Broadcasters Try to Sway DOJ View of Competition

The two-day event is seen by broadcasters as a chance to influence antitrust regulators into changing the way they view the effect of broadcast mergers on competition, they told us. If stations compete with digital advertising giants like Google, common ownership of same-market TV stations is less likely to be viewed as anticompetitive, they said. The department needs to understand if ads on digital platforms are “a substitute or a complement” to TV spots, said Antitrust Division Chief Makan Delrahim in opening remarks.

Delrahim appeared to repeat his view that local TV advertising is a “unique” product here, emphasizing that advertisers buy ads on different media to meet different consumer needs. Different media channels may serve different roles in the eyes of advertisers, from brand awareness to sale, Delrahim said. He also repeatedly said economic rules should change with time. “This is not to say the different channels do not compete. They certainly do on some level. The question for us is, how do they compete?” Though DOJ is confident in the agency's past analysis of competition, the agency recognizes things might have changed, Delrahim said.

Several broadcasters said it's too early to know what effect the workshop will have on DOJ policy, but that it's being held at all is a positive step. “I'm encouraged that they're getting a presentation on the competition from digital advertising,” said Hearst Television President Jordan Wertlieb in an interview. “It's a good sign,” BIA Kelsey Managing Director Rick Ducey told us.

“They're substitutes, but not perfect substitutes,” Charles River Associates Economist Preston McAfee told the event. Advertisers seeking brand awareness use digital media and TV ads in similar ways, but advertisers seeking online clicks will favor online ads, McAfee said. “They aren't directly substitutes, they're often compliments,” said Stanford University professor Susan Athey, who testified for DOJ in the challenge of AT&T's buying Time Warner. Advertising isn't “one big soup,” Athey said.

Ducey and Gray Television President Pat LaPlatney presented evidence local advertisers divide their ad budgets among local TV commercials and a variety of digital options. That spreads any individual ad budget thin, “constraining” the prices broadcasters can charge, LaPlatney said. That issue is exacerbated by the host of media options now available, which divide possible viewers of any one program, said LaPlatney, calling it “competitive dilution.” The Antitrust Division “should recognize the impact of increased competition,” he said.

Falling ad revenue for stations may also be affected by the limited amount of time consumers have to pay attention to any one media source, Athey said. Time consumers spend watching ad-less streaming services such as Netflix cuts into the time they have to watch content with ads, she said. The reduction in advertising spending is a macroeconomic trend, not a result of digital cannibalizing linear TV, said Viamedia President Mark Lieberman.

The targeting capability of digital ads is attracting a great deal of spending, Ducey said. All TV stations in the Washington market combined earned less ad revenue last year than Google did there, Ducey said. “Growth [in advertising] is concentrated in digital video.”

Several speakers focused on the differences between TV advertising and digital. Along with targeting, digital promotions offer unlimited inventory but don't have a transparent system of measurement as broadcasting does with Nielsen, said Procter and Gamble Chief Brand Officer Marc Pritchard. TV advertising also includes more control over what content an ad is played over, Pritchard said. Since digital ads are targeted at people already searching for a product, there's less chance online ads will reach consumers who hadn't already considered buying a given product, said Wendy Moe, professor of marketing at the University of Maryland School of Business. Some brands are “over-targeting,” she said.