This week’s news about a class action lawsuit for price fixing on advertising prices against 6 of the largest TV groups is just about the biggest piece of crap I have ever read.
I know the group heads and many of the station sales leaders at all of these companies. I’ve been part of the TV business for over 40 years, and I am positive that it is absolutely not the case. There isn’t a single one of those people I know who is stupid enough to engage in any conversation that would do anything collusive. These are smart leaders and they would never do that. And, the idea that these 6 companies would agree on anything? Laughable. Even when they do get together at NAB group head meetings, there’s always a lawyer in the room to guarantee that nothing gets done that is anti-competitive.
So, this will get a lot of publicity… probably increase the Maalox usage of several group heads, enrich the lawyers, and be determined to be absolute, total garbage.
Can you tell I’m offended?
And, by the way, if the industry WAS engaging in collusion, then you’d have to say they’ve done a REALLY HORRIBLE job, since our business continues to decline. In fact, the news article about the Mobile, Alabama lawyer’s class action suit suggests local TV revenue was going to be up this year. If that’s the case, it’s because of political spending and no other reason, as most of the stations I know are having real challenges to core revenue.
There are two separate issues. The first is the Alabama lawyer’s suit. Totally bogus.
The second is the Department of Justice inquiry based on their examination of the Tribune/Sinclair merger. From reading the news articles, it appears they’re concerned about our industry practice of sharing quarterly revenue reports with Hungerford or Miller Kaplan. By the way, if you’re reading this and don’t know our business, this information is assembled after a quarter ends, so it can’t be collusive. It only shows how the market did retrospectively. It’s history, much in the same way food manufacturers get retail market share trends from Nielsen scanners in the grocery store or auto manufacturers report monthly sales of SUV’s.
My opinion? Quarterly share reports actually do more to REDUCE ad prices than to raise them.
Here’s what I mean. As a TV sales manager, I live in fear of the day the share reports come in. My corporate bosses are getting them at the same time and their opinion of me will be somewhat determined by how well we did last quarter. If I have a bad quarter… in other words, I lost share of the market’s revenue… I’ll be on the hot seat. I can guarantee you that I’ll do anything I can to make sure it doesn’t happen again. How do I do that? An easy way is to lower the rates. That allows me to increase my share to get back in the good graces of my corporate bosses. Here’s a personal example. Just a few years ago, I was a partner in a station that was kicking butt. During that time, we actually stopped reporting our numbers. We didn’t want our competitors to know how well we were doing because if they knew, their likely response would be to cut their rates. We believed that not sharing information would keep our prices higher. That’s the total opposite of collusion.
It’s even worse than you think. Some companies in our business place too much emphasis on share growth as a determinant of management effectiveness. I’ve seen literally dozens of situations where sales managers of dominant stations are reducing rates to increase share and are actually damaging the market. Ask any TV sales manager if they’ve ever been frustrated by the pricing weakness of a market leader. I can reel off 20 markets off the top of my head where the market leader doesn’t price like the market leader and damages the revenue potential of the entire market.
I’m convinced that the DOJ inquiry will go nowhere because there’s nowhere to go. But, in the meantime, we’ll waste a whole lot of energy, money, and time on an absolutely bogus claim.
When I speak to GM and sales management groups, there’s a line I sometimes use that always gets a laugh. I’ll say, “The TV industry is the only business that can take a 5% reduction in demand and successfully negotiate it into a 10% reduction in our business.” It gets a huge laugh because all the sales managers know it’s true. The price dive for share is one of the biggest challenges facing our business. That sure as hell doesn’t sound like collusion to me.
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