December 2009 – Channel Crossing: DRTV

Expect the First Quarter to be Tight

By Dick Wechsler

First quarter begins on December 26, the day after Christmas. Given the uncertainty that has overtaken the media market for the better part of 2009, what should DRTV advertisers expect? Will opportunistic inventory be available deep into February? Or, will the flood of general advertising dollars that began flowing into the market last spring continue unabated, washing out all hopes of a typically strong start to the year?

There are significant trends indicating that media opportunities, especially for two-minute commercials, will be scarce. General advertising rates appear likely to stay at the historically high levels they hit this fall and inventory will remain extremely tight.

Here’s why. Late last spring, the upfront advertising market never really developed. Buyers–the advertisers–felt that the economy would continue to suffer, that the media market would remain weak and that they would be able to negotiate lower rates than they had in the previous year. Sellers–the networks and syndicators–bet that the economy would improve, that demand for inventory would increase and that they would receive higher rates by selling in the scatter rather than the upfront market. This time, the sellers were right. At present, and likely through the first half of 2010, the media market is a perfect storm for the sellers–and this doesn’t bode well for short-form DRTV.

Brian Fays, executive vice president of direct response, paid programming and ad sales at MTV, reports that the general side simply isn’t releasing inventory for DR sales. “There are only around 12 commercial minutes an hour,” explains Fays. “At present, the general side is able to sell it at significant multiples compared to DR rates.”

Good News on the Horizon
Maria Kennedy, vice president, direct response/paid programming at Discovery Communications, notes that the calendar upfront has been very active. While this appears ominous to the DR market in the near term, I see this as a long-term positive. A strong upfront both establishes a price threshold and stabilizes the market. The more active the upfront market, the less general participation there will be in the scatter market. This allows DR advertisers to have a greater influence on the overall scatter market. Inventory availability becomes more predictable and prices are likely to fall.

Perhaps the pendulum has swung too far, and the momentum behind the current market is unsustainable. Should the bubble burst, as it did following the dot.com collapse, opportunities would be readily available.

My sense is that the calendar upfront will remain active, bringing with it some stability. By the Spring of 2010, general advertisers, weary of the high rates and frantic, uncertain pace of the current scatter market, will return to the certain pricing of the upfront. A strong upfront will lead to a more normal DRTV scatter market by July. Consumer confidence is also likely to improve by then, and along with it, the response rates necessary for a healthy DRTV industry.

Dick Wechsler is president and CEO of Lockard & Wechsler Direct, a full-service direct marketing agency in Irvington, N.Y. He is also a member of Electronic Retailer’s editorial advisory board. He can be reached at rwechsler@lwdirect.com.