Return of the Soaps?

In the last few years, one of the side effects of media fragmentation (and a host of other social and demographic trends) has been the decline of TV soap operas. Several have disappeared – Guiding Light, which started on radio in 1937, was cancelled last year, and it was announced recently that As the World Turns will be discontinued soon.

The soaps got their start as advertising vehicles for companies marketing laundry, dishwashing and related products, thus the genre’s name. Now, just as they shuffle off to wherever old TV shows go to spend their sunset years, it looks like they may be replaced by another form of sponsor-created programming – this time with a trade promo twist.

The world's biggest retailer, Wal-Mart Stores, and the world's biggest consumer-products maker, Procter & Gamble, are jointly creating a made-for-TV movie, in an effort to promote "family-friendly" alternatives to what they say is increasingly risqué TV fare. The two advertising heavyweights have teamed up on the two-hour "Secrets of the Mountain," to be broadcast in April on NBC. The movie, which focuses on a single mother who brings her family to a mountainside cabin, highlights values—such as generosity, honesty and togetherness—that Wal-Mart and P&G executives say are in short supply on television. Ads for both companies will run during commercial breaks, and the film will include product placements for both, their executives say. P&G is spending more than $4.5 million to produce the film, says a person familiar with the matter. It also paid for airtime for the broadcast. Wal-Mart paid some of the costs, including a fee to P&G for the right to be "presenting sponsor.

BusinessWeek said that the movie “features a single mother and her three children who use P&G’s Duracell batteries for flashlights and feed their dog the company’s Iams pet food ... The family eats breakfast cereal from Wal- Mart’s Great Value private-label brand …”

We salute Wal-Mart and P&G and wish them well in their efforts to create family-friendly TV programming. Both companies say they plan additional programming, though it’s not clear whether there will be further production partnerships.

From our perspective, the interesting thing here is that the old idea of advertiser-produced programming has been given the new twist of a supplier and retailer joining together to do the production jointly – that is something that (as far as I know) has never happened before. It adds interest that it is one of the original ‘soap companies’ that pioneered the idea in the earliest days of radio that is also one of the partners in this latest iteration.

Here at TPMA, we’ve been debating whether Wal-Mart and P&G will be sufficiently successful that this will lead to future similar efforts by other major retailers and suppliers, so we’ll make that our exit question: Will it become common for retailers and suppliers to jointly produce programming as advertising vehicles, just as Wal-Mart and P&G are doing?

Quickly Noted

Remembrance of Candy Bars Past
Ever had an Idaho Spud? No, not the potato, the candy bar, described as a “marshmallow center covered with dark chocolate and coconut sprinkles.” It’s one of the few remaining regional candies, along with Abba Zabba, Cherry Mash, Mary Jane, and the best known of the group, the Goo Goo Cluster. The Kraft/Cadbury merger brought to mind the demise (for the most part) of the many small candy companies that once existed in virtually every town of any size: “…in the years between the World Wars, 30,000 different brands were introduced in the United States alone.”
Wall Street Journal, 30 January 2010

Zale Turns to Vendors to Raise Cash
Zale is asking their suppliers to buy back merchandise in return for promises of future purchases. Well, at least diamonds aren’t perishable like food or seasonal like fashion apparel, but nonetheless one suspects that their suppliers may be as cash-challenged as Zale is. “The weak market for some segments of jewelry claimed a number of victims last year. Finlay Enterprises Inc filed for bankruptcy protection in August, while regional luxury retailer Fortunoff filed for Chapter 11 in February.”
Reuters, 4 February 2010

WSJ’s Metro Section: It’s the Advertising, Stupid
The Wall Street Journal is creating a ‘metro’ section carrying local New York news of general interest – the NY Times being their obvious target. One of my thoughts concerning possible outcomes of the current crisis in the newspaper business is that we might end up with national newspapers with local sections. It’s possible WSJ is experimenting with that, and that we might see Chicago and LA versions soon.
Forbes BizBlog, 29 January 2009

India’s PM Signals Further Opening of Retail Trade to Curb Price Rise
India may begin further opening of its retail sector, according to recent statements from the prime minister expressing concern about rising food prices. “He stated that greater competition was necessary in the wake of the retail prices having shot up more than the wholesale prices.” With the prospects of huge growth in India, major international retailers, including Wal-Mart and Tesco, have recently entered the market, but have been limited in what they can do by laws limiting foreign companies to protect smaller retailers.
The Hindu Business Line, 6 February 2010

Meijer's New Approach Focuses on Groceries, Niches
Meijer recently opened a new smaller (100,000 square feet) store in Niles, Illinois focused on grocery and eliminating its usual assortment of hard goods and apparel. They claim the new format is wildly successful, and they will soon open another in Orland Park (at the other end of metro Chicago) and plan to roll out more throughout their Midwest market area.
Indianapolis Star, 1 February 2010

Outlook Sports Desk: Champions League Final Tops Super Bowl in TV Survey
Numbers aren’t in for this weekend’s Super Bowl, but last year the Big Game came in second internationally to the finals of the European soccer championship, the EUFA Cup. The Super Bowl had an average audience of 106 million (90% in the US), while EUFA Cup had 109 million. A distant third was the Bahrain Grand Prix car race.
Reuters, 31 January 2010

Quickly Noted

News Corp Pays $500M to Valassis in Price-Fixing Lawsuit
News Corp’s in-store marketing arm, News America Marketing, had lost a $300 million judgment to Valassis Communications in July, but settled that, and other suits, for $500 million. Valassis alleged that News America had used predatory pricing and package deals with retail suppliers that had the effect of freezing Valassis out of the market. “It has become evident to our legal advisors from pre-trial proceedings over the past couple of weeks that significant risks were developing in presenting this case to a jury.”
The Wrap, 30 January 2010

MP3/iPod Ownerships Soars among Teens, Radio Falls
In the last five years, the percentage of teens who own a digital music device has soared from 18% to 76%. Meanwhile the number of radios in their homes has dropped from 3.3 to 2.5, with a devastating effect on the amount of time they spend listening to the radio: teens spend over three hours per day listening to music, but only 37 minutes of that is via the radio. When I started in this business, one simple rule for marketers was that if you wanted to reach teens, you advertised on radio. Not so simple now.
Media Daily News, 26 January 2010

Coupon Use Skyrockets
For the first time in seventeen years, since 1992 (when we were in a recession), coupon use rose last year. According to Inmar, there were 3.3 billion coupons redeemed last year for packaged goods products, up 27% over the 2.6 billion redeemed in 2008. Also of interest is the distribution/redemption patterns – 90% of coupons are distributed via FSIs, and 50% of the redeemed coupons came from FSIs. "Despite the readership decline in newspapers, people are still willing to go back to their Sunday newspapers for coupons."
Brandweek, 28 January 2010

Follow-Ups

Regulatory/Law: UK to Have Supermarket Ombudsman
Last week, we mentioned that the Conservative Party in the UK had promised to appoint an ombudsman to oversee disputes between supermarkets and suppliers. Almost immediately, the governing Labour Party pre-empted the promise by doing so:

The U.K. Competition Commission recommended the establishment of a body with the ability to penalize grocers in August after an inquiry found they were passing on “excessive risks” and “unexpected costs” to suppliers. The opposition Conservative Party, which leads in opinion polls, has also recommended the appointment of a supermarket ombudsman citing so-called “retrospective discounting,” where retailers reduce the price of products at a later date when they fail to sell.

Online Marketing: P&G Opening eStore
Procter & Gamble is creating an ‘eStore’ to sell its products online. They say they are doing so to research consumer buying habits and will share data with its traditional retailers, but the new outlet may also be an effort to overcome lost shelf space as many of their retailers cut assortments.

Media: Magazines Lose 25% of Advertising
The bleeding has not eased at all in the media space – the latest report is on magazines, who lost 25% of their ad pages in 2009:

Between 2008 and 2009, magazines lost, on average, one-quarter of their ad pages — the worst drop in the decade of data that the bureau, which measures virtually all major American magazines, had readily available. It is significantly worse than even 2001, when pages declined by 17.2 percent from the previous year. And magazines ran only about 170,000 ad pages last year, versus about 238,000 in 2001.

SKU Rationalization: Supervalu Cutting Assortments
We mentioned a month or so ago about Supervalu’s plans to reduce assortments. The Wall Street Journal provided an update, summarized in the opening paragraph:

Supervalu Inc. said it will be reducing the number of items it offers per store—in some cases by as much as 25%—in a move intended to more prominently feature store-branded items and extract lower prices from vendors.

Rabbit Ears Make Comeback in Digital TV Era

Maybe broadcast TV isn’t quite as doomed as it has appeared. With the advent of digital TV, viewers can receive a great many more channels (for free) over the air than used to be available – according to this article there are now three times as many broadcast signals available in the LA area (as many as seventy), many of them broadcasting programming targeted to ethnic groups. What is needed is just an old-fashioned set of rabbit ears, which can cost as little as a dollar, and which now produce a high-quality picture.

Editor & Publisher Closing after 108 Years

As bad as the newspaper and magazine businesses are, possibly the worst possible thing is to be a magazine that reports on the newspaper biz. Nielsen is selling off other publications, such as Billboard and The Hollywood Reporter, but presumably they figured there would be no takers for E&P. Too bad.

No Rest for the Dreary

Newspaper revenues are down another 23%. But nothing describes the problem as well as this graph:

Poll Results: Do Not Mail

It looks like our readers are tired of getting so many catalogs in the mail. Last week, we discussed the increasing number of catalogs (and their decreasing effectiveness) and asked: “Should Congress pass a ‘Do Not Mail’ law, restricting direct mail?” The results:

• 57%: Yes
• 43%: No

A pretty clear margin and, considering that our readers are mostly marketers who might be expected to be more sympathetic to an advertising/marketing tool than the public in general, an indicator that there may be very strong support for such a law. Bad news for the USPS, based on the article cited above in “Follow-Ups”.

Follow-Ups: Postal Service Problems, Book Wars, Newspapers in Decline, and the Economy

We had an item last week about catalogs that touched incidentally on the financial problems the US Postal Service might face if catalog distribution were to be cut back, especially if there were a Do Not Mail list mandated by Congress. The Economist has an article in their current issue on the problems faced by USPS and other postal services worldwide:

Overall, many postal firms now expect total letter volumes to fall by 5-10% or more in 2009. America’s postal service saw a drop of almost 14%, or 28 billion items, in the year to September. Menno Sanderse, an analyst at Morgan Stanley in London, predicts that European postal services could lose half their mail volume over the next ten years.

The book pricing war between Amazon and Wal-Mart continues to get a lot of attention. One ingenious step independent booksellers were discussing was ordering their own books from the giants, since that would be quite a savings compared to buying them wholesale. Alas, Wal-Mart, et al. aren’t dumb enough to fall for that- they have instituted order limits:

Plans by independent booksellers to buy the 10 November titles being offered at steep discounts by Wal-Mart, Target and Amazon have been foiled by the big box retailers who are limiting the number of books one customer can buy. According to the Wall Street Journal, Wal-Mart is limiting purchases to two copies per customer, Amazon has a three-copy limit and Target five. There has been lots of discussion in bookseller forums about buying quantities of titles at the big box retailers as a protest to the discounting policies, but also as way to get a better margin since the 10 books would be cheaper to buy from the stores than from the publishers.

We’ve often discussed the decline of newspapers and the effect that has had and will have on retail advertising and trade promotion. The decline is continuing, and accelerating, with newspaper circulation now lower than it was in 1940, when US population was about 40% of what it is now:

The ABC data estimate that 30.4 million Americans now pay to buy a newspaper Monday through Saturday, on average, and about 40 million do so on Sunday. These figures come from 379 of the nation's largest newspapers. In 1940, 41.1 million Americans bought a daily newspaper, according to the Newspaper Association of America. Average daily circulation of all U.S. newspapers has been in decline since 1987 as papers have faced mounting competition for reader attention and advertising. Online, newspapers are still a success -- but only in readership, not in profit. Ads on newspaper Internet sites sell for pennies on the dollar compared with ads in their ink-on-paper cousins.

That last point would argue strongly once again for shifting trade spend to the web.

And finally, a note on the economy, with a bit about private label. News came out last week about an uptick in GDP, and also about improved results and forecasts from some major brands:

Signs of an improving economy might be in your kitchen or bathroom cupboards. Consumers are showing a willingness to pay a little more to get Colgate toothpaste, Kellogg's Frosted Flakes and Gillette Fusion shavers. That's good news for the economy and the multibillion-dollar companies that make those products and have been battling to keep shoppers from trading down to store brands to save money. Procter & Gamble Co., Colgate-Palmolive Co. and Kellogg Co. all gave upbeat earnings reports and even stronger outlooks for next year on Thursday, a day that also saw the announcement that U.S. gross domestic product rose for the first time in a year. "The strongest brands are the most resilient to economic stress and the first to bounce back as soon as consumers can pay for it, because they don't want to trade down," said Allen Adamson, managing director of branding firm Landor Associates. "They want to get what they want."

Zenith: More Losses for Newspapers, Magazines in 2010-2011

The Zenith Optimedia ad report says that total worldwide advertising spending is down 9.9% this year, and will drop an additional 2.9% next year, followed by a modest rebound in 2011. But things will be even worse for print media: newspapers are down 17% this year, will drop another 4.5% next year, and will level off to a 0.5% drop in 2011. Magazines are worse yet.

Why You’re Still Getting So Many Catalogs

It’s the Digital Age, right? Nobody wants anything to do with print media, right? Catalogs are environmentally destructive, right?

You might agree with some or all of those assertions, but the folks in the catalog business will say that they keep mailing because catalogs work. According to this article in the Wall Street Journal, 17 billion catalogs were mailed last year in the US:

Among retailers who rely mainly on direct sales, 62% say their biggest revenue generator is a paper catalog, according to the latest survey by the Direct Marketing Association. Only a fifth of those retailers said they draw their biggest sales from their Web sites.

And the belief is that even many of the web sales were driven by catalogs:

… the post office recently hired a consultant to conduct a study that concluded that consumers who received catalogs from a retailer spent 28% more on that retailer's Web site than those who didn't get a catalog. "The more often you mail," the study said, "the more sales you could see."

But the numbers are falling at rates that have to have the direct marketers considering changes to their business plans. According to the DMA surveys, the percentage of catalogs that generate a sale declined from over 8% in 2003 to just under 2% in 2007. And while the catalogs generated 46% of direct marketers’ sales in 2008, compared to 36% online, the catalog number was down 5% from the previous year, while the online number was up 5%.

And of course, the USPS survey should be considered in light of the fact that they are far from neutral on the subject. With the amount of on-line billing and payment, and the almost complete disappearance of personal letters, the delivery of advertising is becoming a bigger and bigger portion of their business.

A big threat to both direct marketers and the USPS is the idea of a “Do Not Mail” list:

A San Francisco environmental group called Forest Ethics is circulating an online petition calling on government to set up a "Do Not Mail" list that commercial mailers would have to honor, modeled after the National Do Not Call Registry that allows consumers to block telemarketers' phone calls. By signing up, consumers would block unwanted junk mail, including catalogs. The group says it has gathered about 100,000 signatures.

I’m not sure as many people would sign up for Do Not Mail as have signed up for Do Not Call, an unwanted catalog in your mailbox is less intrusive and offensive than a phone call from a telemarketer who refuses to hang up no matter how many times you say, “Sorry, not interested.”

But any substantial drop in mailings would force the direct marketers to speed up the transition to online marketing, and could be disastrous for the USPS.

Ad Slump Leads Gourmet, 3 Other Magazines to Close

Conde Nast has now shut down six of its magazines this year, but Gourmet, founded in 1941 and with a circulation of almost a million, is the biggest name to be dropped. It’s tough to survive a 50% decline in ad pages. There are no plans, they say, to kill more magazines, but some of the survivors may cut their publication frequency.

Ad Spending Fell 15.4% in First Half of Year

The hits just keep on coming in the media biz, but not in a good way. The drop in spending in traditional media, a wicked combo of the recession, media fragmentation, and (apparently) increasing emphasis on in-store spending, seems to be accelerating. Almost all media were down, but national spending in newspaper was the worst area, down 23%.

NBCU Strikes Deal with GSTV

What’s GSTV, I hear you asking? Or at least that’s what I was asking. It’s Gas Station TV, those annoying things on gas pumps that tell you to go inside and get a day-old hot dog and a slurpee. NBC Universal has a division called NBC Everywhere (no kidding), which has struck a content and advertising deal with GSTV covering the top 100 markets. NBC had a deal with GSTV’s competitor, Outcast, but Outcast switched to CBS (which in turn used to be content provider to GSTV). Media overload, anyone?

Will E-readers Help Save Newspapers?

The new publisher of USA Today thinks that digital, which is largely responsible for papers’ decline, may also save the industry. "USA Today is ‘extraordinarily bullish’ on wireless devices," he said, adding, "You will hear us [say] that hybrid solutions are the key to us moving forward." One advantage of electronic delivery is cost-cutting – printing and circulation account for 30%-50% of newspaper expenses. But what about the ads? They still haven’t figured that out – and until they do, it’s tough to see this as the magic bullet.

Follow-Ups: Media, Walmart

We’ve written often on the decline of traditional media, and the effect it may have on trade promo, as retailers and suppliers look for alternatives. Recently a number of articles have piqued our thoughts on this point:

This article (on a study sponsored by the Newspaper Association of America) notes that newspapers are still cited by a majority of adults as their primary source of shopping information:

59% of adults identify newspapers as the medium they use for planning, shopping and purchase decisions, making newspapers the leading advertising medium cited by consumers for these activities.

Additionally, 73% say they read newspaper inserts, and 41% cited newspapers as their “primary medium” for checking advertising, almost double the 21% for the second-place medium, the internet.

That’s the good news. On the other hand, ad spending in newspapers dropped an incredible 29% in the second quarter:

It's the deepest downturn yet during a three-year free fall in advertising revenue-newspapers' main source of income. The magnitude of the industry's advertising losses have intensified in each of the last 12 quarters.

The question for newspapers is how much of this decline is due to the recession, and how much is the result of permanent shifts to other media. I did a little research based on an item I read about the effect of the introduction of that other disruptive new media, television, on existing entertainment forms of the era. Here’s a chart on the attendance at major league baseball games in the 40s and 50s:

After shooting up when World War II ended, attendance dropped as television started becoming commonplace in homes. The interesting point is that even after the initial drop, the recovery that followed was slow – baseball attendance did not reach twenty million again until the early sixties (when the leagues expanded). Not what newspaper, radio, and TV people want to hear, I’m sure.

A few weeks back, we wrote about Walmart’s recent request that suppliers give them a share of the suppliers’ marketing budget equal to Walmart’s portion of their sales. This blog entry looked at the subject from an interesting perspective. We are all used to the idea that the store is now an advertising/promotional medium, but Walmart’s move might lead to the retailers becoming, in effect, ad agencies:

As always, Walmart is a fringe case. They basically commanded Saatchi & Saatchi X to exist, and it did. Then, when it came time to roll out the Smart Network, they once again built an ad sales agency out of thin air (Studio2). If the cost-supplement initiative really takes off (and the Robinson-Patman issue gets resolved), I could easily see the same thing happening, with a new entity formed to allocate and spend the billions of dollars pumped in via product makers. Not too long ago, Walmart said in-store media is their most important channel, so who knows how far they'll take it when someone else is footing the bill.

What's the most likely outcome here? As Walmart and others heap more trade promotion fees on their suppliers, the overall percentage of ad dollars they control could increase dramatically. This raises several questions:

Will retailers (or at least the largest of them) continue to manage the advertising funds themselves, as they have in the past? Will existing agencies step up to the plate with services tailored to these growing programs? Or, will entirely new entities be spawned for the sole purpose of handling retailer-specific spending accounts?

If I were in the ad agency business, I’d find this rather scary. The rise of the store-as-medium has played a significant part in the current problems of traditional media. The store-as-agency might create similar problems for agencies.

News Corp. Pushing to Create an Online News Consortium

Rupert Murdoch announced a couple weeks ago that he would try to start charging for access to his company’s online news sites. Now we hear that news that News Corp. has initiated meetings with other leading news companies to try to get them to join in the effort since, as an analyst is quoted in the article, "The reality is that unless a lot of people who produce news act in unison to start charging for content, then individually they will fail." Since I played lawyer in the last issue of this newsletter, I’ll mention that others have pointed out that trying to get a group of competitors to act jointly on pricing is generally called price-fixing, and frowned upon by the government.

Media's New Normal: Grim

Forbes reports on a study by an equity fund, Catalyst Investors, that says the current downturn in media is nothing temporary.

In fact, this year will be an "annus horribilis" for traditional media, says Catalyst. Get used to it: Mainstream media's advertising meltdown is the "new normal" for the ad business. Plummeting consumer spending and the Web's ability to eat away at the pricing power of traditional media has driven the declines.

The increase in consumer spending in recent decades drove an increase in capacity in media (e.g., new TV channels, new magazines for every demographic sliver and esoteric interest). And then came the internet, which provided unlimited content and unlimited ad capacity – an oversupply that caused the bottom to drop out of media pricing.

[The internet's] unlimited content and ability to measure ad impact broke "the oligopolistic pricing power that traditional media enjoyed in the 1980s and 1990s." A further dip in ad spending as a percent of GDP will occur over the next two to three years, predicts Catalyst.

Unmentioned in the article are the effects of retail consolidation and the decline of many traditional big advertisers. This blog reports that Macy's has cut back its newspaper advertising by over 50% in the past three years (a $600mil hit to the newspaper industry).


Macy's shifted its spending tremendously, giving a bigger share to TV, but even there it's just a bigger share of a smaller pie. The numbers indicate that Macy's total media spend dropped about $700mil in those three years. This was driven, no doubt, by multiple factors: the recession, the secular decline of the department store channel, and not least by the combining of the old Federated and May Company stores and the closure of redundant outlets. Put it all together, and it spells continued gloom for the media – the recession will end, but the decline of traditional advertisers will not. And the media overcapacity created by the internet will not end either.

Channel marketers, of course, will look at those pie charts and note the absence of in-store marketing. What portion of the missing $700mil was spent on in-store promotions of some type? That's an answer we're unlikely to ever get, but I imagine it is not an insignificant number.

(As an aside, I look at the 1% for internet spending and I want to scream: "What the #$%^& are they thinking??!!??" To be fair, it's an improvement over the 0% in 2005. Maybe they're catching on.)