Moving A $20 Billion Market: How Local TV Is Fighting To Evolve

As the local TV market grapples with falling ratings and viewership, it’s getting harder to meet the reach demands of advertisers.

“We still hold our stations accountable to their guaranteed ratings,” said Joe Cerone, EVP of local investment at Zenith. “It may take extra spots to make it happen.”

Local media sellers are trying to automate supply and extend their reach into OTT while maintaining margins, a tough balancing act that keeps them from fully committing to new buying methods. And advertisers are struggling to move away from legacy metrics as the industry pushes toward adopting CPM as a common currency.

“It’s a very antiquated business approach, and it’s going to take a little while for us to fall out of that,” said Kathy Doyle, EVP of local investment at Magna Global. “The task of turning this all around is so huge.”

But while local TV evolves at a snail’s pace, its audience continues to slip away. Here’s how the local TV market is readying itself for the future.

Embracing automation

As buyers must purchase more spots to maintain reach, negotiating ratings and executing buys has become more complex. Some buyers may have to negotiate every line item in a media plan across up to 210 markets for a multimarket campaign.

Tools such as Hudson MX and ProVantage X have entered the market to ease the manual work. They use machine learning to estimate ratings and negotiate in real time, and hook directly into broadcast sales systems to streamline transactions.

“It’s taken all of the manual keying in away from buyers,” Cerone said. “It’s keeping the reps, the station owners’ and the buyers’ paperwork in sync.”

Delivery and pacing tools are improving as well. Buyers used to wait weeks to receive an invoice and confirmation that their spots actually aired. Now they can get that information the next day through tools such as Nielsen’s KeepingTrac.

“The clients want to spend that money in the window they spent it,” Cerone said.

But these tools are nascent, and there’s room for improvement. For example, buyers are itching to upload custom data sets to inform their local TV buys, but right now that process is still manual.

“I can’t have buyers manually applying data in 210 markets,” Doyle said.

And fully transitioning to new tools is difficult as many agencies are still entrenched on Mediaocean, which has been working to become more automated and interoperable with other platforms, said its chief product officer Manu Warikoo.

Still, getting multiple systems to embrace the same standards is difficult. Industry consortium TV Interface Practices Initiative (TIP) is working to create a common set of APIs and technical standards platforms can adopt to make buying and measurement processes more consistent.

“The lack of technical standards by which these systems talk to each other was blocking progress,” said Brett Jenkins, EVP, chief technology officer of Nexstar Media Group and a member of TIP.

Going over the top

Local media sellers are adding OTT inventory to compensate for declining reach. Nexstar Digital packages OTT, online video and display inventory with the linear inventory from Nexstar Media Group’s 197 local stations.

“The local advertiser wants a packaged solution,” said Warren Kay, chief revenue officer at Nexstar Digital. “They can tie a certain amount of reach and budget to a buy and have a clear sense of what the value is.”

Cox Media Group, which owns 57 stations in 20 markets, offers a similar solution through digital sales unit Gamut, as does TEGNA, which owns 62 stations in 51 markets, through Premion. Hulu has also ramped up its efforts around local TV advertising. Through such offerings, Magna’s local clients are shifting up to 15% of their budget to OTT, Doyle said.

On the cable side, solutions including Ampersand and Xandr make it easier to execute multimarket addressable buys that achieve national reach. And local MVPD sales groups such as Effectv (formerly Comcast Spotlight) are creating audience segments that buyers can run against their programming schedules for more targeted buys.

Buying against audiences allows brands to avoid high CPMs by uncovering audiences on other channels, said Claudio Marcus, VP of strategy at Comcast Advertising.

And ATSC 3.0, a technical standard being developed by broadcast networks that will allow for real-time targeting on linear TV, will make it possible to target households on broadcast networks.

“In the past, we put our commercial on the air and the eyes just came to us,” Cerone said. “Now we have to take our spots and bring it to the eyes.”

From GRP to CPM

The local TV market is also moving past Nielsen GRPs in favor of the CPM as a common currency. Magna has been transitioning over to CPMs since 2016, while Zenith plans to transact fully against impressions by 2021.

“We’re one of the last mediums to convert to it, and I think it’s important and overdue,” Cerone said.

Impression-based buying makes it easier to measure local TV against other mediums, and opens up more inventory as ratings decline. Nielsen only rates programs that attract viewership above a certain threshold, but buying on a CPM allows buyers to include programming that falls outside of what’s Nielsen-rated.

“It helps us extend reach because there are areas we can buy that don’t generate a rating,” Doyle said.

Sellers are also embracing the CPM. The Television Bureau of Advertising (TVB), a trade group representing local network station groups, launched an effort in September 2019 to get the industry on an impression-based system by the end of 2020. NBC’s local TV group and Hearst Television pledged to move away from selling against ratings points as part of the initiative.

But while buyers are eager to compare local TV more easily with other inventory, many are hesitant to move off of Nielsen metrics. So some sellers are being careful not to move too quickly toward a CPM.

“You have to balance the market,” Kay said. “If you move too soon you run the risk of alienating buyers.”

Sellers are also concerned that moving to impressions will undervalue their inventory. Should a mobile video impression, for example, cost the same as a local broadcast spot?

“We have to come to what an impression means with things like duration,” Doyle said.

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