First, let me start by saying that I hope that you are safe and well, whoever you are. And that your family, your friends, your colleagues, and your businesses are also safe and healthy. Secondly, I wondered if we could briefly examine the difference between the words opportunity and opportunism. We should define opportunity first. It’s a set of circumstances that makes it possible to do something. Nothing nefarious. It’s a chance to do something (and let’s presume something that you want done).
Opportunism, on the other hand, is generally understood to be the practice of taking advantage of those circumstances (i.e. the opportunity) with little regard for principles or for the potential consequences of others. This is like the jerks who buy up hand sanitizer and masks and then try to sell them at outrageous prices to others in need of them. Or concert and sports tickets during normal times, but don’t get me started on that.
Now that we have that cleared up, I’ll get to my point. If you are an advertiser who is currently owed any level of TV weight for prior under-delivery, and you are comfortable being on air right now, this may be a damned good time to recover said weight. TV viewership is up. Demand for ads is down, due to certain advertisers and entire categories pulling back. This is not opportunism. If you are owed the audience weight (for reasons we’ll get in to), then you are owed the weight. Networks and stations have plenty of it. This is an opportunity for you to make your prior buys whole and frankly for sellers to get any outstanding liability to you off their books.
Why Would An Advertiser Be Owed TV Weight?
When advertisers purchase TV commercials, they are essentially buying an audience from the seller (a station, network, etc.). That audience is typically on a specific demographic (like Adults 25-54), measurement provider (such as Nielsen) and currency (like Live plus 7 days of DVR playback). Because the audience for each commercial is not known until after it airs and is measured, its audience is based on an estimate of what it will achieve – negotiated between the buyer and the seller. These individual commercials together form a schedule or package with each seller, with a collective estimated audience.
In most cases, that purchased audience which has been agreed between buyer and seller is guaranteed by the seller on some level. In this sense, as we like to tell advertisers, TV and radio media are a kind of pre-paid expense. The schedules air, and the advertiser is billed for them. If the schedules fail to deliver their audience, then the advertiser is owed restitution weight to make the schedules good. Guarantees vary, but as a rule of thumb:
Most National TV is guaranteed per seller to 100% of the purchased audience (delivered over the course of the guarantee period, which might be a quarter or a year).
Local or Spot TV is guaranteed by station by quarter, with the guarantee varying between 90-100% -- often depending on the negotiation, the size of the market, and on the veracity of measurement being employed (for example, many MMi clients receive 100% guarantees by station and quarter in Local People Meter markets and 95% in other markets).
Local or Spot radio should be guaranteed on some level, particularly in markets with Portable People Meter (continuous electronic measurement) technology. Guarantee thresholds may vary from 90-100% and may be at the station or ownership group level. MMi clients have been able to obtain guarantees at the individual station level.
When advertisers accrue under-delivery (referred to as UD in local media and ADU in national), they are owed equivalent recovery weight to provide them with the audience that they already paid for.
If Audience Was Owed, Surely It’s Already Recovered … Right?
Well, not necessarily. For a variety of reasons, sometimes this owed audience delivery is not recovered as quickly as you might think. Frankly, sometimes agencies are just not on top of tracking it and pushing sellers for recovery. When the market is strong, sellers may slow walk recovery for prior schedules, because they would prefer to sell the commercial time today vs. giving it away to address a prior shortfall. There may also be other extenuating circumstances, like client directives to hold off on recovery until a future promotional period. For local media specifically, weight for prior UD will typically only be provided to advertisers in conjunction with a current paid schedule.
So what we see, in some cases, is weight owed to advertisers that can date back for multiple quarters, and in some cases even for multiple years. And these are advertisers who are 3rd party auditing their media buys on an ongoing basis, so they are on top of things relative to others. There can be a variety of reasons for this. In many cases, an advertiser and their agency may not have always had the best processes in place for tracking and recovering weight owed. Putting these processes in place can sometimes take time, during which weight owed continues to rack up. Further, media industry buying platforms unfortunately do not always make it seamless to electronically track and manage recovery.
In certain economies where demand is strong (and during political advertising windows), it can be particularly difficult to get sellers to provide restitution weight even though it is owed. We’ll also frequently see an advertiser hire a new agency, and that agency agrees to recover the prior agency’s owed weight – and then “discovers” it’s more difficult than they anticipated.
Why Now Might Be the Time To Recover What's Owed
So some advertisers have this UD or ADU audience that is owed to them, that may date back for several years. And the older it gets, the harder it becomes to recover. And frankly they still want it, because otherwise they have to write it off. But they are tired of seeing it, tired of talking about it, just tired. For those advertisers and their agencies, now may just be your time.
Obviously, not every advertiser is able to run commercials during this unusual and difficult time. There is a lot of economic uncertainty in general, and many businesses have had their operations interrupted and/or demand for their products or services constrained by the pandemic. In general, research has shown that brands who advertise during downturns fare better during recoveries, however I acknowledge that this may still not be practical for every advertiser.
But if you are advertising, and if you are owed historical UD or ADU weight, this may be a great opportunity for you to get your house in order. Here’s why:
Audiences are there. People are at home, and they’re watching lots of TV. Much has been made about the spike in consumption to streaming services, but TV viewing is up across the board and particularly for younger demos who aren’t usually home as much. So “supply” is abundant.
Many advertisers have cut back. For the reasons discussed above, some advertisers can’t be on air now, or have had to make shifts and cuts. Many local stations are trying to help their clients by giving away free ads, and the FCC recently ruled these stations would not be penalized for this practice for “lowest unit charge” calculations used by political advertisers. NBCUniversal announced last week that it was cutting back on ad time. Overall, “demand” is probably soft.
Sellers face uncertainty. No one knows for certain how long this will go on, or what impact it will have on the TV market going forward. The National TV Upfronts (when TV ad time is purchased for the next season) typically begin in May. They’ve been postponed, and most expect those transactions to look very different this year. In fact, the Scatter market has already become “flexible,” with the Upfronts projected to be “one of the lightest ever”.
This combination of lower demand, higher supply (viewers), and profound uncertainty represents an opportunity (not opportunism) for buyers and frankly also for sellers to get their mutual accounts settled and to start fresh. As my colleague, Lisa Niemeyer, points out in her excellent post on maintaining media accountability through the COVID-19 epidemic “If you paid for commercials last year or last quarter and are owed audiences, now is a great time to make those deals whole.”
Advertisers and their agencies should take a step back and evaluate their situation with regard to audiences owed, and develop an approach to take to sellers. Unquestionably, there are many things to consider. What are impressions selling for in the current marketplace, and how does that cost or value equate to when the shortfall was actually incurred? What programming did the shortfall occur in, and what is available now? Do you have paid schedules running? How old is the liability, and how much trouble have you had recovering it during “normal” times? These all become part of the discussion and negotiation between buyer and seller … again, not opportunism but the opportunity to clear up old audience debts and simultaneously help advertisers retain a presence during difficult and uncertain times.
Ultimately, if you are an advertiser who is carrying UD or ADU weight, and if you are continuing to advertise during COVID-19 or are able to do so, there may be no better time than right now to get those buys made whole with sellers. Remember, this media is essentially a pre-paid expense, and this may be your best opportunity to recover that value (vs. writing it off). Audits of second quarter, 2020 could be the report where we are able to show ADU and UD in those old quarters and broadcast years was finally closed out. We don’t like talking about ancient audience liabilities any more than you and your agency like hearing about them, so don’t let this opportunity to clean them up pass without at least investigating your options.