Guard Against Unreasonable Expectations
Not that we begrudge the good folks at NCP Marketing their great fortune, because we're happy the karate fitness program was such a success. The infomercial for Tae Bo starring Billy Blanks proved again that with the right product at the right time, DRTV has great selling power and can be enormously profitable - even at today's media rates.
Unfortunately, Tae Bo's great success may spell trouble for the infomercial industry. Many advertisers and media sellers may have the idea that Tae-Bo is now the paradigm, and every infomercial not only can be, but should be as successful.
This thinking is akin to believing that every feature film released this year should have the same box office gross as "Titanic" or should be as unpredictably successful as the newest cinematic dark horse, "The Blair Witch Project."
"Blair Witch" is a good parallel to Tae Bo. The independent film was at the right place at the right time, striking just the right chord in the public's mind. Meanwhile, Tae Bo's product was truly unique. It wasn't a piece of exercise equipment. It was exercise, but with a twist. It also had an affordable price point.
Does Tae Bo's success mean the me-too's that are bound to follow will also get rich? Expecting that would be the same as forecasting the "Blair Witch" producers will follow up with another hit film. More often than not, "Blair Witch" and Tae Bo are one-hit wonders. Continued success is the exception to the rule in Hollywood and DRTV.
Because of the unreasonable expectation created by an anomaly such as Tae Bo, media buyers this quarter are again forced by higher rates and fewer avails to scramble for long-form and short-form DRTV spots that will turn a profit for their clients.
We have lost some venues and gained others, but sometimes at a higher-than-acceptable cost per order. Fox's acquisition of America's Health Network is an example. Before Fox took over, AHN counted five million homes. Fox now says its version of AHN has gained 12 million additional homes. With this gain, Fox tripled its rates. The problem? Although rates tripled, response remained the same. After some persuasive negotiating, our buyers were able to bring sanity to our AHN DRTV media buys, bring the rates into line and back into the black for our clients.
Media buyers this fourth quarter also face the usual spate of traditional advertisers who gobble up - at high rates - avails they need for seasonal advertising. Many of these advertisers generate 70 percent of their total annual revenues in the fourth quarter and are more than willing to pay rates that would spell disaster for DRTV marketers.
Of course, the phenomenal increase in dot-com advertising, intended to drive viewers to Internet sites, only adds upward pressure on media rates.
Higher DRTV rates make sense if viewership increases. Unfortunately, that's not the case. New cable channels continue to be born, but they're competing with millions of Web sites, resulting in an even greater fragmentation of the audience.
It's no secret that the overall viewership of the larger broadcast networks has eroded steadily as cable television has become more pervasive. But now, homes that are connected to the Internet demonstrate a significant decrease in overall TV viewing hours.
While networks and stations experience greater fragmentation and fewer viewers, there is still higher demand from advertisers for their time. This means advertisers are willing to pay more for less.
In direct-response advertising, when you pay more money for fewer viewers, you only have reduced profitability to look forward to. This potentially spells big trouble for both long-form and short-form advertisers this fourth quarter.