Viacom’s MTV Networks plans to put the squeeze on commercials in order to avoid a squeeze on its ad revenues in the new era of commercial ratings.
Philippe Dauman, CEO of Viacom, said that during the fourth quarter, Viacom-owned networks would be rolling out “commercial squeezes,” in which commercial elements run on the bottom of the screen while program material runs at the top of the screen.
The squeezes are one of “several initiatives in place to increase engage ment within our commercial pods,” Mr. Dauman said Friday while responding to questions during Viacom’s third-quarter earnings conference call with securities analysts.
Some Viacom networks, he acknowledged, are negatively affected by the new commercial ratings, including MTV and VH1.
According to Steve Stern­berg, executive VP of audience analysis at Magna Global, MTV’s average commercial rating including three days of digital video recorder playback is 14% lower than its live program ratings. VH1’s are 11% lower.
During the upfront, MTV negotiated to have most of its fourth-quarter ad sales based on live program ratings. But starting in the first quarter of 2008, its ad sales will be based on the commercial ratings. The squeeze idea was broached during the up­front negotiations. Some buyers at the time objected to some of MTV’s demands, including the ability to squeeze content and reject ad content if it didn’t think it would retain an audience.
“Any time my commercials are reduced to a percentage of the screen, it kind of bothers me,” said Larry Novenstern, executive VP/joint managing director of Optimedia’s integrated buying and planning unit.
He said he hadn’t discussed the squeeze with MTV, but was interested to hear how Viacom planned to measure and charge for the squeezed ads.
Mr. Dauman said Viacom’s networks also are looking to boost commercial ratings in other ways.
“We are increasing the number of pods, making them shorter. That increases consumer engagement,” he said. He also described podbusters and pods that have the thread of a programming element running through the commercial pod.
Viacom also is getting involved with its clients’ ads.
“We’re very focused on the commercials themselves that we put in, getting involved in some of the product and working with our advertisers to make sure that the advertising is good,” Mr. Dauman said.
The Viacom networks are ramping up product integration efforts to engage viewers with clients’ products as well.
As one example, Mr. Dauman pointed to the launch of Steven Colbert’s presidential campaign on Comedy Central, which was sponsored by Doritos.
“The nature of our programming really lends itself to that,” he said.
Viacom is also selling more digital advertising as it creates more Web sites dedicated to specific shows such as thedailyshow.com, tied to Comedy Central’s “The Daily Show With Jon Stewart.”
Mr. Dauman said the networks would be doing more convergent deals that involve online and on-air platforms. He said about 40 percent of the company’s ad deals were convergent and that it has 185 more digital sponsors. That will make it difficult to isolate the digital ad sales numbers, he said.
In the third quarter, Mr. Dauman said, domestic ad sales were up 5% with a scatter market that was generating double-digit price increases. He said scatter continued to be up by “strong double digits” in the fourth quarter and that ad growth will continue at a similar pace.
“While it’s still very early in the quarter, as of today, domestic ad sales growth in the fourth quarter looks to be comparable to the third quarter,” he said.
Analyst Spencer Wang of Bear Sterns called that level of ad growth “solid” and said it exceeded expectations.
Viacom has been making big investments in programming, which has put a squeeze on the profit margins for its media networks group. Mr. Dauman said the company is focused on reducing program costs by ordering multiple seasons at one time, syndicating more content and leveraging its size with suppliers.