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Tuning Out TV

The nation's top advertisers and network television executives will invade New York City once again this week for what has become the TV industry's most celebrated exercise in failing up: the annual "upfront" market. That's when the Big Six--ABC, CBS, NBC, Fox, UPN, and WB--unveil their new fall schedules to advertisers, who then pony up billions of dollars to prebuy commercial time that costs more and delivers less. Even though network audiences continue to dwindle, the upfront is expected to surpass last year's record haul of $9.5 billion. While the take probably won't represent a double-digit increase like last year's 15 percent jump, it will give the networks all the excuse they need to boast that nothing succeeds like a 30-second TV spot.

Yet behind all the spin about the new shows--most of which will be canceled before you can say My Big Fat Obnoxious Fiance --the networks are painfully aware that it is they who are buying time. Under assault from cable, DVD s, and the Internet, CBS, NBC, and the others can't come close to delivering the crowds they once did. And even when hit shows like The Apprentice and CSI do attract millions of viewers, commercial-zapping digital video recorders like T iV o are waiting in the wings to crash the advertising party. "Advertisers aren't willing anymore to simply put all their money into 30-second spots and cross their fingers," says Kathy Delaney, executive creative director of the ad agency Deutsch, which handles Revlon and Mitsubishi. "Those days are gone."

The new reality of TV is that many of the country's biggest advertisers, including Coca-Cola, General Motors, and Procter & Gamble, are finding alternative ways to put their goods and their messages in front of consumers, and they're doing it with some of the money that used to pay for prime-time television commercials. Revlon is running minimovies in theaters, American Express airs short films on its Web site, and General Motors' Hummer H2 gets almost as much face time as the crime specialists on CSI: Miami . In a March survey of the Association of National Advertisers, more than 40 percent of those asked said they planned to move part of their next-year ad budgets to other outlets, such as the Internet, outdoor advertising, product placement, cable, and special events.

Coca-Cola, the onetime king of the commercial, for instance, cut back its spending on TV ads from $269 million in 2001 to $189 million last year, according to TNS Media Intelligence/CMR, which tracks ad spending. In addition to online advertising, outdoor ads, and sponsorship of events such as the NCAA basketball tournament, some of that money is being used for the company's new Red Lounges. Located in two shopping malls so far, the lounges are essentially Coke-immersion zones where teenagers can play video games, surf the Web, sprawl on the red sofas, and--what else?--drink Coke. Aside from vending machine sales, which are easily quantifiable, it's hard to measure what these hangouts will do for Coke's bottom line. Not that Coca-Cola is concerned. "We want to be part of our customers' lives every day," says Katie Bayne, Coca-Cola's head of integrated marketing. "We want to connect with them where their passions are."

Ditto for Revlon, which recently began airing two-minute minimovies in theaters featuring Halle Berry and other beauties. "We used to have to really convince clients to think beyond the TV spot," says Delaney. "But it's not so difficult now that they realize that the stronger your brand essence, the less it matters if someone zaps through your commercial on T iV o." Advertisers also are trading in their turf between TV shows for roles in them--and movies, too. The William Morris Agency and Creative Artists Agency now represent dozens of consumer goods companies, including Ford, Anheuser-Busch, and Motorola, which they bring to the table when movies, music videos, and TV shows are on the drawing board. When Ice Cube's new movie, Are We There Yet?, opens, it will be tough to determine who has the leading role: Ice or his jazzed-up Lincoln Navigator.

Then there is cable. Forget the old argument that all the Queer Eye for the Straight Guy showings can't equal one episode of The Apprentice . While that may be true, it no longer matters that much. For the first time, cable's aggregate audience will actually top the combined viewership of the Big Six networks, and the Discovery Channels and CNNs of the world are expected to commandeer as much as $1 billion of upfront ad money. "For advertisers interested in target marketing, the networks can seem inefficient," says Brad Adgate, senior vice president at Horizon Media, a media buying firm in New York. GM, for example, which reduced its prime-time spending by $40 million last year, is shifting more dollars to cable, the Internet, and other outlets to get its wide range of products in front of as many demographics as possible.

The Internet, which attracted $6.5 billion in ads last year--a 16 percent increase over the year before--is expected to jump an additional 6 percent this year. Online advertising offers not just interactivity but an easy way to mingle content and direct targeting in a subtle fashion--at a fraction of the network price. When visitors to American Express's Web site watch the minifilm starring Jerry Seinfeld and a comically neurotic Superman, for instance, the card is barely mentioned. "There are a lot of people asking what are we accomplishing," says Peter Tortorici, head of TV programming at MindShare, a media services firm. "Who knows, exactly? But we're capturing critical mass and bringing them to our site."

In a world where the average consumer receives 3,000 ad messages a day, simply reaching audiences is no longer enough. Advertisers want to have a one- on-one dialogue with consumers. And while many are content to let celebrities do their pitching, Procter & Gamble, for example, is turning directly to teens. Dubbed the Tremor Nation, its online focus group of more than 200,000 teens weighs in with opinions on everything from product names to packaging of P&G products. Then the word of mouth begins. So far, Tremor has been behind the buzz on CoverGirl's latest lipstick color and Pringles's newest potato chip flavor.

Which is not to say that advertisers won't continue to fork over millions to reach millions in one pop. "Network television is still the best medium for building brand awareness and selling products," says Adgate. Some advertisers, including Toyota and Anheuser-Busch, are even slightly increasing their prime-time spending to capitalize on big events like the Summer Olympics. On top of high drama and a wide audience, few things please advertisers more than associating with the feel-good atmosphere created by athletes pursuing their dreams.

Even so, broadcasters are worried enough about their future that for the first time ever, they have banded together to promote network television as a whole. There is a lot at stake, and not just the $55 billion that TV collected in advertising revenue last year. The entire business model that has made broadcast television a money-minting machine--sell lots of 30-second commercials for gobs of money and then use the cash to foot the bills for everything else--is in peril. "For the price of one spot in a hit show, you can buy a lot of everything else," says Robin Kent, chairman and CEO of Universal McCann, the global advertising conglomerate. "And even a 1 or 2 percent drop at the networks would have a huge impact."

Join 'em. With that in mind, the networks, too, are adapting. Although DVR s are in fewer than 4 percent of homes, their popularity is growing. And studies show that the average TiVo viewer zaps 77 percent of the commercials out of recorded shows. Since the more popular shows are the ones most likely to be recorded, it is the most expensive commercials that are biting the dust. So networks are focusing on integrating ads into shows and striking deals to keep ratings makers happy and advertisers in the mix. NBC will soon debut The Contender, a boxing contest produced by Reality TV's reigning prince, Mark Burnett, and DreamWorks Television. In an unprecedented concession by a network, the show's producers will retain six commercial spots each episode, which they can sell to advertisers who will also get to showcase their product. In another unusual deal, consumer products giant Unilever will produce six episodes of a new ABC drama and license it to the network in return for the ad time.

Not all these newfangled approaches work. Major League Baseball quickly discovered how far afield it had gone earlier this month when it agreed to allow Sony Pictures to promote its upcoming Spider-Man 2 movie by decorating bases with the Spider-Man web. Fans threw a fit, and the project was scrapped. "All sides recognize that things are going to change, but to what and in what way, nobody really knows," says Tortorici. "All we know is that whatever we think the future of TV is, we'll think differently about it a year from now."


Betsy Streisand, usnews.com. May 24, 2004.

Copyright © 2004 U.S.News & World Report. All rights reserved.