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No More ‘Tropical TV’

Puerto Rico’s TV Advertising Marketplace Has Hit The Big Time After A Decade Of Little Change. New Programs, New Delivery Methods, And Fewer, More Expensive Commercials Are Changing The Rules Of The Game


March 20, 2003
Copyright © 2003 CARIBBEAN BUSINESS. All Rights Reserved.

From clutter to quality: TV advertisers seek better ways to get their commercials seen and remembered

TV was once considered a wasteland, but now--with hundreds of choices for viewers--it is starting to look like the promised land. Unless, that is, you are an advertiser.

Reaching potential consumers through the small screen is becoming an extraordinarily challenging task. Elusive audiences shuffle around a virtual maze of TV-channel fragmentation and new media, giving marketers and advertising agencies a run for their money.

The introduction of new programming choices, the dramatic increase in cable and satellite TV subscriptions, the sharp reduction in commercial inventories and the subsequent hike in TV ad rates have all added up during the past few years to transform Puerto Rico’s television industry.

While Univision’s entrance into the local market in April 2002 may have crystallized these changes, the transformation has been some time in the making.

The TV transformation unfolds

Coca-Cola President & COO Steve Heyer, a former TV & advertising executive, addressed the issue during a recent conference hosted by Advertising Age. "You television executives among us had better recognize that you are prisoners of media fragmentation and proliferation, and of the changing media-consumption habits of younger generations," Heyer told the audience.

Coming from the man in charge of the world’s most recognized brand, the warning should not be taken lightly.

Local advertising agencies have caught on and are demanding more from their television counterparts. "TV has to reinvent itself; it can’t continue offering the same things it did before," said Ineabelle Velez, vice president & media director at Lowe Circulo. "TV has to offer various programming alternatives; it has to offer advertisers new choices. Everyone is after bottom-line results, and we won’t achieve those unless we throw out the old rulebook."

Some credit Univision with sparking a revolution in the local market, setting high programming standards and waging a fierce battle against commercial clutter, since its arrival in Puerto Rico. "Univision has taken the lead in announcing that it will set a standard in prime time by limiting commercial time to 10 minutes per hour," said William McKenna, president & CEO of Mediafax. "That’s a very aggressive standard, but it’s very good. It has put pressure on the other stations to reduce their clutter, maybe not to as low as 10 minutes but definitely lower than it has been in the past."

Clutter levels during Telemundo’s (Channel 2) prime-time programming in January 2003, for example, were an average of 16.99 nonprogramming minutes per hour (including station promotions), down from last year’s average of 20.49, according to Mediafax’s Clutter Report. Televicentro (Channel 4) has also reduced clutter from an average 19.13 minutes per hour last year to 17.81.

While the effort is improving the advertising environment, reducing available time for commercials has inevitably pushed TV ad rates up, placing a hurdle between some advertisers and their target audiences. "Prices in Puerto Rico hadn’t changed because TV stations kept increasing their supply of commercials [time per hour available to advertisers]. They would reduce the number of station promos and increase the number of commercials," said McKenna. "Now, however, supply and demand will determine the price."

The higher advertising costs notwithstanding, TV stations are receiving praise for their initiative to clean up the clutter. "All three local channels have made a commitment to reduce commercial clutter. They understand it doesn’t help retain audiences, because people get tired of watching so many long commercial breaks," said Mike Zayas, media director at McCann-Erickson. "Reducing clutter allows channels to increase the number of viewers and raise prices." According to Zayas, all three local TV stations have hiked ad rates by around 15%, an amount he considers acceptable.

In fact, the consensus is that bargain-basement TV ad rates were undermining the local market. "The local TV market hadn’t grown because excess commercial inventory didn’t allow it to. If they continue to control inventories and adjust their prices to reasonable levels, the market will grow," said Santiago Rubin, partner at S&M Group, a consulting firm that handles ad sales for satellite TV provider DirecTV. According to Rubin, former head of the now-defunct Teleonce, Puerto Rico’s TV market has been undervalued for years, with CPM (cost per thousand viewers) levels three times lower than those of comparably sized markets such as Baltimore, Cleveland, and Sacramento.

Industry insiders agree that the rate hike is bound to improve the environment for advertisers, who will have the opportunity to insert their ads in shorter commercial breaks. This will greatly improve the chances that the ads not only will be seen but also will be remembered and acted upon by consumers. Circulo’s Velez added that local stations have put premiums on odd-length commercials, such as 10-second or 20-second spots, because they are harder to insert in shorter commercial breaks and add to the audience’s perception of excessive clutter.

Higher ad rates might also have the effect of driving away advertisers who were placing ads on TV simply because they could afford to. In fact, Velez said clients with smaller budgets are already considering other media or are concentrating their TV efforts on a single channel, allowing them to leverage their negotiating power.

Cable and satellite make friends with fragmentation

Cable TV and satellite TV offer advertisers less expensive insertions, though the audience is much smaller and much more fragmented. Of the 1.3 million television viewers in Puerto Rico, roughly 45% subscribe to some form of paid television service, whether cable TV or satellite TV. "The cost of placing ads on cable TV is more attractive than the cost of placing ads on local TV," said Jose Alegria, general manager of Liberty Cablevision. "It adjusts easily to the advertising budgets of small and midsize businesses."

Certain hard-to-reach audiences, such as teenagers and working women, are accessible to advertisers through cable and satellite. "Local TV is aimed mostly at housewives, which is why there are so many soap operas and talk shows on Channels 2, 4, and 11," said Velez. "The choices for other demographic groups are narrower on local TV, so cable and satellite TV are real options to get to those hard-to-reach segments." Velez warns, however, that with so many choices, it is sometimes difficult to reach consumers through cable or satellite.

Cable and satellite companies have turned fragmentation into a selling point, arguing that specialized programming ensures commercial messages will get to their intended audiences. According to Gabriel Palerm, regional sales & marketing manager for Adelphia, advertising on cable TV curtails the spillage of messages to unwanted audiences. "The reach of local TV is much greater, but the effectiveness of certain spots that aren’t intended for mass audiences is much better on cable TV," said Palerm.

The inventory that cable and satellite companies have for local advertising insertions is limited. While there are dozens of channels to choose from, the time allotted for local insertions on those channels is only two minutes per hour.

On the flip side, cable and satellite companies have detailed information about their consumers, which can help advertisers place ads where they want them. According to Rubin, cable and satellite subscribers generally have higher than average purchasing power, with incomes exceeding $29,000, a highly attractive profile for certain marketers, such as consumer products manufacturers, telecommunications providers, banks, and makers of luxury items.

Palerm said that homes with cable or satellite TV view much less local TV. While in the past people subscribed to cable to get better reception of local channels, today’s TV viewer is more sophisticated and prefers the ample choices available from paid TV. According to Palerm, Telemundo’s ratings from 12 p.m. to 5 p.m. are 34% lower in households subscribed to Adelphia than they are in the rest of TV viewers in Puerto Rico.

Although the benefits of cable TV are evident, the consensus is that local TV is still king. "Well over 70% of the TV viewing is local. It’s part of the culture; you can tell people are into it and consider it theirs," said McKenna.

Cable and satellite TV serve a niche that will continue to gain importance as the number of subscribers continues its vertiginous growth. In fact, Rubin said DirecTV expects to increase its subscriber base from 175,000 to 250,000 by year’s end.

"It’s a very exciting time in television. I didn’t see as many changes in the past 10 years as I’ve seen this past year," said Joseph Martinez, vice president of sales at Televicentro. "No more tropical TV. We’re playing with the big boys now."

Interactive TV presents endless possibilities for advertisers

TV viewers will soon be able to react immediately to advertising on their screens thanks to the technology of interactive TV (iTV).

A hungry viewer, for example, will be able to order a pizza as soon as the first tantalizing shot of a steaming hot pizza appears on the screen, presenting an attractive possibility for marketers of every kind.

Santiago Rubin, partner at S&M Group, which handles media sales for DirecTV, told CARIBBEAN BUSINESS that the possibilities of interactive television are as boundless as clients’ imaginations. According to him, iTV is the future of television.

Rubin explained that advertisers can take advantage of interactivity to direct viewers to informational pages about their products during a commercial or to connect viewers to a sign-up form for a contest, among other options. DirecTV tested interactive features during the recent transmission of the Serie del Caribe baseball tournament and received enthusiastic feedback from viewers, said Rubin.

More than 50,000 DirecTV subscribers in Puerto Rico have receivers with interactive capabilities, according to information provided by S&M Group. These subscribers have access to a number of interactive features, such as interactive channels, polls, enhanced TV, and synchronized commercial spots that provide a link to special offers or additional information about the advertised products or services.

Advertisers, in turn, can use these interactive features to drive traffic to their websites, to collect valuable information about consumers, or to advertise special promotions or contests.

When television alone doesn’t cut it

The traditional media mix of television, print, and radio is now more of a media maze, with so-called alternative media popping up everywhere one can imagine.

As the menu of media options grows, advertisers are being forced to consider placing ads in unconventional places--such as bathroom stalls and gasoline pump handles--in order to reach their desensitized audiences.

"There’s so much fragmentation that even leading brands with generous advertising budgets are having to branch out into alternative media to reach their target audiences," said Eduardo Galindez, partner at Tactical Media Group (TMG), an alternative media agency.

Galindez was quick to add that he doesn’t expect alternative media to replace traditional media, though there are times when alternative media can be marketing vehicles as important as TV, print, and radio. The fact that leading brands such as Coors Light, Toyota, and Banco Popular are investing heavily in alternative media shows these vehicles are effective in reaching scattered audiences. "The fact that they are cost-effective is just added value," he said.

The alternative media industry has also played a crucial role in bringing its product to the forefront, not only finding innovative ways to reach potential consumers but also investing in research and testing to quantify results, said TMG Partner Jorge Pierluisi. "We are making an effort to ensure that we are perceived as serious, effective media for our clients’ marketing mix. Through research, we are helping our clients understand what our media can do for them," he said.

Alternative media have an advantage over mass media in that they are audience-specific and are able to break through the clutter. Because of their location, vehicles such as bathroom stalls, gasoline pump handles, and light boxes on university campuses have the ability to captivate the attention of audiences when they have nothing else to distract them.

Television, however, continues to draw advertisers because of its unmatched reach and brand-building power. "TV is definitely the dominant medium," said Galindez. "Cost is a considerable factor, but clients will have to adapt."

This Caribbean Business article appears courtesy of Casiano Communications.
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