to be at a higher growth rate in cable than broadcast. But it's slowed down dramatically and the reason is the fact that advertisers have made such a huge investment in cable that it's hard for them to continue to maintain those growth levels. I think you'll probably have an increase in cable spending if for no other reason than you continue to have a shift in viewing to cable. But even there, I think it will be a very moderate increase.
THR: What are your expectations for the kids TV ad market?
Scanzoni: The kids marketplace I think is going to be pretty much a continued replay of the last couple of years -- relatively stagnant growth. And I don't think that's necessarily that directly economically tied into the general market. I think that's just a function of the core categories having gone through a lot of consolidation.
THR: What do you think about the upfront presentations themselves? Do you think changes need to be made?
Scanzoni: I think they've gone away from the central purpose, which is to basically sell the programming and the strategy behind it to advertisers to really more of a dog-and-pony show with highlights and a sales message that probably isn't even intended for the advertisers anymore. It's really intended for the Wall Street contingency and the Hollywood contingency. Having said that, I think it's a great promotional platform for the networks.
THR: What do you think of the changes NBC and others are making in scaling down their presentations?
Scanzoni: I think some of the changes that people are trying to make this year -- presentations in small groups and making them much more informational and much more where you can exchange ideas and have a dialogue -- is probably a good thing. I think people are realizing that and they're trying to bring it back to what it was so hopefully some of the things that are being tried this year work. We don't need all the pizzazz.
THR: Do you see advertisers that are spending less on TV ads this season moving their marketing dollars elsewhere?
Scanzoni: I think what happens in this kind of a situation is there is a tendency for advertisers to move money into the promotional space, into areas like direct marketing, free standing inserts and couponing, where there is a more direct and calculable return on investment. Even the online world can give you a much clearer return you can measure in more precise terms. We believe online will continue to see healthy growth next year, probably eight to 10%.
THR: Have you heard anything about the new shows we'll be seeing at this year's upfronts?
Scanzoni: We're a little bit behind the timetable because of the strike. So I think it's still a little gray in terms of what's going to be offered. My sense is that you're probably going to see more reality shows because of the economics behind those, and the ability to turn those around quicker, from a development standpoint.
THR: How do you think C3 ratings have been going after a year?
Scanzoni: I think it turned out exactly the way we thought. It's helped broadcast television in primetime. They're getting incremental audience in primetime and a pretty significant boost in daytime by being able to capture some of the delayed viewing that takes place on DVRs that is not commercially skipped.
On the cable side, they're seeing slightly less audience, better than they were last year, but they're still probably under-delivering five or six% versus program live. But the numbers are getting better as they change the way they format the commercials with shorter breaks. So all in all, I think it's been a good thing.
THR: What's next after C3? Are ad buyers or advertisers going to start asking for more granular data?
Scanzoni: I think for next season C3 will be it. That will probably be it for a while, frankly. I think the granular data is out there. And it's always good to look at but if you're going to use it as a currency for negotiations that's a whole other challenge. It's got to be stable and projectible and second-by-second data with the current sampling techniques is that not that stable or projectible so you can use it directionally, you can use it strategically, but I think right now it's still quite a bit of a challenge to use it commercially.