It’s getting pretty bloody hot in this saucepan; SCA shares leap
Welcome to a midweek update from Unmade. Today: Principal media risks being the final straw. And on the Unmade Index, a sudden jump in the SCA share price.
Unmade’s Compass roadshow concludes in Melbourne tonight.
Join Gold FM’s Christian O’Connell, NAB marketing boss Tomas Dobson, CHEP strategist Nomfundo Msomi and TBWA’s CEO Kimberlee Wells at the Garden State Hotel as they reflect on 2024 and project into 2025. The conversation, moderated by Unmade’s Tim Burrowes, kicks off at 5 for 5.30pm. Tickets are still on sale, or free to Unmade’s paying members.
If you’ve been thinking about upgrading to an Unmade membership, this is the perfect time. Your membership includes:
A complimentary ticket to all of Unmade’s events, including HumAIn, REmade, Unlock, and Compass;
Member-only content and our paywalled archives;
Your own copy of Media Unmade.
Boiling point for media’s frog soup
If metaphors are your preferred way of describing complex socio-economic dynamics, then it’s hard to go past the boiling frog when it comes to the situation faced by the media industry over the last two decades. The theory is that if you put a frog in a saucepan of cold water and only slowly raise the temperature, it doesn’t notice until it ends up being boiled alive.
Let’s go back to the turn of the century, as the first digital publishers were beginning to make a go of this new business model by placing banner ads on their sites.
Some bright spark approached them and offered them software to help them serve their ads. Imagine how much more you could get from advertisers by being able to run ads based on time of day or the reader’s location. Magical.
Then along came this thing called programmatic advertising. By participating, publishers could throw in their unsold advertising inventory and get a new source of revenue. Admittedly it was at a much lower rate, but it was better than not using that inventory at all.
However, those programmatically-led auctions began to drive down the price that advertisers expected to pay everywhere.
And gradually the systems became more complicated, with demand side platforms and sell side platforms all beginning to clip the ticket along the way.
If you’d told those publishers, that by 2023, participating in the programmatic chain would see 64% of the ad dollars siphoned off to the tech middlemen before they got to the creators of the content, then the idea of taking part would have seemed like lunacy. But nobody told them that.
And after it happened with the platforms, along came the media agencies.
For a time the business model of media agencies was a perfectly respectable one, in theory at least. By combining the buying power of multiple clients, an agency would be able to negotiate a better price from media owners than a client would receive on their own.
It was an arrangement that worked for client brands, agencies and media owners.
The key word was agency. As in acting as an agent for the brand. As in acting in the brand’s best interest.
And then began the rise of principal media which is finally receiving the spotlight it desperately needs.
The Association of National Advertisers in the US - the same people who’ve been sounding the alarm over the leaky programmatic chain - started to issue warnings about principal media many months ago.
Principal media is a remarkably anodyne description for such an egregious departure from how media is traded.
Media agencies, who already have the trust of the client brand, get to buy the media cheaply on their own account instead of on behalf of their client.
Then, they get to package it up, mark it up and sell it on to their client. Instead of the client banking the saving of being with a media agency, the agency banks the profit on the mark up.
The red alert should finally have begun to sound locally after a piece in Mi3 which raised the issue:
“An example unpacked to Mi3 this week involved an advertiser who assumed they were buying broadcaster BVOD in a principle (sic) media deal – but the CPM rate was double what broadcasters are selling at themselves and was loaded with cheaper connected TV (CTV) ad slots, not broadcaster video on CTV.
“The BVOD market is twice as big as is being reported,” a broadcast executive told Mi3. “BVOD is about $450m but the actual market is around $900m when you take into account agency principal-based media mark-ups, tech fees, 'magic dust' fees and the rest. It needs to clean up," they said. If the broom was swept by vigilant agents – i.e. not principal media arbitragers – "those channels that do not exist in the real total TV market would be gone in an instant".
They added: "If Seven, Nine, Ten, Foxtel and SBS were being paid the amount of money that an advertiser pays for BVOD, we’d have a very different outlook at the moment – if we received 75 per cent, even 50 per cent of the price advertisers are paying in market it would be different.”
In a piece published over the weekend, Mutinex founder Henry Innis mounted the argument that principal media is workable… if media agencies change their operating models to remove the conflict of interest.
As Innis puts it: “If you believe agencies aren’t seriously considering principal media or think your unique relationships shield you from this trend, you’re either wrong or delusional.” He goes on:
“I don’t see anything actually wrong with principal media. The analogy I give is a convenience store. Most of the time, we all have been to buy a drink or late night snack from a convenience store. You probably pay double what you’d pay versus a normal supermarket, but that’s okay. You’re paying for convenience.”
However, one problem with that argument is that convenience is what advertisers thought they were already paying their agency for.
Another problem is that this reselling by media agency groups is yet another clipping of the ticket . Each time it happens, it means fewer dollars for the media companies who make the content in the first place.
We are also beginning to see leakage where AI-driven search from Perplexity et al lifts publisher content and delivers an answer right there on the page and doesn’t pass anything along he chain at all.
At what point does such a small proportion of the reward reach the makers of the media that it just isn’t worth them bothering any more? We’re already there.Just about every media company is doing less than it used to. Over the last few days there’s been a big round of cuts at ARN Media. Next week it will be somewhere else.
The water is reaching boiling point. Frog soup is imminent.
SCA share price leaps as Unmade Index gains
The Unmade Index improved for a third day in a row on Tuesday as it continued to edge upwards from its recent low point. The index grew by 1.39% to 447.2 points.
Yesterday saw remarkably mixed fortunes for the two major audio stocks. Late in the day, Southern Cross Austereo’s price jumped by 12.6% to its highest point in almost three months. Meanwhile ARN Media lost 5.5%.
There were similar split directions in the TV sector where Nine gained 2.9% and Seven West Media lost 2.9%.
Time to leave you to your day. If you’re in Melbourne, we hope to see you at the Garden State Hotel tonight for Compass.
And we’ll be back tomorrow with an audio-led edition of Unmade.
Have a great day.
Toodlepip…
Tim Burrowes
Publisher - Unmade
tim@unmade.media
