Diversify Your Client List to Succeed

Spots N Dots
The Daily News Of TV Sales
August 25, 2017

DIVERSIFY YOUR CLIENT LIST TO SUCCEED

STATIONS NEED MORE SMB CONTRACTS

‘Diversify’ has long been the advice financial advisors give their clients, and now it’s what one Wall Street analyst thinks is the best move for the TV industry to keep growing. The MoffettNathanson Ad Tracker estimates total U.S. ad spending grew 7.5% during the second quarter. But that’s only because online gains offset a 3.6% drop in spending during Q2 on traditional media. “This was the worst traditional growth rate for a non-Olympic quarter since the end of the recession in 2009,” analyst Michael Nathanson says. Compare that with a 23% jump in online ad spending.

One solution may be to reach beyond the list of traditional advertisers and categories. Nathanson’s dive into the numbers shows that mediums with a higher concentration of clients seem to be at the greatest risk. He thinks traditional media like TV has too much client concentration in sectors like automotive, retail, and consumer products which aren’t growing budgets—and not enough focus on small to medium-sized businesses whose ad dollars are fueling online growth. “Simply put, traditional media and agencies in the U.S. face the same problem,” Nathanson says. “The limited scale of their client base works as a major drag on growth as these industries experience structural headwinds.”

If the adage that pain brings change, this might help. It appears the television industry will suffer a worse “hangover” coming off a year with a presidential election and the Rio Olympics. The MoffettNathanson Ad Tracker now projects local TV stations revenue to drop 9% to $15.7 billion in 2017. That’s a bit worse than the 8.2% decline forecast earlier this year. The outlook for local cable ad sales has also been adjusted to a projected 10% decline compared to last year, revised from a previous forecast of a 6.1% drop in sales. MoffettNathanson also lowered its outlook on national TV and cable network ad spending. The firm did the same for outdoor, radio, newspapers and magazines as it now projects traditional ad spending will fall 7.2% this year. That’s over a point more than the estimate released earlier this year.

Things look somewhat better in the coming year. “Our 2018 estimate of +6% total U.S. advertising growth is set to accelerate from the weaker 2017 growth after lapping the compares against the summer Olympics and the presidential elections,” Nathanson tells clients in a report. He also estimates traditional media spending will still slip next year—but by just 2%.

“I’d be a little more optimistic about 2018 than 2017,” WPP chief Martin Sorrell told investors this week. That’s because next year is what he calls a “mini-quadrennial” year stimulated by midterm congressional elections and the World Cup. Until then worries about what’s getting done in Washington and tougher scrutiny over how ad dollars are allocated are why Sorrell said WPP has seen some big consumer brands pulling back on marketing this year.

ADVERTISER NEWS

Sears same-store sales were down another 12.3% in its latest fiscal quarter and Kmart’s comps fell by 9.4%, the drops somewhat enhanced by the closings of many store pharmacies and cutbacks in some electronics products in some stores. The company has closed about 180 stores so far this year, is on track to close 150 more and announced the closure of an additional 28 Kmart stores……Dollar Tree, which now calls itself “North America’s leading operator of discount variety stores,” had a 5.7% consolidated sales increase for the quarter that ended on 7/29, with same-store sales up 3.9% at Dollar Tree stores and up 1.0% at Family Dollar units. The company expects to finish the year with low single-digit same-store sales growth and close to a 4% expansion in square footage growth. It added a net of 99 more stores during the past quarter……Michaels total net sales rose 1.2% in its latest fiscal quarter coming from ten more stores than a year ago and a 0.6% comp store sales increase. Customer transactions were up, but average ticket slipped a bit……The Federal Trade Commission approved Amazon’s takeover of Whole Foods Market on the same day Whole Foods shareholders voted in favor of the deal. Closing date should come before the end of the year. It’s easy to see why the government didn’t find a problem. The two companies combined are responsible for less than 2% of grocery sales in the U.S., while Amazon’s current grocery footprint amounts to a few concept stores and a grocery delivery service that operates in just a few cities.……In a different Amazon note, Retail Leader reports the company has been quietly expanding its network of physical stores for its original books-oriented business. Ten stores should be open by the end of the month and the VP of its books units said, “How many is it? We don’t know yet… We’d like to be able to have as many stores as would make sense”…..Arby’s will introduce Smoked Turkey Leg as a limited-time offer at a small number of restaurants in nine regions starting next week.……J.M. Smucker net sales were down 4% for the quarter that ended on 7/31, primarily driven by lower volume than anticipated for Folgers. The Smucker’s brand along with Crisco and Pillsbury also saw decreases, but the company’s pet foods division produced sales gains and the company noted increased marketing expenses for pet foods during the past quarter. Smucker is currently awaiting regulatory approval for the acquisition of Wesson from Conagra Brands……Not all the mall-based apparel chains are struggling—total comps from American Eaglewere up 2% driven by double-digit increases at AE’s lingerie brand Aerie. An analyst from Jefferies LLC told The Wall Street Journal to succeed in the current retail environment merchants need to have both online and retail operations—“You may not need 1,000 stores but you need more than zero stores,” Randy Konik said.

NETWORK NEWS

The new celebrity contestants for the 25th season of Dancing with the Stars will be revealed live on ABC’s Good Morning America Wednesday, September 6th. The celebrities will be paired up with the shows professional dancers and brave the dance floor for the very first time. The dancers will be judged by a panel of renowned ballroom experts as well as being voted upon by the viewers of the show. On Thursday, pro dancer Mark Ballas announced the 25 professional dancers that will be paired with celebrity dancers when Dancing with the Stars returns to ABC on Monday, September 18th at 10 PM (ET)……The upcoming second season of Superior Donuts on CBS will star Diane Guerrero (Orange is the New Blacks, Jane the Virgin) as a series regular. Guerrero will star opposite Judd Hirsch and Jermaine Fowler as Sofia, an Uptown millennial who parks her food truck, which serves healthy, socially conscious breakfast foods, in front of the old-school donut shop featured in the series. Her character will be introduced in the season premiere on Monday, October 30th……CBS has won the heated competition and picked up History of Them, a multi-camera/hybrid comedy from One Day at a Time co-creator and executive producer Gloria Calderon Kellett. The project is a semi-autobiographical romantic comedy about a multi-cultural couple falling in love. The show will feature narration by their future daughter, using the couple’s social media from present-day as a guide. History of Them is one of two big pilot production commitments this broadcast buying season for Sony TV. The other is the Norman Lear/Peter Tolansingle-camera pilot Guess Who Died for NBC……Another put-pilot commitment from CBS went to an untitled legal family drama from Martin Gero(Blindspot), Greg Berlantiand Sarah Schechter. The drama, written by Blindspotco-executive producer Brendan Gall and Gero revolves around five multi-racial adopted siblings who fight for justice in the courtroom amid wildly different legal careers. They must also deal with the mystery of a family tragedy that exposes the sins of their father. Recently, Berlanti Productions and Quinn’s House landed a put pilot commitment at NBC for a White House political drama called Republic and another from CBS for an hour-long procedural called God Friended Me……Another legal drama is in development at CBS from Aaron Kaplan’s Kapital Entertainment and CBS TV Studios. The untitled project centers on a high-powered corporate attorney who joins the Texas legal team defending her wealthy estranged husband after he is arrested for the decades-old unsolved murder of his first wife. Josh Safran(Quantico) is a producer and writer on the project.

ACCOUNT ACTIONS

Macy’s has named BBDO New York as its new creative agency of record, replacing Figliulo&Partners, which took over the account last year. Kantar Media reports Macy’s spent $681 million in measured media last year and $243 million for this year’s first six months (of course the account is back-loaded because of the holiday season). Carat is expected to continue as the client’s media agency of record.

DONE DEALS

Adam Symson, President and CEO of The E.W. Scripps Company has announced some leadership changes: Senior Vice President, Broadcast Brian Lawlor is now President, Local Media. Vice President, Digital Operations Laura Tomlin is now SVP, National Media, Senior Vice President, Chief Administrative Officer Lisa Knutson is now Executive Vice President, Chief Strategy Officer, and Senior Vice President, Chief Financial Officer Tim Wesolowskiand Senior Vice President, General Counsel William Appleton are now Executive Vice Presidents.

Scott Ehrlich has joined Sinclair Broadcast Group as Vice President of Emerging Platform Content. Ehrlich has spent three decades in the media business in roles spanning licensing, production, creative development, technology, network management and programming.

Mission Broadcasting has named Lance CarwileCorporate Program Director for its growing group of commercial television stations. Carwile was a Group Program Coordinator and Regional Program Director for LIN Media and most recently for Media General and Nexstar Broadcasting.

THIS AND THAT

Facebook will stream fifteen college football games this season, six from the Mountain West Conference and nine from Conference USA, starting with Marshall vs. Miami of Ohio on 9/2. None of the game will appear on television. Digital sports network Stadium is producing the games.

BUSINESS BYTES

Supermarket News reports “price rationality” is returning to the grocery business with “reflation,” as retail food prices are starting to rise based on surveys done in some major markets. Eight of the twelve chains in the study conducted by Jefferies and Bare International had increased everyday prices on a year-over-year basis and it was also noted that promotions have also subsided from levels seen in the first quarter. A Jefferies analyst commented the firm sees the results as an indication recent cost increases to supermarket operators may finally be making their way to retail pricing, which would give a boost to upcoming comp stores sales results that will be coming from supermarket companies.

Being the first big company in a new category often works well for the trailblazer—but not always. Concept leaders such as Webvan, which offered delivery of supermarket purchases about twenty years before the public was ready for the idea, have failed before. Currently, the meal kit idea looks like a winner, but market leader Blue Apron looks to be running into problems. Progressive Grocer notes the company’s Initial Public Offering of stock was a “lackluster” event and the company has already instituted a hiring freeze while letting go 14 members of its recruiting staff. PG adds the company has been hit with several lawsuits including a couple from lawfirms alleging Blue Apron “misrepresented the challenges it faces with customer retention, delayed orders and reduced ad spend.” (We’ve previously reported the company cut advertising last quarter and plans to keep it at a lower level than when it started). Among the threats to Blue Apron, PG notes many bricks-and-mortar chains are already entering the food kit space, including Kroger with its Prep+Paredline and Publix’ Aprons Meal Kits. Amazon could easily integrate food kits when it takes over Whole Foods (and in an ironic note, it was Amazon that took over what was left of Webvan fifteen years ago). And to add to Blue Apron’s worries, research from Field Agent found that 76% of people who do not currently use food kits and 78% of people who do, said they want their local grocery stores to develop meal kits they could buy locally.

ROKU INCREASES MARKET SHARE

New consumer research from Parks Associates reveals Roku is increasing its lead in the streaming media player landscape, with 37% of U.S. households owning and using a Roku device as of Q1 2017, up from 30% in Q1 2016. According to Parks Associates, of the other major players in this market, only Amazon’s Fire TV had an increase in its share of installed base during the same timeframe. Amazon increased its share from 16% to 24% of U.S. broadband households.

AUGUST AUTO SALES UP?

Here’s some good news: Edmunds is predicting August automotive sales will amount to 1.526 million new cars and trucks, which would be 8.2% better than July and 1.3% over August 2016. If correct, that would make August the first month this year in which sales beat the same month last year. By manufacturer, Edmunds sees gains for General Motors (up 1.9% from last August), Toyota (plus 11.6%), Honda (plus 7.9%), Nissan (plus 1.4%), and Volkswagen (plus 7.2%). Declines are expected for Ford (down 2.4%), Fiat Chrysler (-4.7%), and Hyundai/Kia (-6.1%).

Kelley Blue Book also issued a forecast on Thursday, predicting new-vehicle sales will rise 1.5 percent year-over-year to a total of 1.53 million units in August 2017. KBB predicts an estimated 16.6 million seasonally adjusted sales for the year.

“August should be the first year-over-year increase of 2017, due in part to an extra selling day this month,” said Tim Fleming, analyst for Kelley Blue Book.