May 13, 2009

What's Up With DRTV Media

The biggest concern in the industry right now, the one topic that's on every client's mind, is what's happening with short-form DRTV media. In late 2008, everyone believed 2009 was going to be the biggest year in DRTV history -- and January indeed started with a bang. But then things started falling apart. These days, more than one industry leader has expressed concerns to me that we might be in for a long summer.

Whenever I have questions about the media environment, the first person I turn to is Dick Wechsler, president of Lockard & Wechsler Direct. If there were such thing as a PhD in DR media, Dick would be known as "Dr. Wechsler." As busy as he is running a successful agency, Dick was kind enough to write the guest post below, which explains what's happening and what we can expect. Dick writes:

Few factors affect the health of the DRTV business more than available and affordable television inventory. With the world mired in a deep recession, one would expect television inventory to be widely available at fire sale rates. That isn’t the case. In fact, the market for DRTV inventory, particularly two-minute avails, is extremely tight.

Putting emotional frustrations aside, there are real factors shaping the current media environment. There’s a good chance we’ll be contending with these factors for some time to come.

1. There is a real reduction in the number of commercial minutes available. There were 15% fewer commercial minutes in January 2009 than in January 2008. There were 10% fewer commercial minutes in February 2009 than in February 2008. This contraction places significant pressure on inventory that would normally be available to DRTV advertisers.

2. The 2009 Cable Upfront Market, which follows a calendar year, was the strongest in history. Upfront contracts are inflexible in the first quarter of the deals. The strength of the Cable Upfront explains why 1Q was surprisingly tight for DRTV despite the economic downturn.  In fact, the progressive growth of the Cable Upfront market over the past three to five years is largely responsible for the tightening of the 1Q DRTV market over that same period.

3. Poor economic conditions did prompt many Upfront advertisers to release inventory back into the market as is permitted under their contracts. However, much of this inventory never found its way to the DRTV scatter market. Why? Because the advertisers who released it were allowed by the cable networks to purchase it back at lower rates than they had negotiated in the Upfronts. These buys are taking place week to week, creating a very volatile market.

4. Going forward, we expect the Upfront Market to weaken and the Scatter Market to strengthen creating even greater inventory and pricing volatility.

5. DRTV is a leading indicator of the economy. Inventory began to open up in 2Q 2008 and response rates were strong. The economy began to unravel in 3Q. We’ve experienced a progressive tightening of inventory since January of this year and a corresponding weakening of response rates.

So, going forward, expect the DRTV media market to be choppy. Despite growing unemployment and a weak economy, very real factors have affected the television marketplace and the opportunities one would expect to be available to DRTV advertisers.

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