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.
The Problem with the Excel Method
Typically undertaken once a year or on a quarterly basis at most, the Excel method is still laborious and time-consuming for the person tasked with doing it. The effort is compounded if that person analyzes actual sales data to make decisions instead of applying across-the-board percentage increases.
More importantly from a revenue management perspective, using Excel for infrequent rate card updates often leads to inventory being undervalued; linear sellers can’t adjust prices in response to changes in the marketplace. For a prime example of this, consider the weeks and months after the pandemic hit. COVID-19 wiped out much of the existing high-value programming, which changed the inherent value of what remained. (Take ESPN’s Michael Jordan documentary series “The Last Dance,” which drew massive ratings in the absence of live sports.) In many organizations, rate cards weren’t updated in time to help sellers to capture more revenue from programming that was suddenly more valuable.
How Pricing Dynamics Are Changing
Due to the flight of audiences to streaming platforms, linear sellers have less power to command across-the-board percentage increases in pricing, which is another trend that favors dynamic, automated rate cards. Although the major TV networks secured double-digit CPM percentage increases in the three annual upfront cycles prior to 2020, their power to command these types of commitments looks increasingly tenuous.
For context, the upfronts began in 1962 with ABC, which wanted to see how the market felt about its news programming. As cable networks emerged and started producing original programming in the late ’90s, the upfronts became a standard in the commercial cycle for linear TV, serving as an effective vehicle to manage primetime scarcity. But COVID may have permanently reduced their role by forcing broadcasters, media agencies and brands to carry on without the pomp and circumstance of the annual in-person event. Meanwhile, Procter & Gamble’s Chief Brand Officer Marc Pritchard has expressed his intent to circumvent them as much as possible in favor of direct negotiations with networks.
Why Data and Automation Are Key
In a future world where an increasing number of buyers may reject automatic price increases, analyzing historical sales and performance data at scale to calculate rate cards will be critically important, and Excel alone can’t do the job. Sellers need to invest in a platform that’s powered by machine learning and data science.
Overall, the current low frequency of rate card updates, coupled with the lack of sophistication in how rates are calculated, is a missed opportunity for broadcasters and operators. Linear sellers should be aiming for weekly refreshes (or monthly, at a minimum) to account for continuous shifts in supply and demand that affect the perceived value of inventory. Furious has found that sellers can achieve a 10% revenue lift from automating their rate card process, assuming that governance is in place to improve adherence by sales teams.
To learn more about how automation can help programmers and operators optimize TV ad prices in 2021 and how change management should be approached in TV sales organizations, download our playbook,“How Automating Rate Cards and Pricing Helps Linear TV Sellers Increase Revenue."