When I answered the phone it was a woman from the Department of Justice. Sure! I thought this was a prank call. But then she went on to explain that the reason for the call was to set up a conference call with their lawyers to discuss the upcoming Tribune and Sinclair Broadcasting merger and the impact on my retail client in the Greensboro-High Point-Winston Salem market. How interesting! In my 35+ years of media buying handling some larger, Fortune 500 accounts, I've never been asked by the government about my opinion. . . .nor do I know anyone else in the industry that has. What did they want to know?
To my surprise, I spent an hour on the phone answering questions about how I make my buy decisions and how would the merger impact my client and the market, speaking to a group that was highly intelligent about the process. They genuinely wanted to understand how share of dollars to each station are determined, what elements go into the negotiation, what would change with the merger, and how would this affect the cost of advertising in the market.
Yes, they knew what a DMA is! There are 6 major broadcast stations in the Greensboro-High Point-Winston Salem DMA, with currently 4 ownerships. WXII (NBC), is owned by Hearst and operating sister station WCWG (CW); WFMY (CBS) is owned by Tegna Media; WGHP (Fox) is owned by Tribune; and WXLV (ABC) and WMYV (MY TV) are owned by Sinclair. With the merger, this would go down to only 3 ownerships.
As a media buyer, am I concerned about this merger? What would be the impact on costs and programming? To answer the question, yes I am concerned about the merger and am very impressed that our government is doing due diligence to understand how the local market will be affected. Television advertising is still an extremely effective method of advertising for local retailers.
The lawyers asked if cable or digital media would be good alternatives to broadcast television. My opinion is that they all are very good forms of media, but one does not replace the other. While cable is viewed on a television set, how they price and sell their advertising is quite different from broadcast. Not to say one is better than the other, just different.
Cable buying is more like digital on-line buys; it's programmatic based on algorithmic purchasing. Customized software is used to automate the buying, placement and optimization of media inventory. Audience profiling and statistical data are computed to determine the effectiveness of a media schedule. Frequency of exposures to your advertising message are built by increasing budget and take time to accumulate.
Local cable systems only get a few minutes per hour for local advertising, whereas broadcast stations have more available inventory per hour. The way cable manages its inventory, it's hard to force a frequency level. Cable oversells their inventory then pre-empts without notice. So even if you buy heavily in a time period, most likely it will not run. Frequency can be more easily purchased on broadcast since they have more inventory and price based on availability. Frequency of exposure to ads on broadcast can be achieved by buying spots every 15 to 30 minutes within specific programming or time periods. On digital, frequency is better handled via retargeting or remarketing campaigns.
In other words, cable and digital media need to be considered as part of a media mix, not as an alternative to buying broadcast television. No differently than deciding to do radio, newspaper, magazines or billboards. It's part of an overall media strategy.
So back to the original question, how will the ownership change impact buying broadcast advertising.
In this particular case, I don't think it will have a negative impact. I buy many markets in which Sinclair dominates the market, either in ratings or with number of stations. In my experience, Sinclair runs good stations. They invest in popular programming and are fair and reasonable in their pricing.
With strong competition from WFMY-TV and WXII-TV, and up and coming CW, there is enough competition within the market to control pricing. In fact, the Greensboro market actually is lower in price than its ranking. So, if there is a slight increase in rates, it won't have a tremendously negative impact. Regardless of how many stations have the same ownership, they still can only justify rates based on the audience they deliver. If they out-price themselves, the advertisers will not get results and the industry will kill the golden goose.
It will be interesting to hear how the Department of Justice proceeds with this potential merger.