NBC Continues to Struggle Despite Leadership Change

In the late-1990s, advertisers couldn’t do better than securing a spot on NBC’s Thursday comedy night.

But times have changed. NBC has been in decline for several years and this fall’s ratings show that the trend is continuing. During the first four weeks of the fall season, viewership from the key demographic of 18 to 49 years is down 16% from last year. As the most valued advertising group, this could spell bad news for NBC in their quest to court new advertising.  NBC has consistently come in fourth behind ABC, Fox and CBS for several years.

What’s to blame? While NBC was owned by GE, executives cut costs in order to keep up with smaller audience segments. Now that ownership has changed to Comcast, executives are committed to turning the network around over the next three to five years. Comcast was mainly interested in the cable channels in NBCU’s stable, but will need to deal with NBC’s problem of hemorrhaging money and audience numbers. In order to do so, they have brought on Bob Greenblatt, the former creative chief at Showtime. He has retooled the staff, brought in new heads of scripted programming and is already focusing on the 2012 spring and fall seasons.

Greenblatt and his team have big challenges to overcome. Two of their biggest shows, “Law and Order SVU” and “The Biggest Loser,” have experienced major viewership drops – mainly due to each losing a star. The “Law and Order” spinoff had a 20% decline and “The Biggest Loser” lost 23% of their viewers compared to last year. Prime time is losing out on hundreds of millions of dollars per year, but Comcast has committed to NBC as a turnaround opportunity.

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TV Still Pulls in Majority of Advertising Dollars

Although most Americans are watching less television and spending more time on the Internet, through their computers or mobile devices, marketers are sticking with tried and true channels and advertising on television.

Over the next year, advertisers are expected to spend 3.3% more than the previous year. Television advertising itself is accounting for 34% of the total U.S. ad market, according to data from Interpublic Group of Co.’s Magnaglobal. In addition to the projections for 2011, the same study showed that TV’s share of advertising is expected to increase to 38% by 2016 for a total of $81.3 billion spent.

Major marketers are increasing spending both in TV and online as they try to negotiate how the two mediums can work together to bring more revenue. Online ad spending is expected to reach $30.1 billion in 2011, placing it as the second largest ad-supported medium. According to Magnaglobal, it is expected to reach $7.4 billion by 2016 (which will be 22% of the ad market).

What has evolved is a “two-tiered” advertising environment in which television and online advertising are at the center and other media on the periphery. The Internet has taken a large share from print advertising, which is continuing to decline. The same hit in media buying hasn’t been seen on television yet despite the growth of online viewership. Industry experts theorize that the wide spread appeal of television and the storytelling potential of television spots are keeping TV in the running.

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Netflix Surpasses Traditional Video Subscriptions As It Reaches 20 Million Subscribers

Netflix Inc. has posted a 52% profit jump and a 34% revenue increase in the fourth quarter of 2010, which plants the 13-year-old media company in a top spot for media subscription services.

Traditional video services Showtime and Starz have 18.5 million and 17.4 million subscribers respectively, and Netflix came in at 20 million in 2010, with over three million being added just during the holiday season.

Netflix expected to grow as it increased its video on demand streaming service, starting at just $7.99 per month, but only predicted a 3.6 million increase in new subscribers. The total for 2010 turned out to be 7.7 million.

The boom in Internet video overall contributed to Netflix’s growth, CEO Reed Hasting was careful to point out. The overall acceptance of video on demand as a desirable media form influenced Netflix’s growth. Still, their impressive growth spells good news for on demand content which, in turn, may influence more entertainment companies to offer licenses to Netflix and other services.

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Google Wins Omnicom As Ally

Google has partnered with advertising company Omnicom Media for online display advertising. This will bolster Google’s entrance into the display ad space.

As the search giant expands its marketing and advertising revenue, it needs to make strategic alliances with established marketing firms with clientele who are already spending money in the space. Under this deal, Omnicom will be spending hundreds of millions in display ad purchases for its clients over the next few years. In return, Google is working with Omnicom on an application “trading desk” that allows Omnicom to more easily purchase display advertising on Google’s ad exchange.
Omnicom has already been using the ad exchange to bid on advertising spots throughout Google’s network, using its own technology. This new setup will allow easier access for Omnicom as well as better analytics to see how ads are performing.
Display advertising, while still controversial as a somewhat untested and unproven advertising market, will be worth over $5 billion this year. 2009 saw about $5 billion with steady growth over the previous three years and industry insiders expect that growth to continue.
Ad exchange systems, such as what Google promotes, allow marketers to choose more niche-based and focused sites to advertise with. These systems create genre-based website networks that the advertiser can then bid to use for their marketing. Advertising can be purchased for specific websites or pages or for suites of websites with similar themes and visitors. Site owners sign up with the ad exchange in hopes of getting more revenue from advertising with less effort spent looking for ad buyers.
Critics of deals such as this latest Google-Omnicom agreement, say that these types of deals raise conflicts of interest questions for the industry and especially for clients and potential clients of the firms in question. If, for instance, Microsoft were to be a client of Omnicom and see this deal with search rival Google (Microsoft owns the Bing search engine), might they question their investment?
Omnicom counters this by saying that the deal renders lower-cost advertising for its clients and does not require them to put specific clients onto Google’s networks. The deal allows Omnicom to focus on its expertise and leave technology to someone who knows it best.

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Walgreens to Serve Alcohol Again

In hopes of regaining lost market share and bolstering slumping sales, the popular drug store chain Walgreens is reversing its 15-year-old alcohol sales ban and will begin to carry alcohol in stores located in states that allow it.

Until the mid-90s, Walgreens was one of the nation’s largest liquor retailers with most stores having full liquor selections available. Alcoholic beverages comprised about 10% of its total sales revenues. Costs began to rise as staff and maintenance began to cut into profits on the liquor sales and Walgreens finally stopped carrying alcohol altogether.

Beer and wine sales have been re-introduced into about 3,100 of the drug store chain’s 7.500 stores nationally and will become available in about 5,000 stores nationally by year’s end.

Walgreens, which prides itself on its community-oriented image, sees this move as a response to sluggish sales and losing market share while rivals such as CVS and Rite Aid both offer beer and wine on their store shelves. Walgreens plans to go a step further and offer local fare at some stores, such as stocking locally-produced Washington State wines in their regional stores in the northwest.

Due to crime concerns, however, the drug chain will not be stocking anything more than beer and wine for now.

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Comfort Foods Make for Comfortable Growth – Even in a Recession

Most companies right now are clamping down on their marketing budgets, trying to trim the fat where it’s not necessary.

For General Mills, that strategy was counterintuitive; they need consumers to consider their products perfect for the burgeoning recession, and they ramped up their marketing spending by 16%. Their reward? An 8% increase in revenue, with 14.7 billion in sales, and a consumer base that thought the company’s products were the perfect comfort foods for these difficult times.

General Mills provides a lot of supermarket staples, including soup, cereal, baking goods, instant mixes, and other such homey comforts. Granted, they’re in an industry that naturally endears them to budget strapped Americans. Hamburger Helper, for instance, has improved their sales astronomically, due in no small part to its association with low budgets.

The comfort factor cannot be denied, though. Many of General Mills’ products are sold in similar forms by other companies – the different being that General Mills spent their marketing money hard and fast at the beginning of the recession.

While other companies were unsure whether they were willing to take the risk to put in more marketing money, General Mills had already sewn up consumer loyalty. They had officially become the most comforting brands for the recession.

This isn’t to say that they didn’t put in some new strategies too. The Betty Crocker products, for example, now have a wide and expanding base of recipe-seekers in a spanking-new online forum. But sometimes it’s best to stick with tried and true in uncertain times – a message General Mills managed to drive home to consumers just when they needed to hear it most.

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