September 2008 The Evolving Media Economy. 2 Once Upon a Time, Marketing = Media + Creative Traditional media was primary (sole?)

September 2008

The Evolving Media Economy

www.MagnaInsights.com2

Once Upon a Time, Marketing = Media + Creative

•Traditional media was primary (sole?) venue for communications objectives


But Fragmentation Fractured That Proposition


Music Was The Canary In The Coal Mine

Source: Magna, RIAA

•Digitization changed production, distribution and consumption

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Rev

enu

es (

$000

s)

TotalDigitalSales

RetailSales

Manufacturers'Shipments

Manufacturers' Shipments of Recorded Music

Napster Launched (June 1999)

BitTorrent, Kazaa, Grokster, etc. active

iTunes Launch (March 2003)


And DVRs Were To Be The Last Nail In The Coffin


With A Digital Revolution Blooming In The Aftermath


But Traditional Media Never Died

“Television is the worst form of

advertising, except all the others that have been tried”



•New advertisers rely on it for mass branding effects

1 McDonald's 1 AT&T Wireless2 KFC 2 Verizon3 Burger King 3 Sprint4 Miller Lite 4 McDonald's5 Budweiser 5 Home Depot6 AT&T 6 T-Mobile7 Wendy's 7 Subway8 American Express 8 Toyota Tundra9 Miller High Life 9 Lowes

10 Advil 10 Wendy's

20071987

Top 10 Network TV Advertisers

Source: Magna analysis of TNS-CMR data



•Large brand-based advertisers: focus on reach…

Network TV Prime Time Reach - Live Only Adults 18-49

96.17% 96.72%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

2002 2007

Source: Initiative Analysis of Nielsen Data


Source: Magna, US Census, Veronis Suhler, OPA


•…And frequency

0

100,000

200,000

300,000

400,000

500,000

600,000

2005 2006 2007 2008 2009 2010

TV

Radio

Total Internet

Newspapers

ConsumerMagazines

Search

1.8bn

37.0bn

51.3bn

56.9bn

241.3bn

539.0bn

Total US Population: Hours Spent With Media

Mil

lio

ns

of

Per

son

-Ho

urs

Per

Yea

r


Source: Magna, WARC, InternetWorldStats. Weekly reach figures for France and UK, daily for other countries. Reach definition for magazines = issue reach in France, Italy and Spain. Internet reach typically = % of population online monthly per Nielsen NetRatings, ITU and other sources as of June 30 2007 (except for US = March 31, 2007)


•This is true in established markets…

Media Reach By Country

0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%

100.0%

TV

Rad

io

New

spap

ers

Mag

azin

es

Inte

rnet



•…And emerging ones

Source: Magna, WARC, InternetWorldStats. Weekly figures for Brazil and Russia. Russia, China and India magazines are issue reach figures. Indian TV and radio = daily, newspapers = issue. Chinese TV = weekly and radio = daily. Internet typically = % of population online monthly per Nielsen NetRatings, ITU and other sources as of June 30 2007

Media Reach By Country

0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%

100.0%

TV

Rad

io

New

spap

ers

Mag

azin

es

Inte

rnet



•It also holds for young audiences…

Young Audiences' TV Viewing Trends

15.0

17.0

19.0

21.0

23.0

25.0

27.0

29.0

1991

-92

1992

-93

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

Ho

urs

of

Vie

win

g P

er W

eek

P2-5

P6-11

P12-17

P18-34

Source: Magna analysis of Nielsen Media Research data



•…In the US and around the world

Source: WARC

TV Reach: Adults and Teens

0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%

100.0%

UK

Ger

man

y

Fra

nce

Italy

Spa

in

US

Bra

zil

Rus

sia

Indi

a

Chi

na

Adults

Teens


Consequences of Reach and Frequency Paradigm

20 YEARS AGO

•Models that were well-designed…



20 YEARS AGO

•…For an era of homogenous media platform access…



TODAY

•…May not be as well-suited for a world of Web 2.0%…



TODAY

•…Which will reach some audiences and miss others


Drivers of Online Spend = Endemics, New Businesses

•Largest advertisers drive TV, smaller advertisers drive online

Source: Magna analysis of TNS-CMR data


Source: Magna, US Census, Veronis Suhler


•Reflecting effectiveness for SMEs…

$0.00$1.00$2.00$3.00$4.00$5.00$6.00$7.00$8.00$9.00

$10.00

2005 2006 2007 2008 2009 2010

Search

Newspapers

Total Internet

ConsumerMagazinesTV

Radio

Advertising Dollars Spent Per Hour of Media Consumption

$9.39

$0.94

$0.08

$0.58

$0.10

$0.33



•…Who benefit from a Democratization of Advertising

Source: Magna analylsis of IRS data

Ad Expenditures By Small Businesses

4.0

4.2

4.4

4.6

4.8

5.0

5.2

5.4

5.6

5.8

Mil

lio

ns

of

US

Co

rpo

rati

on

s W

ith

<$1

0mm

Ass

ets

(5.0)

5.0

15.0

25.0

35.0

45.0

55.0

Bil

lio

ns

of

Ad

Exp

end

itu

re $

by

Co

rpo

rati

on

s W

ith

<$1

0mm

A

sset

s

Expenditures

Small Businesses


•Beyond search, emerging media = small business today

Emerging Media: Systemic Growth Requirements

Source: Magna, IAB

2008 Emerging Media Advertising

$0.0

$2,000.0

$4,000.0

$6,000.0

$8,000.0

$10,000.0

$12,000.0

Search All Other Emerging Media

(Mill

ion

s)



•Impacting “gut” decisions

= ?



•Establishing better infrastructure



•Re-aligning organizational structure

Operating Division

Retail Distribution

Product Development

Branding

CEO

Other Corporate Functions

COO

PR / Corporate Communications

Operating Division

Product Development

Branding

Operating Division

Product Development

Branding

CMO / Central Marketing

Creative OtherMedia

Marketing, PR, Retail, Sales



Source: Magna

Direct / Online Sales



•Focusing on people, not pages (or ratings)



•Assessing value, not cost

Top 10 DMAs

$>$National Network



•Transforming data into actionable insights

= + ?

Contact:

Brian Wieser, CFATel: 646-865-2260Email: [email protected]

www.MagnaInsights.com


Discussion

•Roger Keating

SVP, Digital Media

Hearst-Argyle Television

•Steve McGowan

SVP, Insights and Client Research Initiatives

The Nielsen Company


Issue #1

•Consumers in Control Vs. Controlled Consumers?

0%

20%

40%

60%

80%

100%

120%

2006 2007 2008 2009 2010 2011

TV

Co

nsu

mp

tio

n I

nd

ex

Increase Due toPopulation Growth

Increase Due toHousehold TVConsumptionGrowth

Baseline - Today'sTV ConsumptionLess DVR Usage

-2%

+5% +5%

+8%

Source: Magna


Issue #2

•Fragmentation: Friend or Foe?

0.02.04.06.08.0

10.012.014.016.018.020.0

1-10 11-20 21-30 31-40 41-50 51-60 61-70 71-80 81-90 91-100

101-110

111-120

121+

# of Channels in Home

Un

iqu

e #

of

Ch

ann

els

Vie

wed

in

Ho

me

2007

2006

2005

2004

2003

2002

2001

Source: Magna analysis of Nielsen data


Issue #3

•Who Crosses Platforms?

Multichannel Homes

DVR Homes

VOD Homes

Broadband Homes

Satellite Radio Subscriptions

HD Subscriptions

Mobile Phone Subscriptions

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

% o

f U

S H

ou

seh

old

s

Source: Magna

Documents

September 2008 The Evolving Media Economy. 2 Once Upon a Time, Marketing = Media + Creative Traditional media was primary (sole?)