Commercial Free Speech – What’s that?

Posted 1/16/2013

For sheer impact, almost nothing compares with the First Amendment to the American Constitution. Here it is, in its breathtaking simplicity:


Amendment I

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.


You needn’t be a legal scholar to appreciate, or be familiar with, the powerful resonance this articulation of fundamental freedoms has had since it was written into the US Constitution on December 15, 1791.


Almost from its inception, the First Amendment has also provided a foundation on which tradesmen and businesspeople base their freedom to communicate the virtues of their products and services to attract customers. However, the weight of judicial precedence from around the world, and in India, has tempered Commercial Free Speech (CFS) as this is known, on account of its transactional intent, by: subjecting it to exacting standards of probity and privileging consumer protection above business promotion.


Advertising self-regulation emerged in various countries, in India in the form of the Advertising Standards Council of India (ASCI) est. 1985, to ensure that businesses would not give cause to lawmakers to enact draconian legislation curbing CFS.


Why is CFS important? Here are the three principal reasons:


Informed consumer: Choices will tend to widen as markets develop and competition grows for the consumer’s attention and wallet. Consumers need to have access to relevant information that will enable them to make informed choices.


Innovation spur: Businesses will be kept on their toes by their competitor’s product and marketing innovations thereby creating a permanent incentive for being most innovative and responsive to consumer needs. Businesses that fail to serve the consumer will fail while those that do will grow creating a circle of life that optimizes economic good in the community.


Affordable media access: Advertising revenue is, by a wide margin, the biggest source of revenue for newspapers, magazines, radio stations, television channels and even the new media. You paid a mere R 2 for this newspaper. As you probably know, even its raddi value is more than that. What enables the publisher to pay for news gathering, printing, delivering the newspaper to your doorstep and the overall administration of the complex enterprise? Advertising revenue does. 


In spite of 27 years of efforts by the ASCI to ensure CFS is protected in India, key stakeholders continue to be utterly oblivious of their obligations to self-regulate. Teleshopping slots for spurious exercise equipment, newspaper classifieds for euphemistic ‘Escort’ services and magazine ‘advertorials’ for liquor brands not only damage consumer interest, they offend specific laws of the land.


While no statistics are available in the public domain, empirical evidence suggests that offenders against advertising self-regulation represent a small minority in the overall volume of commercial communication.


Unfortunately, this irresponsible minority continues to go unchallenged thereby endangering CFS for the compliant and responsible majority.



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We cheapen ourselves

An ‘Upfront’ season for India

Posted 1/11/2013

For seven years, I had the proud privilege of working for News Corporation. Now, while the visible face of any media company is the content that readers, viewers and listeners consume every day, the invisible aspect which converts all these consumers into revenue is every bit as important to their success and sustainability. You might win Pulitzers and Emmys faster than you can build cabinets to show them off in and yet go ti..(oops), belly up. Conversely, you may ignore those pyrrhic victories and go after what matters to the shareholders: a sensible return on their capital. Before you turn the ferocity of your righteous indignation upon me, reminding me of the social responsibilities that the Media bear, let me reassure you that we are of a mind. However, even for the successful performance of its magisterial role as the Fourth Estate, the Media first must be solvent. Friends again?


Back to that Newscorp theme. In 2008, I decided to figure out how ‘Upfront markets’ actually function and to watch and learn, secured an invitation from the Fox Cable cousins in their lofty Manhattan perch at 1211, Avenue of the Americas. American television businesses work on an annual creative cycle that kicks off, right after the slow summer, in September. Content teams are ready with their lineups for the year to follow and advertising sales teams prepare to take their shiny new inventories to market. The exercise is conducted with much pomp and ceremony. Client and Media Agency grandees from across the country assemble for a week of hectic negotiation, and even more hectic partying, in the Big Apple. Fox, ABC, CBS, NBC and all the lesser siblings pull out all stops to showcase new offerings. And before the Upfront week is over, anywhere up to ⅔rd of available inventory for the next 12 months will have been sold, leaving the balance for ‘Scatter’ and ‘Make good’ requirements.


How does a major network like Fox approach the exercise?


Strategy teams collate the preceding year’s sales data to stack clients up by volume and value. The analysis teases out only the spends on Upfront buys and arranges all client accounts in diminishing order based on Yield (based on CPT). The stack is now broken up into quintiles. This is when things get really interesting. Accounts in the top quintile must be applauded for being staunch allies. Conversely, accounts in the bottom quintile must suffer penalty for being, well, cheapskates. This is easily done. When the ad sales team goes into a negotiation meeting with top quintile clients, it is armed with the authority to pass on discounts to them that will enable them to enjoy CPTs below what they paid in the previous year. These are typically medium sized clients with not much negotiating muscle but their analyses would have told them how they were shafted in the previous year. They will hold out for some relief, and will be well pleased when the broadcaster finally ‘yields’ and gives them a good deal. At the opposite end, the bottom quintile clients, usually the country’s biggest advertisers counting big FMCG, giant retail and mega auto among them, will be hit with a demand to raise CPTs at least to the fourth quintile or else get locked out of any Upfront deal. This will lead to noisy kicking and screaming frequently involving the Media AOR behemoths but, to use Bibi Netanyahu’s memorable phrase, it is a Red Line.


By consistently sticking to this approach, the big four have steadily grown revenues in the high single digits, and sometimes even better, right through a period when network television in the US has actually seen shrinking audiences as it conceded more and more ground to cable.


In the meanwhile, here in India, we add 1 Crore, yes, 10 Million new television homes year, or over 40 million new viewers in the C&S 4+ audience. And yet, an off-the-record chat with any network CEO in India will reveal flat or even declining CPRP, much less CPT (which we don’t compute anyway). Always, the explanation is the same- plaintive bleating about competitive intensity and how it is ruthlessly exploited by the extortionate M’s who shall not be named, to squeeze their prices down ‘til there’s nothing left to speak of.


Why does this ‘Upfront’ approach work in the US and not in India?


Upfronts are not a divinely ordained ritual. Some clear thinking and creative minds in the American television industry came up with them as a way of securing the basic economics of the participants, one year at a time, and then persuaded all their peers to join. From time to time, someone will have second thoughts about whether it serves their individual interest best to be a part of this herd behaviour, and inevitably there are stragglers. Eventually, the long term wisdom of staying together wins out and they return to this watering hole.


In India, in stark contrast, the television industry has been defined more by rifts, suspicion and even open hostility. Broadcasters have been prepared to spite one another’s faces by cutting off their own noses. However, recent years have seen the apex body, Indian Broadcasting Foundation, learn to pull together and several baby steps have been taken in this new spirit of bonhomie. Witness, for example, the News and General Entertainment Content Self-Regulation bodies. Or a shared commitment to realizing the Broadcast Audience Research Council for overseeing future television audience measurement.


The Upfront process offers big benefits:

  1. Broadcasters write in enough revenue to defray, broadly speaking, all variable costs for the year (and if they are doing very well, fixed costs as well). Scatter revenues will become the jam, the bread & butter having already been secured.
  2. Clients have to take decisions within a very tight timeframe. The ability to string out a negotiation endlessly until a broadcaster’s spirit is broken is summarily taken away.

    1. Big clients with large media inventory appetites cannot risk everything on buying Scatter as there may simply not be enough left on the table. Also, whatever is left will likely be offered in a seller’s market scenario.
    2. Clients get the opportunity to see how good the quality of the advice their Media AOR offers really is. A well chosen buy – sponsorships come to mind – will yield benefits like gangbusters and demonstrate the agency’s chops.
    3. Clients get to do ‘Comparison Shopping’. All the wares are at one place and one time.
    4. Broadcasters’ creative and sales teams are challenged to convert their glib talk into concrete action in a pressure cooker environment.


Actually, I could riff on.


The only question is: Will the broadcast industry man up?


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