The Sternberg Report

Cable Upfront: Are All Rating Points Equal?

In May, the broadcast networks will be unveiling their new programming and primetime schedules for next season.  But March and April are when cable networks try to persuade advertisers they are the best among the many cable networks that get virtually the same number of viewers.

If you look at season-to-date C7 Adult 18-49 primetime ratings for the broadcast networks, there is about three-tenths of a rating point separating first-place and second place – a small difference.  But in the cable world, this same small gap is considered massive.  The #3 and #25 ranked ad-supported cable networks are separated by just three-tenths of a rating point.  Why is this marginal rating difference so big for cable?  

Every cable network (except ESPN and Adult Swim) averages less than half a rating point among adults 18-49 in primetime. When ratings are so small, even modest disparities become big percent differences. Unlike broadcast, cable network ratings are analyzed using two decimal places instead of one.  Otherwise there would be too many networks with identical ratings for buyers to rank (and we know how network buyers, sellers and researchers like to rank things).  Whenever you start playing around with expanding decimal places, you know you're dealing with  small numbers.

Do rankings matter? When trying to project next season’s performance, however, there really is no difference between a network that gets a .33 and a .27 rating this season.  The difference may just be statistical noise, and those numbers could easily be reversed next season.  Since the switch to C3, this is more likely than ever.  Instead of averaging 60 minutes for an hour-long program, for example, you’re averaging maybe 15-20 minutes.  This can only add to the statistical bounce when dealing with such small ratings and small sample sizes (the two major contributing factors to statistical error).  The .33 rating will rank 8^th among Adults 18-49 while the .27 (which is just six-hundredths of a rating point lower!) will rank 14^th, and most people will think the network with the .33 rating is much better positioned and will get more viewers next season.  This, of course, is not necessarily true.

Having recently worked at a cable network where we went from ranking 14^th one season, to 8^th the next, to 11^th the next (with average ratings that were essentially unchanged), I can attest to how crazy this is.  Industry perception of our performance  changed significantly despite our stability and consistent ratings.

 If actual rankings based on ratings don’t matter much (at least among the top 20 or so cable networks) what does matter?

Original scripted series have been key in branding and re-branding several cable networks.  They often create buzz, improve the network’s reach, and have more engaged program viewers than any other genre.  More than half of all viewing to original scripted cable series, however, is time-shifted via DVRs. In 2010, there were only two original scripted series on cable that had 50% or less live viewing (Rescue Me and Mad Men).  During the 2013/14 broadcast year, the vast majority of original scripted cable series had less than 50% live viewing.

Live viewing matters. Whether or not you believe C3 or C7 take fast-forwarding through commercials into account (they don’t), the best research I’ve seen on the subject (and not just because I conducted the study) showed brand message recall to be three times as great for primetime series viewed live than those time-shifted via DVRs (there was virtually no difference in program engagement).  I think that’s all that needs to be said on the value of live viewing.

Median Age is a secondary measure.  Audience size should trump audience skew.  In other words, if your target is Adults 18-49, if two networks have the same number of those viewers, why does it matter that one network has a median age of 48 and the other has a median age of 52?  Several years ago, when CBS first took the rating lead among Adults 18-49, it was the only network with an average median age over 49.  Median age does not tell you how many viewers are watching.   There seems to be some mystical value still pegged to anything under 50, which is simply ridiculous, particularly when the actual size of the audience is similar.

Median Income is valuable but misleading. If you’re looking at Adults 18-49 $100K+, it’s really the household income of those adults 18-49.  For 18-24 year-olds, that is often their parents’ income.  Any income measure should start with 25 at the youngest. 

It also does not take household size into account.  A 45 year-old couple with three kids and a household income of $100,000 probably does not have as much disposable income as a single 35-year-old with a household income of $75,000. 

Someone with a household income of $100,000 in New York City, doesn’t have as much spending money as someone with the same household income in Omaha.  When I was at Magna Global, I had Nielsen include income by region in NPower.  I believe it is still there.

So while there is some directional value in median income analyses, people should be careful how they use it.  At the very least, it should be merged with household size.

Mad Men: Remembering "The Good Old Days"

The final seven episodes of season 7 of Mad Men begin on Sunday, April 5th.   

Can it really be eight years ago when the folks at AMC came in to see my group (when I was at Magna Global), nervously bringing with them a tape of a new scripted series called Mad Men?  They were wondering how advertisers would react, and how they should market the show.  They were doing the same with other media agency groups all over town.

An Expensive but Brilliant Risk

When Mad Men debuted in July 2007, original scripted programming had not yet enjoyed widespread success in basic cable.  There were just a few sporadic successes. FX was just winding down The Shield, and was a year away from Sons of Anarchy.  USA had some modest success with Monk, The 4400, and Psych.  TNT was two years into its hit drama, The Closer. Lifetime had just debuted Army Wives.  And now AMC of all networks, known among ad buyers for old movies and old viewers, was trying to pitch a new, stylish period piece about the ad industry (a subject that had never done well on TV in the past).  It was an expensive, and ultimately brilliant, risk.

After a group of about 10 of us saw the pilot, there was silence for a few seconds.  Then I said, "I think you might have something here."  A few others agreed, but it was by no means unanimous. That’s not to say I thought it would be the influential iconic series it turned out to be, but I thought it was well worth the effort.  I had long had debates with some of my colleagues about network branding.  My belief has always been people don’t watch networks, they watch programs.  As long as you effectively promoted a new show beyond your own air, a good series can find an audience.

The cast were not well known at the start, but Mad Men continued to prove one of my favorite sayings, “Stars don’t make shows, shows make stars.”

While never a major ratings success, it has had a fiercely loyal audience and a fundamental impact on the medium, becoming the first basic-cable series to win an Emmy for best drama.  It may not in and of itself made that much money for the network, but it paved the way for other groundbreaking AMC series, Breaking Bad and The Walking Dead, not to mention numerous series on other cable networks.  It may also have been the first series to inspire “binge” viewing, or at least helped coin the term.

Mad Men was fortunate to come at a time when cable networks were starting to look for new ways to re-brand themselves and go after original scripted series.  Had the show received the ratings it got on AMC on any broadcast network, it might have been canceled after it’s first or second telecast.

Was the Ad Industry Really Like That?

A lot of people have asked me if the ad industry was even remotely similar to how it is portrayed on Mad Men. 

Well, I started working in the media department at Ted Bates & Company in 1979.  Unlike the world of Mad Men, media departments were now well established.  It was right before the Reagan era, when Wall Street supplanted Advertising as the glamour job.  But when I started out, there were at least 20 people competing for every entry level advertising position. The great advertising agencies, like Ogilvy and Mather, J. Walter Thompson, Young & Rubicam, Doyle, Dane, Bernback,, Ted Bates & Company, Benton & Bowles, McCann-Erickson, and many others, were still intact and independent.. 

But the overall Mad Men environment and attitudes, while starting to change, still existed to a large degree.

• I originally wanted to be an account executive, but was told that Jews had very little chance of getting anywhere in advertising outside of media.  They would let us handle the money, but not deal directly with clients or top agency management.
  

• Many of the hard-core drinkers were being drummed out of the business (at least on the agency side), but some of my bosses had several bottles of liquor in their bottom desk drawers (although office bars as seen in Mad Men were no longer prevalent).

• When I went to a business lunch, if you didn't get at least one hard drink people looked at you like there was something wrong. If we were taken out to lunch on a Friday, we were basically out for the rest of the day. On Friday night, we'd go to the bar downstairs and hang out all night (I was young, single, and living in Manhattan).
  

• At off-site gatherings, executives freely smoked pot and did other things that today would do a lot more than just raise eyebrows.
  

• There were no computers or even faxes, so the business moved much more slowly. During the upfront, a plan would come in from the networks, we'd spend two or three hours analyzing it by hand on calculators, while our bosses would go out to long lunches and health clubs for the afternoon. Then they'd come back around 6 or 7pm ready to work. This is probably how the upfront first became a late night negotiating process.
  

• Women were still treated poorly. There were very few female department heads, and the ones I knew were tough cookies (they had to be). We had one male intern, who swatted a female co-worker of mine on the butt with a newspaper as she was passing by. While he was told that this was inappropriate behavior in the workplace (I guess as opposed to outside the office), he was not disciplined or fired. Many men still assumed that female bosses must have slept their way to the top.  Common language used in the workplace would today lead to a non-stop string of sexual harassment lawsuits.

• I knew several executives who had affairs with, and ultimately married, their secretaries.

• Racism was no longer overt, but was nonetheless rampant.  I actually had a woman in Human Resources (then called Personnel) at one of my subsequent agencies, tell me before sending me a potential candidate, "I just wanted to let you know she's black.  Is that a problem?"  And this was in the early 1980s!

By 1985, much of this had changed. But it changed for good when Ted Bates & Company, then the 3^rd largest ad agency in the U.S., was sold that year for $450 million, and its CEO walked away with a reported $110 million.  A lot of other folks at the company also got a lot of money.  Clients started saying, “What the heck is going on here?  These guys are making too much money.”  Commissions clients paid to agencies started to change, agency margins started to fall, many of the great ad agencies started to merge or be sold, media departments started to spin-off into separate agencies, and giant advertising holding companies were formed.  The fun, to a large degree, was over. 

While the early 1980s, when I started my career, were nothing like the early 1960s portrayed in Mad Men, the environment I experienced when I started out makes me believe the advertising world it portrays on TV was not far off the mark (although certainly exaggerated for dramatic effect).  The good old days were not good for everyone, but it certainly makes for good television. I'd love to see what happens to Don Draper and his crowd (both at work and at home) during the 1970s and 1980s.

While I haven't yet seen any of the upcoming episodes, I'm going to relish the experience.  Shows like Mad Men are few and far between.  While I often DVR and view two or three episodes at a time, since I don't want to have to avoid all the spoilers on social media, I'll probably watch these final seven episodes live (or at least before I go to bed on Sunday night).