Never mind the video cell phones. DRTV media buyers will face enough challenges this year in the television landscape they’ve already got.

By Jack Gordon

Nobody denies that the television advertising industry is changing. Viewership continues to fragment as satellite and cable stations proliferate. TiVo and digital video recorders allow viewers to watch programs whenever they like-and choose to skip the commercials when they do. Wireless broadcasting to handheld devices such as video-enabled iPods and cell phones may lead to…well, at this point it’s anybody’s guess.

But except for cable and satellite fragmentation, which tends to act as a brake on advertising-rate increases, none of those developments had any great effect on direct response television (DRTV) marketing in 2005. And among DRTV media buyers-the agencies that purchase television time for infomercials and short form DR advertisements-the consensus is that gee-whiz technology won’t shake the industry’s foundations in 2006, either. A few years down the road, probably, but not yet.

What kinds of factors are likely to make a media buyer’s job tougher this year? “The Winter Olympics in the first quarter and political advertising in the third quarter will have much more impact on DRTV buying than anything like TiVo or wireless broadcasting,” says Scott Paternoster, president of Chief Media in New York, speaking in January.

What about non-technological threats that might suddenly drop out of the sky onto the DRTV industry in 2006? None of the experts at six national agencies contacted by Electronic Retailer pointed to any. “You always hear statements from top national networks and local broadcast stations who threaten to take away the red-headed stepchild of infomercial avails and replace them with the homecoming queen of regular programming,” observes Sandra Cercone, president of JBT Media Management Inc. of Tempe, Ariz., which specializes in long-form DRTV. “But in an industry with so much touting of major changes on the horizon, the only thing that ever seems to change is the rates of the paid-programming avails.”

According to media buyers, the trends that will have the biggest impact on the price and availability of time slots in 2006 are already familiar. And, they say, the factors that will determine success for DRTV campaigns are timeless.

THE YEAR THAT WAS…AND IS
2005 was like any other year in that the first quarter saw the strongest DRTV sales and the third quarter generally was slowest, agencies report. Some mentioned that Hurricane Katrina dragged viewers away from infomercials last September just as they expected the Winter Olympics to do in February.

Depending on which agency we spoke to, and the kinds of time its clients wanted to buy, media rates for long and short form DRTV time were anywhere from “flat” to “volatile” to “up sharply” in 2005. Expressing the consensus view is Gene Silverman, vice president of marketing services for hawthorne direct inc. of Fairfield, Iowa, who says simply, “I can’t remember a year in the past 20 when rates haven’t gone up.”

One force that pushed up rates in 2005-and promises to continue nudging them skyward this year-is a strong general-advertising market, especially for cable stations. “Cable remains far and away the most efficient media for DRTV, but the proliferation of better programming has attracted a greater viewing audience and, therefore, more corporate advertisers,” says Dick Wechsler, president of Lockard & Wechsler Inc. of Irvington, N.Y. He says the trend has placed pressure not only on rates, where there has been a “significant increase on a CPM [cost-per-thousand] basis,” but also on inventory. “The strain is on all inventory, but two-minute avails in particular,” Wechsler says.

General advertisers also have affected the DR media market by moving directly into its space. An influx of general marketers using DRTV to support retail sales “impacts the type of response rate you get for true direct marketers,” says Chief Media’s Paternoster. What’s more, he adds, hybrid-DR marketers who aren’t solely reliant on ROI from their commercials are willing to pay rates higher than the market otherwise would bear to get clearance. “That drives rates in a way not advantageous to pure DRTV marketers.”

The main victim of that new competition is short-form DRTV, but the market for half-hour infomercial avails is beginning to see similar pressure. “Paid ministerial times [i.e., paid religious programs] were more prevalent last year than in the past,” notes Rob Medved, president and media director of Cannella Response Television Inc. in Burlington, Wis. “And on the local level, we have seen an increase in auto dealerships running half-hours.”

The competition for half-hour time slots increased tremendously last year in the U.S. Hispanic TV space, says Nadia Ashrafian, CEO of Capital Media Inc. of Mission Viejo, Calif., a specialist in the Spanish-language market. The flood of new advertisers into the U.S. Hispanic space was “almost like a Gold Rush,” she says. “Rates are getting more expensive, and there will be more competition for half-hour inventory in 2006,” though media time is still less expensive on a CPM basis than in the English-speaking market, she says.

The main countervailing force in the English market, which acts to keep prices in check and avails plentiful, is the proliferation of media outlets. The increasing number of cable networks and satellite stations promotes price competition and allows media buyers to take their business elsewhere if a station’s rates become unreasonable.

A factor helping DRTV marketers make money despite rate hikes is their increasing sophistication at driving prospects not only to 800 numbers but also to e-commerce web sites that add to sales totals. “Leads and direct sales that go to the Internet can improve DRTV efficiencies by an average of 15 percent and as high as 35 percent,” says Wechsler.

Which product categories were hot in 2005 or are likely to get hot this year? Answers range from household and weight-loss products to financial services and entertainment (such as pop-song collections), depending mainly on which of an agency’s clients had hit campaigns. Most media buyers consider the question irrelevant for DR marketers’ planning purposes.

As far as they’re concerned, categories don’t matter, products do. DRTV campaigns for the Little Giant ladder and the Pasta Express kitchen appliance did well in 2005. So did one for Vonage, the voice-over-Internet-protocol phone-service provider. So did one for the book, “Natural Cures They Don’t Want You to Know About,” by Kevin Trudeau.

“We say it all the time, but product is always king in DR,” declares Silverman. “A product that is hot and appealing transcends categories, seasonality and even media rates. If you’re lucky enough to have a client with a hot product, you’ll do well regardless.”

WHAT’S NEXT?
Fragmentation isn’t the only trend occurring in the cable and satellite industries. “Fragmentation will again be the buzzword of 2006, with more networks gaining further distribution in an ever-expanding digital marketplace,” Cannella’s Medved acknowledges. “But on the other hand, we have also seen some consolidation, allowing network buys to occur through fewer vendors, such as NBC Universal and Viacom.”

Wechsler agrees that a significant change in the cable/satellite industry involves “the more sophisticated way they sell their inventory. Big MSOs [multiple system operators] like [satellite providers] DIRECTV and Echostar are effectively selling their entire network through ‘national reps,’” he says. “By making it easier to buy local cable as a mass media, they are attracting more advertisers, raising competition and pushing rates higher.”

A more dramatic example of consolidation appeared in late January, when CBS Corp. and Time Warner Inc. announced plans to close their respective UPN and WB television networks this fall and merge the remnants into a new joint-venture network called CW.

Digital recording and TiVo may present major challenges to DRTV advertising at some point, but that point is further away than 2006, agencies say. “There’s an argument that TiVo will mean a falloff in DR response rates, especially for short form, but we haven’t seen it yet,” says Paternoster.

hawthorne direct’s Silverman adds that TiVo’s impact, when and if it comes in a dramatic way, will not be simply a matter of viewers fast-forwarding through commercials. It also will affect buying and reporting patterns. “A lot of our reporting has to do with the time a phone call comes in so that we can allocate an order to a particular telecast or daypart,” he says. “That’s how we repurchase media-by knowing how well a half-hour or flight worked.” If viewers call about offers they saw on recorded TiVo programs, it becomes harder to match the call to the time slot.

As for wireless broadcasting, Silverman says January’s Consumer Electronics Show (CES) in Las Vegas convinced him that “the future is here.” Cell phones are rapidly turning into “Internet browsers, TV sets and [receivers for] video on demand,” he says. “We will have to figure out how to deliver our commercial messages in the context of a video-on-demand world.”

But nobody believes a direct marketer will go broke by failing to have the whole thing figured out in 2006. “Don’t panic!” advises Wechsler. “The media environment is always in a state of flux, but the rules for successful direct marketing don’t change.” For instance, he says, “Opportunities are fleeting, so maximize your winners aggressively and cut your losers ruthlessly. Don’t fight a down market-you can’t win. Study and understand the relationship between DRTV and Internet marketing, and develop the skills and tools to optimize it.”

That’s a list to which just about every agency would add: Whatever the medium, new or old, test…test…test.

Jack Gordon is editor at large for Electronic Retailer magazine. We would appreciate your feedback. To submit comments, point your browser to mediamar06.marketing-era.com.