itn networks board meeting march 11, 2009. itn networks 2009: begins a multi-year period where itn...
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ITN Networks
2009: Begins a Multi-Year Period Where ITN Will Face its Greatest Challenges
Unprecedented Risk / Uncharted Waters / No Playbook
Economy
Management / Sales / Planning / Buying Research / Marketing / Technology
Success Will Require An All-Out-Effort:
Rapid Declines in Broadcast Ratings: Inventory
Potential Rise of “Unwired” Competition
Wide Changes in Local to National Audience Conversions
ITN Networks
2009: Begins a Multi-Year Period Where ITN Will Face its Greatest Challenges
Economy
Rapid Declines in Broadcast Ratings: Inventory
Potential Rise of “Unwired” Competition
Wide Changes in Local to National Audience Conversions
Leverage Relationships
Execute Short and Long-Term StrategiesAgencies - Clients - Television Stations
Key:Unprecedented Risk / Uncharted Waters / No Playbook
ITN Networks
2009:Rapidly Diminishing Supply of Broadcast TV Ratings
Challenges
NetworksPrimetime
Daytime
Morning News Evening News
- 13% to - 16%
Syndication
- 12%
- 9% - 5%
Late Night
- 2%
Across All Primary Demographics
Off-Network
- 9%
First Run
- 12%
Daytime
- 17%
Year-to-Year Declines: 4Q 2008 vs. 4Q 2007
National Measurements
ITN Networks
2009:
NetworksPrimetime
Daytime
Morning News Evening News
Syndication
Late Night
Across All Primary Demographics
Off-Network
First Run
Daytime
- 24% to - 32%
- 26%
- 23% - 24%
- 27%
- 28%
- 23%
- 25%
Last 3 Years of Declines: Last 3 Years of Declines: 4Q 2008 vs. 4Q 2005
ChallengesRapidly Diminishing Supply of Broadcast TV Ratings
1/41/4thth of Broadcast Television Audience of Broadcast Television AudienceHas Disappeared in Only 3 YearsHas Disappeared in Only 3 Years
National Measurements
ITN Networks
2009:
Local Measurements
ChallengesRapidly Diminishing Supply of Broadcast TV Ratings
Most Markets’ Broadcast TV Declines Have Been Even GreaterKey Factor: Changes in Nielsen Measurement
Technologies from Diaries to Local People Meters
Top 21 Markets / Top 25 by Dec 2009 Decline in Available Broadcast GRPsDecline in Available Broadcast GRPs
Last 3 Years: Last 3 Years: 4Q 2008 vs. 4Q 2005
New York Chicago Philadelphia Boston Atlanta Houston-33% -28% -30% -33% -41% -40%
Tampa Seattle Miami Denver Orlando St. Louis-42% -30% -36% -29% -33% -37%
W18-49:
ITN Networks
2009:
Digital Transition is Creating a New, Accelerated Decline
9.4%% of U.S. Homes
Completely Unready:
7.4%July ’08November ’08
Represented~16%
of Total Broadcast Television Audience
3.9%
Represented~14%
of Total Broadcast Television Audience
Represents~ 8%
of Total Broadcast Television Audience
With No Other Options, These Homes Watch Disproportionately More Broadcast TVDigital Unready Homes have No Cable, No Satellite, No Converter Box
March ’09
ChallengesRapidly Diminishing Supply of Broadcast TV Ratings
ITN Networks
2009:
Nielsen Oct. ‘08: Random Sampling of Homes Recently Converted to “Ready”26%
Elected to Get “Ready”by Subscribing to Cable
-50%Decline in Viewing toBroadcast Television
+9%Increase in Total
Television Viewing
9.4%% of U.S. Homes
Completely Unready:
7.4%July ’08November ’08
3.9%March ’09
ChallengesRapidly Diminishing Supply of Broadcast TV Ratings
Digital Transition is Creating a New, Accelerated Decline
Network Pipeline for New Off-Net Syndicated Shows is Drying Up
• Economy Has Cut 2009 Production Plans
• NBC: Leno M-F 10p-11p: 1 Hour of Broadcast Prime: No Future Syndication Potential
• Low-Cost Reality Programs Have No Syndication Shelf-Life
Fall 2006 Fall 2007 Fall 2008
# of New Prime Shows: 29 22 15Avg. RTG A18-49: 3.1 2.7 2.2
ABC/CBS/NBC/FOX
Total GRPs: 89.9 59.4 33.0-44% vs 2007-63% vs 2006
(Example: 1x in Each Program)
Off-Network Syndication: 75% of ITN’s Entertainment & Consumer Networks
2009:
ITN Networks
ChallengesRapidly Diminishing Supply of Broadcast TV Ratings
ITN Networks
2009:Local to National Conversion Factors are ChangingMore Rapidly, by Market and by Station
Individual Market Factors• % of Homes Converting to Digital Readiness• Speed of DVR Penetration • Local Appeals to Current Network & Syndicated Programs
Nielsen Initiated Factors• Local People Meter Expansion• A/P Meter Technology• National Sample & Weighting Changes
Challenges
Lower Ratings Are Significantly More Volatile• Average Rating Per Clearance in a Market: ~1.0 on Most Demographics• 0.3 Change in Rating is 30% Difference from a 1.0
ITN Networks
2009:Potential Rise of “Unwired” Competition
- New and Significant Threat to ITN: Non-Factor for over 10 Years- Largest Threat to ITN’s Future Revenue and Profitability
Challenges
• Much Publicized Local Market Softness: Fuels Belief in Opportunity
Station Groups & Reps Agencies / Agency GroupsSeeking Dollars Seeking Efficiencies
ITN Networks
2009:Potential Rise of “Unwired” Competition
Challenges
• Rush to Develop “Cheap” Unwired Alternatives Threatens ITN’s Category• Brands the “Unwired” Category as “Cheap”, Not Strategic • No Expertise – No Investment in Technology • Failures Negatively Affect the “Unwired” Concept
ITN’s Success is Built on Expertise to Manage Through Challenges
•Developing “Unwired” Threats: Metro, Telemerica, TVAS, Tribune•Increased Agency “Spot” Threats: MediaVest, Group M Agencies
Pure Price Play – No Strategic Value Beyond the Lowest Cost
ITN Networks
2009:
EconomyChallenges
Marketers Seek Both Significant Cutbacks in Dollarsand Greater Efficiencies on Committed Dollars
Rapid Decline in Consumer Spending
•Are Under Extreme Pressure to Respond•Seek to Consolidate Dollars with Fewer Players, Seeking More Incentives, Upgrades & Values • Identify ITN’s Upfront Pricing Does Not Pass On Emerging Local Market Efficiencies
Agencies
ITN Networks
2009:
EconomyChallenges
Marketers Seek Both Significant Cutbacks in Dollarsand Greater Efficiencies on Committed Dollars
Rapid Decline in Consumer Spending
Premium Strategic Value is Being Replaced with Cost Efficiency
The ITN “Brand” is Being Replaced with Relationships
Leverage ITN – Client & Agency Relationships
ITN Networks
2009:
2Q 2009 Optional Dollars
3Q 2009 Optional Dollars
$59.7 Million
First Priority: Secure 2Q & 3Q 2009 Optional Upfront Dollars
Calculated Responses
ITN Networks
2009:
• ITN Offered 10% CPM Rollbacks on All 2Q & 3Q Upfront Activity, on the Condition Advertisers Firm Up Optional Dollars
Adjust Prices While Re-Affirming ITN’s Strategic Value
Leverage ITN – Client & Agency Relationships
- Sought to Minimize Overall Cancellations - Secure Most Profitable Dollars / Forfeit Less Profitable
Calculated Responses
• Re-Affirm ITN’s Strategic Value- Key Strategies of Custom Networks: Ratings – Programs – Dayparts – Consumers
- Pro-Active: Maintain Strong Delivery Track Record from 4Q – February, Despite Significant Audience Declines
Strengthen ITN’s Position for Scatter Opportunities
ITN Networks
2009:
Results: ITN Maintained and Slightly Grew 2009 Billing
Leverage ITN – Client & Agency Relationships
Minimized Upfront Cancellations:• 2nd Quarter: 37% of Optional Dollars Were Cancelled / Projected ~60%
Various Agencies-Clients Rejected CPM Rollbacks / Required Full Cancellations (Economy)
Calculated Responses
2nd Quarter Dollars Cancelled: $12.2 million
• 3rd Quarter: Advertisers Have Until May 1st to Firm-Up
7% of Optional Dollars Were Firmed Up Early
ITN Networks
2009:Leverage ITN – Client & Agency Relationships
Calculated Responses
Results: ITN Maintained and Slightly Grew 2009 Billing
Added New Scatter / Upfront Billing:
•ITN was Rewarded for “Goodwill” / Strategic Value / Pricing Initiatives75% of New Dollars Came from the Agencies Who Accepted Rollbacks
•Existing Clients Expanded Into New ITN Networks for ScatterReckitt placed $2.1 million in ITN Daytime: Never Purchased Upfront or Scatter
•Developed Dialogue with Agencies for New, First Time ClientsSprint: $1.7 million “Small Business Owners” News Network, with Vignettes & Digital Extension
•Existing Clients Expanded Into New Networks for Upfront CommitmentJohnson & Johnson Added $1.5 million Upfront in ITN Noon News: Not Purchased in Initial Upfront
1Q 2009 2Q 2009 3Q 2009Billed as of March 10:$9.8 million $9.1 million
4Q 2009$458 thousand$1.1 million
ITN Networks
2009:Leverage ITN – Client & Agency Relationships
• Rollbacks Reset CPM Bases for All Future Upfront Activity
• New Scatter Clients Expect Greater Discounts for Future Upfront Commitments
• Profitability Will Be Challenged When the Local Marketplace Turns Back Up: Key Reason to Develop “Strategic Value” over “Cheap”
• Enabling ITN to Maintain 2009 Billing in Weak Economy
Efforts Will Have Short & Long-Term Effects
Calculated Responses
Example:Gross Billing $$
Gross Selling CPM
Guaranteed Impressions (000)
ITN Gross Cost CPM
ITN Gross Cost $$
ITN Gross Profit $$
ITN Gross Profit Margin
$30 Million
$20.00
1,500,000
$15.00
$22.5 Million
$7.5 Million
25%
Effect of CPM Rollback$30 Million
$18.00
1,666,667
$15.00
$25.0 Million
$5.0 Million
17%
10% CPM Rollback
- 33.3%
10% More Imps
ITN Networks
2009:Leverage ITN – Client & Agency Relationships
Efforts Will Have Short & Long-Term Effects
Calculated Responses
ITN Must Create New Efficiencies
Yield in CPM Efficiency is Only 7% , Not 30%
ITN Networks
2009:Pro-Active: Emerging Local Market Efficiencies are Temporary
Demand:Economy
Supply:Ratings
Local Broadcast Television
Temporary Situation Ongoing Situation
Calculated Responses
Original Rating P25-49: 1.3 New Rating P25-49: 1.0-30% -23%
Original Unit Cost: $1,000 New Unit Cost: $700
TV Station’s Late News:
ITN Networks
2009: Re-Buy Stations: Narrow Rotations to Key Days & Times
Calculated Responses
TV Station’s Late News: Mon-Sun 10pm-11pm
10:00pm
10:15pm
10:30pm
10:45pm
1.3
1.2
1.0
1.1
1.4
1.3
1.2
1.1
1.6
1.5
1.3
1.2
1.8
1.6
1.4
1.3
1.2
1.0
0.9
0.9
1.0
0.9
0.8
0.8
1.2
1.0
0.9
1.0
Mon Tue Wed Thu Fri Sat Sun
Avg. Rating P25-49: 1.2
Avg. Rating P25-49: 1.5 +25%
Declines in Unit Cost Hit Bottoms – Real Efficiencies Are Created From Audience Targeting
1. New YorkWNBC
WABC
-100%
+ 55%
2. Los AngelesKDOC
KTTV
KNBC
KTLA
-70%-41%
+ 107%
+ 69%
3. ChicagoWWME
WBBM
WLS
WCIU
WMAQ
WGN
-94%-50%-41%-33%
+ 105%
+ 37%
4. PhiladelphiaWTXF
WCAU
-30%
+ 795%
5. Dallas KDAF
KFWD
KDFI
KDFW
-52%-49%
+ 166%
+ 58%
-15% Across Most Other Stations
6. San FranciscoKBWB
KICU
KBCW
KNTV
KOFY
KTVU
-99%-66%-36%
+ 100%
+ 100%
+ 98%
7. BostonWBZ
WFXT
-22%
+ 34%
8. AtlantaWGCL
WATL
WUPA
WPCH
WSB
WAGA
-98%-77%-54%-41%
+ 62%
+ 55%
9. WashingtonWTTG
WRC
WUSA
-26%
+ 118%
+ 67%
10. HoustonKNWS
KPRC
-71%
+ 24%
11. DetroitWKBD
WMYD
WWJ
-23%
+ 69%
+ 53%
12. PhoenixKNXV
KUTP
KTVK
KPNX
KPHO
KSAZ
-43%-40%--22%
+ 286%
+ 202%
+ 38%
% Change in Station’s Share of ITN Dollars within Each Market1Q/2Q 2008 to 1Q/2Q 2009
ITN Networks
2009:Calculated Responses
13. Tampa WWSB
WTTA
WMOR
WTOG
WFTS
WFLA
WTVT
-97%
-84%
-35%
-29%
-28%
+ 100%
+ 63%
14. Seattle KING
KIRO
KONG
KSTW
KCPQ
-47%
-26%
+ 95%
+ 94%
+ 37%
15. MinneapolisKMSP
KSTC
KSTP
WUCW
WCCO
-52%
-48%
+ 79%
+ 55%
+ 34%
16. Miami WSVN
WFOR
WPLG
-49%
+ 136%
+ 55%
18. DenverKDVR
KUSA
KTVD
-29%
+ 42%
+ 30%
19. OrlandoWKMG
WOFL
WRBW
WESH
WFTV
WKCF
-46%
-25%
+ 221%
+ 85%
+ 46%
+ 21%
20. SacramentoKQCA
KTXL
KOVR
KMAX
KXTV
-58%
-49%
-24%
+ 70%
+ 62%
17. ClevelandWUAB
WBNX
-33%
+ 44%
ITN Networks
2009:% Change in Station’s Share of ITN Dollars within Each Market
1Q/2Q 2008 to 1Q/2Q 2009
Calculated Responses
ITN Networks
2009:Leverage ITN – Television Station Relationships
Calculated Responses
Pro-Active – Not Re-Active to the Changing Market ConditionsSince 4Q’08, ITN has made Dramatic Buying Shifts Across Most Markets
• Executing Individual Station & Group Deals for New Efficiencies
• Hedge Individual Market Conditions & Timing
• Identify & Manipulate Buys According to Increasing Changes in Local-National Conversion Factors
• Hold Stations Accountable – Set Firm Examples & Rewards
• Increase Flow & Speed of Data to Improve Reaction Time, as ITN will Have Less Room for Error
ITN Networks
2009:
Demand:Economy
Supply:Ratings
Local Broadcast Television
Inevitable Situation 2010? / 2011?
Calculated Responses
Pro-Active: Emerging Local Market Efficiencies are Temporary
State of Constant Negotiation: Leveraging to Establish Efficient, Sustainable CPMs