Furious's Blog

An automation strategy can help reduce price variability and achieve sustainable increases in total revenue, but most TV sellers have yet to introduce one. The status quo for updating rate cards is using Excel to apply across-the-board percentage increases every year—or every quarter, at best. This leads to inventory being undervalued because pricing doesn’t reflect continuous shifts in supply and demand.

Furious has found that sellers can achieve a 10% revenue lift from automating their rate card process and using data-driven pricing methodologies, assuming that governance is in place to improve adherence by sales teams. To achieve this, programmers and operators should develop a strategy for the planning, implementation and operation stages. Here’s what each one entails.

For most linear TV sellers, the process for updating rate cards is fundamentally unchanged from the 1950s, as I explained in a previous post. Instead of using a pencil and a ledger as they did in the past, today’s analysts use Excel, but they’re still applying across-the-board percentage increases instead of analyzing actual sales data to make decisions on pricing.

An automation strategy can help to reduce price variability and achieve sustainable increases in total revenue, but most sellers haven’t introduced one. The obvious question is how—and where—automation should be introduced.

Here are the five key processes and workflows to consider:

Used to share pricing with buyers, TV rate cards contain a complete list of ad rates for specific time slots, stations or networks. In most seller organizations, they’re only updated annually or quarterly at most, and new rates are calculated using Excel. Often analysts apply across-the-board percentage increases rather than analyzing historical sales data to optimize pricing; the latter is simply too difficult with Excel as their only tool.

Although linear TV sellers are now able to segment and deliver audiences in ways that would have been inconceivable in the past, the normal process for updating rate cards is still a relic of the 1950s. The key difference is that instead of calculating prices with a pencil in a ledger, analysts now use Excel. 

TV has long been viewed as a cost-effective vehicle for delivering reach, which still holds true today. According to one estimate that backed into pricing on a CPM basis, the average price across all national TV advertising in the U.S. is under $2.50, though TV CPMs are usually perceived to be at least 10 times higher. (The author, Simulmedia’s Dave Morgan, attributes this disconnect to the fact that TV CPMs are usually expressed in terms of primetime programming and against the coveted demo of 18- to 49-year-olds, ignoring the totality of TV’s massive reach.)

To be clear, high-value programming can be expensive. The average CPM for primetime broadcast ads bought in the upfronts for the 2019–2020 TV season was $36.19, up 13.2% over the previous year, according to eMarketer. Then there’s scarce inventory that fetches astronomical prices: The average cost of a Super Bowl ad in 2020 was $5.6 million, up from $5.25 million in 2019. 

Here’s a quick primer on how TV is priced and sold.

Aside from being calculated in Excel instead of a ledger, the process for creating TV rate cards, which provide a complete list of ad rates for specific time slots, stations or networks, hasn’t fundamentally changed since the 1950s. Given how dynamic and complex the TV marketplace has become, there are a number of challenges and risks in continuing down this path.

The marketplace for TV and video advertising is incredibly dynamic right now, and it’s hard to be certain of anything. On the one hand, major sports have all returned, which is great news for buyers and sellers alike, but we can’t necessarily count on an uninterrupted NFL season. And while studios are finding ways to safely resume production, we’re still left with much less premium primetime programming than we can usually count on in the fall.

We continue to live in a weird time with high uncertainty. Although it sometimes feels like a semblance of normalcy could be returning, it’s also clear that things can quickly turn the other way.

Likewise, the fate of premium content this fall is still very much unknown. Although studios should theoretically be able to limit access and institute intelligent procedures in order to resume production, one virus carrier can set off a chain of events that puts everything in jeopardy—as we’ve seen with Major League Baseball.

For that reason, content providers need to have a thoughtful plan B. Although networks might be inclined to lean on recent reruns or old standbys like “How I Met Your Mother” or “The Big Bang Theory,” now would be a smart time to look into the extent of your catalog and make more of it available on VOD.

If we’ve learned anything from the streaming wars, it’s that a range of content can have a firm place in the hearts of millions of viewers—from decades-old movies and shows to recent programming with small but intense cult followings. Obtaining VOD rights may be less expensive and easier than airing rights for linear TV content, and there’s no time like the present to start converting traditional linear advertising dollars into digital ones. Given the prevailing uncertainty, going all in on your VOD library is a smart idea.

Here are three steps to get started.

As of press time, the NBA and NHL are poised to return for the playoff season, which is a huge boon for the TV advertising ecosystem and for sports fans.

I’d like to begin with a bold statement. If you haven’t redone your rate card across your entire portfolio of linear, spot-sold inventory during this lockdown period, you’re missing revenue opportunities.