Pricing Storm on Horizon

Mar 20, 2006  •  Post A Comment

The Weather Channel is putting itself at the center of the next storm over how advertising is priced.

The network is the first to buy raw minute-by-minute viewing data from Nielsen Media Research. It plans to provide sponsors with post-buy reports based on both the minute-by-minute data and traditional demographic ratings from the fourth quarter so they can gauge viewership of their commercials, said Liz Janneman, The Weather Channel’s senior VP of cable advertising sales.

Jon Mandel, the chief investment officer at ad buyer MediaCom known for blunt statements and stirring controversy, applauded The Weather Channel’s use of additional data. While TWC is just beginning to use the new data for demonstration purposes, Mr. Mandel said, it should be the basis of ad price negotiations.

“I think we’re going to be doing everything on commercial ratings,” Mr. Mandel said. “The question is how many people are watching the commercial. We pay for how many people are watching the commercial.”

Minute-by-minute ratings, along with methods to measure the use of digital video recorders and audience interest level in commercials, are part of a shift in the television industry that’s helping networks and advertisers put more precise values on commercial time.

Networks that resist incorporating new data into their commercial pricing will suffer, Mr. Mandel said.

“If they don’t want to admit how many people are watching the commercials is important, then I’m going to have to put a little more fat into the adjustment and that will just drive money further out of television and into other media,” he said. Networks and advertisers will have to examine how minute-by-minute data affects their bargaining position before the information starts to affect price negotiations.

“This would be a massive change to the system, and I don’t know that we’ll see that implemented going into the upfront,” said Steve Grubbs, CEO of PHD. With the new data will come new disputes over which commercials command a premium. The first spot in a pod of commercials gets the highest viewership, so networks will have to reprice their inventories.

“You would need agreement between the vendors and the buying community that they were going to move to that new currency,” said Rino Scanzoni, chief investment officer for Mediaedge:cia. “There’s been discussion, but there’s no agreement that’s going to be the currency of negotiation.”

Assigning a rating to each 15-second spot isn’t practical because the data may be suspect, particularly for lower-rated cable networks, Mr. Scanzoni said. He prefers generating an average rating for all of the commercial time in a program.

“I think eventually that’s probably where the industry will go,” Mr. Scanzoni said. “The question is when, and I think it’s going to be sooner as opposed to later.”

Pricing practices are likely to be in turmoil until networks and buyers become accustomed to juggling new ratings data from digital video recorders and on Hispanic audiences and out-of-home exposure to various media, said Bruce Goerlich, executive VP and director of strategic resources at ZenithOptimedia.

The Weather Channel, whose program and advertising ratings vary by about 1 percent, isn’t willing to guarantee the size of its commercial audiences, Ms. Janneman said.

“We would love to go forward and guarantee on the minute by minute, but we don’t want to be the only ones,” she said. “Once the entire industry purchases this data and is willing to move to this data as a guarantee, then we will gladly do it.”

Where Weather Meets the Wine

The Weather Channel is making its upfront pitch in agency presentations and is planning a series of events called Wine and Weather Parties around the country, starting this week in Chicago. Experts will discuss how weather affects the grapes used to make wine.

Though the channel’s ratings are small (it ranks 31st among cable nets, with an average of 149,000 viewers 25 to 54), its ad revenue will rise 8.8 percent to $161.1 million this year, according to Kagan Research. The network generates a hefty 42 percent cash flow margin for owner Landmark Communications, said Kagan senior analyst Derek Baine.

In its upfront presentations, The Weather Channel will show off new programming, including “Abrams and Bettis on the Weather,” which will run at 8 p.m. weekdays, pushing “Storm Stories” to 7 p.m., where it replaces the second hour of “P.M. Edition.” Hosts Stephanie Abrams-called a “weather goddess” by some fans online-and Mike Bettis will discuss the day’s breaking weather news.

“Our Climate With Dr. Heidi Cullen” is a new weekly show about the Earth’s climate outlook that will be interactive and include video clips from viewers. Guests will include scientists, politicians and entertainment figures.

Coming to the network in the first quarter of 2007 is “Epic Conditions,” which Liz Janneman, senior VP of cable ad sales for The Weather Channel, described as extreme sports meets the most perfect weather conditions, looking at the places where the climate is just right for skiing, snowboarding or golf.