The news of this past week should be of concern to CFOs of companies that have invested in National TV over the course of the last two years.
On December 18th, MediaPost reported that “TV season-to-date” ratings declined between “20% to 30%,” which in turn created a “probable make-good inventory shortage and possible rare TV network cash-back payments to marketers.” Similarly, Digiday reported that “TV networks are overdue on their bills to advertisers” and that some advertisers “are still owed for ad buys placed one to two years ago.”
In short, TV viewing declines have resulted in guaranteed audience delivery shortfalls by the networks. Thus, the networks owe advertisers compensatory media weight or cash-back to make up for that underdelivery. Unfortunately, many of the networks don’t have inventory available to make good on their obligations to advertisers. Complicating matters is the fact that advertiser demand has driven up scatter market CPMs, which makes it less attractive for the networks to offer make-good weight, when they can sell their inventory at a premium, rather than honor upfront market commitments.
Okay. We understand. Audience delivery shortfalls are a fact of life. That said, we cannot think of a good reason why an advertiser would allow a network to take them out one to two years on their guarantees or why their media agency partners would not take a more aggressive stance with regard to securing ADUs (make-good weight) or cash-back.
A guarantee is a guarantee… period. If a media seller cannot deliver on its commitment within the contract parameters, then restitution should be tendered immediately.
So what’s the problem? The answer, and what should alarm CFOs, was the perspective shared by both publications that network and media agency personnel believe that advertisers weren’t “all that interested” in cash-back offers because they “have nowhere to put it.”
Too bad that advertiser CFOs weren’t interviewed by these publications for their point-of-view. From our experience, we have never met a CFO that would rather cede control of any portion of their organization’s ad investment to an agency or a media seller, rather than manage those funds themselves. Who would? If the networks can’t or won’t provide make-good inventory, most CFOs would prefer a check to cover the dollar value of the audience delivery guarantee shortfall. This scenario eliminates any uncertainty regarding the disposition of their funds and reduces the risks of leaving their organization’s pre-paid media funds in the hands of third-parties and perhaps losing track of them altogether.
Advertiser concerns should not be limited to the networks. Media agency National TV buyers have a responsibility to monitor audience delivery, while a campaign is running and to secure in-flight ADUs to cover rating shortfalls when possible. Daypart specific underdelivery is supposed to be tracked by quarter, with make-good weight secured and applied per the terms of the upfront guarantee, which they negotiated on the advertiser’s behalf. Given declining viewership trends, agencies should understand the importance of this aspect of their media stewardship responsibilities and take extra precautions to safeguard their clients’ National TV investments.
The irony… while waiting for their clients to be made whole on prior-year upfront guarantees, media agencies, more often than not, continue to invest additional advertiser funds with the same networks that owe those clients make-good weight and or cash-back refunds.
Our auditing experience repeatedly shows that few CFOs are aware of the important benefits that can be gained by meeting with their marketing team to undertake a formal review of their organization’s National TV media buying and performance monitoring controls including, but not limited to:
• National TV Upfront Guarantee Letters/Terms
• Media Authorization Form Language
• National TV Media Buying Guidelines
• Agency Weekly Audience Delivery Tracking Reports
• Agency Quarterly Post-Buy Performance Reporting
• Agency Quarterly ADU Tracking Reports
The situation described by MediaPost and Digiday poses financial risks for advertisers in general and specifically for those organizations that are not actively managing their National TV media investments.