Rino Scanzoni

Rino Scanzoni, our TVWeek Media Buyer of the Year is the Chief Investment Officer for GroupM. As such, he oversees all trading and implementation for the GroupM media agencies: Mindshare, MediaCom, Maxus and Mediaedge:cia. His also the Chairman of Mediaedge:cia.

A longtime colleague of GroupM Global Chief Executive Officer Irwin Gotlieb, Scanzoni was previously Executive Vice President and Director of National Broadcast of MediaVest, TeleVest and D'Arcy Masius Benton & Bowles. He joined D'Arcy in 1978.

This past year presented both media buyers and media sellers with the most challenging economy many had ever seen. Talking to a number of sellers to determine our Media Buyer of the Year, Scanzoni was mentioned time and time again as being particularly smart and effective on the buying side during last year's upfront. So that's where we started our discussion. Following is an edited interview between Scanzoni and TVWeek's Chuck Ross.

TVWeek: Congratulations on being named our Media Buyer of the Year. It’s our 10th annual.

I wanted begin by talking a little bit about what we were facing during last year’s upfront. It was an economy that many of us hadn't seen in our lifetime. Please share your thoughts about what how you saw the marketplace and what you thought you needed to do to make sure it turned out to be a win for your clients, yet at the same time getting the networks to move in a market that wasn't to their advantage at all.

Rino Scanzoni: I think our approach is a very different one, that it's based upon very, very stringent and deep analytics. I've always believed that when you look at the television business, the national television business, it parallels a lot of the way business in general is conducted.

There is a consistency in the media – particularly television – that follows a lot of those basic underlying principles. One of the things that I am very interested in and have a pretty good background in is economics.

So I approached this past upfront very, very scientifically. Not only this past year but consistently, over time, if you approach this scientifically, this is a marketplace that plays in a very similar fashion to a lot of the financial markets. So that’s how we approach it, in our tools. And how we go to market has a lot to do with those principles.

A lot of our strategy stem form the fact that we spend a lot of time doing forecasting and trying to really get engaged about where the market demands are going to be--how much will be coming from what categories, and how that’s going to play out in the market. Then we develop a strategy accordingly. And I think that's probably what's given us a success over time.

TVWeek: So what did you think the lay of the land was going into last year’s upfront?

Scanzoni: I've said this very publicly. The upfront marketplace doesn't tell you anything. It's nothing more than a reaction to what's impacted the marketplace historically—the five, ten months that lead up to it.

It's all about what the total market potential is and that's how we approached this.

When we got into last year there was no doubt that we knew there was going to be a drop in demand in the upfront. The reason is because, obviously, we were going through a very difficult economic time. The short-term market for the last ten months leading up to the upfront was soft. That's going to create the rationale to divest away from the upfront.

So if you focus in on that part of it you will always miss the boat. Again, as I mentioned, what you have to do is look at what the total market potential is. That's really what matters. The upfront is a futures market. You look at it and ask, “Is is that price better or worse than what the total market potential is?” and then you develop an investor strategy accordingly

Most people don't do that. They react to the market. We don't do that. We don't pay much attention to if the upfront market's up 30 percent or down 20 percent. What matters to me is what does that mean relative to what the total market potential is. And so all of our strategies are based on how much money is going to ultimately be spent in television in a given area when you add it all together.

So last year when we went into the upfront and we saw clearly there was going to be a pricing correction because there was a decline in demand that was pretty significant.

Thus that led to a scenario where it was very, very clear that making long-term commitments was in the best benefit of our clients.

TVWeek: OK, So you had your stategy. But how then do you convince the networks to move? How do you convince them that yes, Rino’s right? The last thing they want is to be hosed in a down market.

Scanzoni: I think what it has to do with is the fact that I think we have some credibility over time—the ability to be able to actually project what a marketplace is going to be.

The sellers obviously need to create an advantage in the upfront marketplace because if there is no advantage, there's no point in spending the money long-term. You can spend it week to week, in the scatter market. So they need a strike place that will support a scatter marketplace going north. Because that's really what clients want to see if they make that kind of investment in the upfront.

So it's a matter of going down to each network and having that conversation in a very, very intelligent form. Plus I have the ability to span four agencies. In the national TV area we book probably a little over a quarter of the U.S. market. We've got every category of advertiser. We have a pretty good idea of what the potential demand situation is going to be. So I think that gives us a tremendous amount of credibility. That plus the fact that we move based upon what we believe, not based upon what other people are doing.

So if I feel that this is where we need to be, that creates an advantage, because we are prepared to make those commitments without the marketplace ultimately validating it.

And that's a big difference because what happens in an economic downturn especially it that everyone's watching what everybody else is doing and they're reacting to what everybody else is doing.

I don't really care about what everybody else is doing, it doesn't really matter to me. What matters to me is what I believe the opportunity in the marketplace is and where the price should be. And if the price is at the right point and the opportunity is there, then obviously we are going to make the commitments, regardless of what anybody else is doing.

TVWeek: In negotiating last year’s upfront was there one particular deal that you thought was the one that really broke the ice?

Scanzoni: No. We had multiple conversations. I don't think what we ultimately did was driven by any one network. I think we wound up closing business pretty quickly across all the networks. It wasn't a situation where one established the market for us. I think we were having those conversations with all of them and I think that some of the reports about us doing an NBC deal were clearly premature. Our deal with NBC was important, but that wasn't the driver at all, I don't think.

TVWeek: Would you say there was a driver or not really?

Scanzoni: No. I think all of the networks got our perspective. A lot of our competitors were pushing for price levels which were completely unrealistic given the dynamics of the marketplace. Whether we were talking to ABC, CBS, or NBC, last year I think they were all kind of in the same place. They got where this was going and what they needed to do. It wasn't a situation where one got it and then eventually the others came around. I think they were all pretty much in the same place in terms of what the market potential was and I think our view and their view were not that far apart.That's really why I think we were able to put it together pretty quickly.

TVWeek: Though the upfront process seemed to last longer last year than in the past. Is that a good thing? Is it a bad thing? And do you think that will be repeated this year?

Scanzoni: I think the days where the upfront happens in three days—which was probably 10 years, 10 to 15 years ago—that's not going to happen any more. There’s just way too much complexity. There's a heck of a lot of fluidity between the different components of cable and syndication and now we have online video. There are all of these different considerations that have to be made. It's a very, very complex market. Things are going to take longer and maybe if the market's a little bit under some strain it takes a little bit longer.

But the days when this thing is all going to happen in two or three days are history. And I'm glad to see that go because given the amount of investment involved, to be sitting here and doing business at four in the morning is insane and it was probably insane 12 years ago.

So I'm glad that we've evolved into a much more sophisticated approach that allows for a reasonable amount of time to make some very important business decisions. You're going to continue to see a market that will be drawn out for no other reason than there's a lot of players, there's a lot of complexity, and the deals are complicated now. They just don't involve buying a bunch of spots and agreeing on a price. There are a lot of marketing initiatives that are layered on that are very, very complicated and need to be worked through. You're going to continue to see an upfront market that will take some time to work through regardless of the economic dynamics in any given year.

TVWeek: It's interesting hearing this from you, since legend has it that if anyone was able to take advantage of those deals at 4 a.m., it was you and Irwin.

Scanzoni: Again, I don't think it's a situation where you're going to get a better deal at four in the morning than you're going to get at four in the afternoon. When we were doing that you were dealing with a much more constrictive marketplace. You didn't have 70 viable networks. And you didn't have all of the other areas where you can reach customers through video contact.
So that requires in many cases a different approach. The market has changed now and the complexity of it is five fold to what it was 20 years ago. That’s not going to lend itself to deals at 4 a.m., nor should it.

TVWeek: Now that you’ve brought up how much the viewing contact with the consumer has changed and exploded, can you talk a little bit about the whole issue of fractionalization and the fact that clearly people want to see and hear media when they want to see and hear it. We’ve got the splintering of audiences and the increase in the amount of programming by distributors such as cable, satellite and telcos. But outside of an Olympics or a Super Bowl or an “American Idol,” it’s harder and harder to find the really mass audience.

Scanzoni: The positive is that it’s presented a huge opportunity. The good news is that that up to this point we've been dealing with relatively stable TV viewing levels. That’s across all demographic groups. And in many cases we've actually seen an increase in TV viewing. Overall, if we look at the last 20 years, it's been relatively stable. There has been no loss of television viewing to other media.

TVWeek: Just a redistribution within television.

Scanzoni: Yes. But what the redistribution has done is it has now provided all of these additional venues to reach your audience. There used to be a point where you'd buy three spots in a roadblock—when there were three networks—and you would reach 95 percent of the audience

Well obviously you can't do that any more. But the reality is that you could still put together a schedule across the networks that are suitable for your target audience and still reach the same audience. So there has been no impact whatsoever on reach. Our clients continue to be able to reach an audience.

In fact, what they can do now is that they have a much higher level of targetability because of the fractionalization. A lot of the networks that have grown in the last 20 years have a much more defined audience. So there has been no decline in ability to reach an audience.

So what we've had actually in the last ten years is a tremendous amount of deflation in television costs for advertisers. The reality is that as more viewing goes to cable, more dollars go to cable, and people reblend their mix. The bottom line, television costs to advertisers have declined significantly.

TVWeek: As advertisers put more and more money on cable.

Scanzoni: Exactly. And as your costs are going down, reach is not impacted and you have the ability to even deliver more targeted advertising. So, it has actually been a tremendous boom to advertising investment in television. Fragmentation has created huge opportunities for clients.

TVWeek: Meanwhile, for those advertisers who want to reach the mass broadcast audience the irony is you need more GRP's to do it--

Scanzoni: Their cost per thousands over the last 10 to 12 years might have been rising slightly higher than cable but it's only because their supply is going down faster than their revenue.

National television has been deflating. Because as you spread more and more money and you move it because of fragmentation to cable, you're repurchasing those GRP's at a much lower price. So on a bottom line basis you've actually had price deflation.

If you look at some of the cable networks, there's probably 12 of them that drive most of the viewing. And they probably have seen not only significant unit price growth because their audiences have been growing, they’ve also seen some CPM inflation as well. And in many cases it’s relatively comparable to broadcast even though there is still number differences.

But the reality is that it all comes down to revenue. What matters is that cable is in a position where their profit margin is a lot healthier than the broadcast model, which still relies predominantly on advertising. A lot of cable monies are being driven by the fact that they have dual revenue streams . Their model is obviously a lot healthier than the broadcast model which still relies predominantly, as I said, on advertising.

TVWeek: I want to shift this discussion and talk about Return-on-Investment—ROI—and the client side for a few minutes. What do you think about the future of interactive TV and what are the various ways that television particularly can improve what you can get for your clients on a delivery basis that’s somehow approaching more an ROI kind of measurement?

Scanzoni: It's very important. Fragmentation, by the way, has probably improved ROI, because of the fact it's allowed for finer level of targeting.But I think we are on the verge of moving the television model, which is really feeding out messages to the masses. Even though the masses have been redefined a little bit to a more targeted level because of cable, we're now on the verge of actually moving what we consider this broad-based entertainment content distribution advertising system.

We’re going to move to a much more addressable level, where there is going to be the opportunity to identify, down to the household level, the audience that is relevant to a particular advertiser. Once we can connect a particular client in that way with their target, that should crive significant improvements in ROI.

Right now – even though cable fragmentation has probably allowed us to be much more targeted—there still is a significant amount of waste. We still have messages being exposed to audiences that would never consider an advertisers product It's gotten better – we're much better off now than we were when there were only three networks. But when we're at a point where we can actually insert down to the household level on a national basis, we'll see this huge increase in ROI.#

In Tuesday's Must Read part two of our interview with Rino Scanzoni, our TVWeek Media Buyer of the Year, he talks more about ROI and the importance of measurement and  the future of TV advertising and TV itself. Click here for Part 2.