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ITN Networks

ITN Networks. Board Meeting. March 11, 2009. Rapid Declines in Broadcast Ratings: Inventory. Wide Changes in Local to National Audience Conversions. Potential Rise of “Unwired” Competition. Success Will Require An All-Out-Effort:. Management / Sales / Planning / Buying

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ITN Networks

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  1. ITN Networks Board Meeting March 11, 2009

  2. Rapid Declines in Broadcast Ratings: Inventory Wide Changes in Local to National Audience Conversions Potential Rise of “Unwired” Competition Success Will Require An All-Out-Effort: Management / Sales / Planning / Buying Research / Marketing / Technology ITN Networks 2009: Begins a Multi-Year Period Where ITN Will Face its Greatest Challenges Economy Unprecedented Risk / Uncharted Waters / No Playbook

  3. Rapid Declines in Broadcast Ratings: Inventory Wide Changes in Local to National Audience Conversions Potential Rise of “Unwired” Competition Key: Leverage Relationships Agencies - Clients - Television Stations Execute Short and Long-Term Strategies ITN Networks 2009: Begins a Multi-Year Period Where ITN Will Face its Greatest Challenges Economy Unprecedented Risk / Uncharted Waters / No Playbook

  4. Year-to-Year Declines:4Q 2008 vs. 4Q 2007 Networks Syndication Primetime Off-Network - 9% - 13% to - 16% Across All Primary Demographics First Run Late Night Daytime - 12% - 2% - 12% Daytime Evening News Morning News - 17% - 9% - 5% ITN Networks 2009: Challenges Rapidly Diminishing Supply of Broadcast TV Ratings National Measurements

  5. - 28% - 24% to - 32% - 23% - 27% - 26% - 25% - 23% - 24% ITN Networks 2009: Challenges Rapidly Diminishing Supply of Broadcast TV Ratings National Measurements Last 3 Years of Declines: 4Q 2008 vs. 4Q 2005 Networks Syndication Primetime Off-Network Across All Primary Demographics First Run Late Night Daytime Daytime Evening News Morning News 1/4th of Broadcast Television Audience Has Disappeared in Only 3 Years

  6. Key Factor:Changes in Nielsen Measurement Technologies from Diaries to Local People Meters Top 21 Markets / Top 25 by Dec 2009 Decline in Available Broadcast GRPs Last 3 Years: 4Q 2008 vs. 4Q 2005 New YorkChicagoPhiladelphiaBostonAtlantaHouston -33% -28% -30% -33% -41% -40% W18-49: TampaSeattleMiamiDenverOrlandoSt. Louis -42% -30% -36% -29% -33% -37% ITN Networks 2009: Challenges Rapidly Diminishing Supply of Broadcast TV Ratings Local Measurements Most Markets’ Broadcast TV Declines Have Been Even Greater

  7. July ’08 November ’08 March ’09 % of U.S. Homes Completely Unready: 7.4% 3.9% 9.4% Represented ~14% of Total Broadcast Television Audience Represents ~ 8% of Total Broadcast Television Audience Represented ~16% of Total Broadcast Television Audience Digital Unready Homes have No Cable, No Satellite, No Converter Box With No Other Options, These Homes Watch Disproportionately More Broadcast TV ITN Networks 2009: Challenges Rapidly Diminishing Supply of Broadcast TV Ratings • Digital Transition is Creating a New, Accelerated Decline

  8. Nielsen Oct. ‘08: Random Sampling of Homes Recently Converted to “Ready” 26% Elected to Get “Ready” by Subscribing to Cable +9% Increase in Total Television Viewing -50% Decline in Viewing to Broadcast Television ITN Networks 2009: Challenges Rapidly Diminishing Supply of Broadcast TV Ratings • Digital Transition is Creating a New, Accelerated Decline July ’08 November ’08 March ’09 % of U.S. Homes Completely Unready: 7.4% 3.9% 9.4%

  9. ABC/CBS/NBC/FOX Fall 2006Fall 2007Fall 2008 29 22 15 # of New Prime Shows: Avg. RTG A18-49: 3.1 2.7 2.2 Total GRPs: 89.9 59.4 33.0 (Example: 1x in Each Program) -44% vs 2007 -63% vs 2006 • Economy Has Cut 2009 Production Plans • Low-Cost Reality Programs Have No Syndication Shelf-Life • NBC: Leno M-F 10p-11p: 1 Hour of Broadcast Prime: No Future Syndication Potential ITN Networks 2009: Challenges Rapidly Diminishing Supply of Broadcast TV Ratings • Network Pipeline for New Off-Net Syndicated Shows is Drying Up Off-Network Syndication: 75% of ITN’s Entertainment & Consumer Networks

  10. Nielsen Initiated Factors • Local People Meter Expansion • A/P Meter Technology • National Sample & Weighting Changes Individual Market Factors Lower Ratings Are Significantly More Volatile • % of Homes Converting to Digital Readiness • Speed of DVR Penetration • Local Appeals to Current Network & Syndicated Programs • 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: Challenges Local to National Conversion Factors are Changing More Rapidly, by Market and by Station

  11. Agencies / Agency Groups Station Groups & Reps Seeking Efficiencies Seeking Dollars ITN Networks 2009: Challenges 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 • Much Publicized Local Market Softness: Fuels Belief in Opportunity

  12. Pure Price Play – No Strategic Value Beyond the Lowest Cost • 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 • Developing “Unwired” Threats: Metro, Telemerica, TVAS, Tribune • Increased Agency “Spot” Threats: MediaVest, Group M Agencies ITN’s Success is Built on Expertise to Manage Through Challenges ITN Networks 2009: Challenges Potential Rise of “Unwired” Competition

  13. ITN Networks 2009: Challenges Economy Rapid Decline in Consumer Spending Marketers Seek Both Significant Cutbacks in Dollars and Greater Efficiencies on Committed Dollars Agencies • 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

  14. Premium Strategic Value is Being Replaced with Cost Efficiency The ITN “Brand” is Being Replaced with Relationships ITN Networks 2009: Challenges Economy Rapid Decline in Consumer Spending Marketers Seek Both Significant Cutbacks in Dollars and Greater Efficiencies on Committed Dollars

  15. 2Q 2009 Optional Dollars 3Q 2009 Optional Dollars $59.7 Million ITN Networks 2009: Calculated Responses Leverage ITN – Client & Agency Relationships • First Priority: Secure 2Q & 3Q 2009 Optional Upfront Dollars

  16. - 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: Calculated Responses Leverage ITN – Client & Agency Relationships • Adjust Prices While Re-Affirming ITN’s Strategic Value • ITN Offered 10% CPM Rollbacks on All 2Q & 3Q Upfront Activity, • on the Condition Advertisers Firm Up Optional Dollars - Sought to Minimize Overall Cancellations - Secure Most Profitable Dollars / Forfeit Less Profitable • Re-Affirm ITN’s Strategic Value

  17. 3rdQuarter:Advertisers Have Until May 1st to Firm-Up 7%of Optional Dollars Were Firmed Up Early ITN Networks 2009: Calculated Responses Leverage ITN – Client & Agency Relationships • Results: ITN Maintained and Slightly Grew 2009 Billing Minimized Upfront Cancellations: • 2nd Quarter:37%of Optional Dollars Were Cancelled / Projected ~60% Various Agencies-Clients Rejected CPM Rollbacks / Required Full Cancellations (Economy) 2nd Quarter Dollars Cancelled: $12.2 million

  18. 4Q 2009 2Q 2009 3Q 2009 1Q 2009 $1.1million $9.1million $9.8million Billed as of March 10: $458thousand • ITN was Rewarded for “Goodwill” / Strategic Value / Pricing Initiatives 75% of New Dollars Came from the Agencies Who Accepted Rollbacks • Existing Clients Expanded Into New ITN Networks for Scatter Reckitt placed $2.1 million in ITN Daytime: Never Purchased Upfront or Scatter • Developed Dialogue with Agencies for New, First Time Clients Sprint: $1.7 million “Small Business Owners” News Network, with Vignettes & Digital Extension • Existing Clients Expanded Into New Networks for Upfront Commitment Johnson & Johnson Added $1.5 million Upfront in ITN Noon News: Not Purchased in Initial Upfront ITN Networks 2009: Calculated Responses Leverage ITN – Client & Agency Relationships • Results: ITN Maintained and Slightly Grew 2009 Billing Added New Scatter / Upfront Billing:

  19. ITN Networks 2009: Calculated Responses Leverage ITN – Client & Agency Relationships • Efforts Will Have Short & Long-Term Effects • Enabling ITN to Maintain 2009 Billing in Weak Economy • 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”

  20. ITN Networks 2009: Calculated Responses Leverage ITN – Client & Agency Relationships • Efforts Will Have Short & Long-Term Effects Example: Effect of CPM Rollback Gross Billing $$ Gross Selling CPM Guaranteed Impressions (000) ITN Gross Cost CPM ITN Gross Cost $$ ITN Gross Profit $$ ITN Gross Profit Margin $30 Million $18.00 1,666,667 $15.00 $25.0 Million $5.0 Million 17% $30 Million $20.00 1,500,000 $15.00 $22.5 Million $7.5 Million 25% 10% CPM Rollback 10% More Imps - 33.3% ITN Must Create New Efficiencies

  21. Local Broadcast Television Supply: Ratings Demand: Economy Temporary Situation Ongoing Situation TV Station’s Late News: Original Unit Cost: $1,000 New Unit Cost: $700 Yield in CPM Efficiency is Only 7% , Not30% ITN Networks 2009: Calculated Responses Pro-Active: Emerging Local Market Efficiencies are Temporary Original Rating P25-49: 1.3 New Rating P25-49: 1.0 -23% -30%

  22. TV Station’s Late News: Mon-Sun 10pm-11pm Avg. Rating P25-49: 1.2 MonTueWedThuFriSatSun 10:00pm 10:15pm 10:30pm 10:45pm 1.2 1.0 0.9 0.9 1.0 0.9 0.8 0.8 1.2 1.0 0.9 1.0 1.4 1.3 1.2 1.1 1.6 1.5 1.3 1.2 1.8 1.6 1.4 1.3 1.3 1.2 1.0 1.1 +25% Avg. Rating P25-49: 1.5 ITN Networks 2009: Calculated Responses • Re-Buy Stations: Narrow Rotations to Key Days & Times Declines in Unit Cost Hit Bottoms – Real Efficiencies Are Created From Audience Targeting

  23. ITN Networks 2009: Calculated Responses % Change in Station’s Share of ITN Dollars within Each Market 1Q/2Q 2008 to 1Q/2Q 2009 1. New York 2. Los Angeles 3. Chicago 10. Houston 7. Boston 12. Phoenix 11. Detroit 9. Washington 4. Philadelphia 6. San Francisco 5. Dallas 8. Atlanta KDAF KFWD KDFI KDFW WTXF WCAU KNWS KPRC WGCL WATL WUPA WPCH WSB WAGA KBWB KICU KBCW KNTV KOFY KTVU WWME WBBM WLS WCIU WMAQ WGN KNXV KUTP KTVK KPNX KPHO KSAZ WKBD WMYD WWJ KDOC KTTV KNBC KTLA WNBC WABC WBZ WFXT WTTG WRC WUSA • 100% • + 55% • 22% • + 34% • 26% • + 118% • + 67% • 52% • 49% • + 166% • + 58% • 94% • 50% • 41% • 33% • + 105% • + 37% • 43% • 40% • -22% • + 286% • + 202% • + 38% • 99% • 66% • 36% • + 100% • + 100% • + 98% • 98% • 77% • 54% • 41% • + 62% • + 55% • 30% • + 795% • 71% • + 24% • 23% • + 69% • + 53% • 70% • 41% • + 107% • + 69% -15% Across Most Other Stations

  24. ITN Networks 2009: Calculated Responses % Change in Station’s Share of ITN Dollars within Each Market 1Q/2Q 2008 to 1Q/2Q 2009 14. Seattle 17. Cleveland 13. Tampa 15. Minneapolis 20. Sacramento 16. Miami 19. Orlando 18. Denver WKMG WOFL WRBW WESH WFTV WKCF WWSB WTTA WMOR WTOG WFTS WFLA WTVT WUAB WBNX KMSP KSTC KSTP WUCW WCCO KING KIRO KONG KSTW KCPQ KQCA KTXL KOVR KMAX KXTV WSVN WFOR WPLG KDVR KUSA KTVD • 46% • 25% • + 221% • + 85% • + 46% • + 21% • 97% • 84% • 35% • 29% • 28% • + 100% • + 63% • 47% • 26% • + 95% • + 94% • + 37% • 52% • 48% • + 79% • + 55% • + 34% • 58% • 49% • 24% • + 70% • + 62% • 33% • + 44% • 49% • + 136% • + 55% • 29% • + 42% • + 30%

  25. Executing Individual Station & Group Deals for New Efficiencies • Hedge Individual Market Conditions & Timing • Hold Stations Accountable – Set Firm Examples & Rewards • Increase Flow & Speed of Data to Improve Reaction Time, as • ITN will Have Less Room for Error • Identify & Manipulate Buys According to Increasing Changes in • Local-National Conversion Factors Pro-Active– Not Re-Active to the Changing Market Conditions Since 4Q’08, ITN has made Dramatic Buying Shifts Across Most Markets ITN Networks 2009: Calculated Responses Leverage ITN – Television Station Relationships

  26. ITN Networks 2009: Calculated Responses Pro-Active: Emerging Local Market Efficiencies are Temporary Local Broadcast Television Supply: Ratings Demand: Economy Inevitable Situation 2010? / 2011? State of Constant Negotiation: Leveraging to Establish Efficient, Sustainable CPMs

  27. ITN Networks

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