WASHINGTON, D.C. — TEGNA President and CEO Dave Lougee testified this morning at a Department of Justice public workshop on competition in television and digital advertising.
Below is his testimony as prepared for delivery.
We are discussing an important topic at an important time. As the broadcast and other communications industries experience unprecedented, rapid change, a proper understanding of the market dynamics in spot advertising is essential. An overly restrictive antitrust view continues to impede broadcast transactions, even as broadcast’s competitors—for viewers and advertisers —are rapidly increasing their already massive scale, unimpeded by regulation.
This administration has taken aim at over-regulation. In the antitrust context, Assistant Attorney General Delrahim has explained that the Division under his leadership will avoid substituting central decision making for the preferred free market while ensuring that transactions don’t harm competition. A critical tool for doing so is an accurate, updated and forward-looking understanding of the actual marketplace—in this case the marketplace for local video advertising.
We are not here to re-litigate the past. As you know, many of my colleagues and I in the industry have believed for some time that a modern market definition of spot advertising is broader than just over the air stations, and for a long time should have included large and sophisticated cable interconnects that provide local advertisers broad reach and inventory on nearly a hundred channels in a local market. But with the explosive growth of digital media, the local video advertising landscape has changed so fundamentally, that those old debates are now largely beside the point.
Simply put, high speed broadband to the home….and high speed broadband to the phone…has changed everything in the video marketplace. With the rise of 4G and unlimited data plans, every screen is a TV. To my 19 year old son, a mobile phone like this is his TV. His viewing of over the air television in the past year can be counted in minutes, not hours. But like much of his generation, his viewing of long and short form video programming on his mobile device can be counted in weeks. And for some time now, those video consumption patterns no longer are restricted to younger consumers. Today, mobile broadband covers 99% of the U.S., and approximately 87% of Americans own devices that can access mobile broadband, and of course that number is growing. Fixed, wired broadband to the home is now estimated at 82%, and also growing.
With the onset of ubiquitous high-speed internet service, there’s been an explosion of platforms and applications with video advertising capabilities that consumers have flocked to….whether they’re massive players like YouTube and Facebook, or a long tail of mobile applications and services that consumers value…with more being added every week.
To the point of this hearing, none of that would matter if all this valuable video content was not available to the local advertiser to reach their target customers…with the same exact ads. But that’s the critical change I want to emphasize to the department. Today they are available, and local advertisers are buying them en masse. As a result, there’s no longer a question that these digital options aren’t just complements, but substitutes for local advertisers.
Let’s look at it through the lens of a local advertiser, and how he or she views their advertising options. They have a fixed advertising budget. Their goal of that budget is to maximize the return on their advertising investment. It’s worth noting that they have an enormous amount of effective options to reach their customers beyond video ads, including direct mail, paid search, radio, etc. and they use those options. But with respect to their video advertising, they are targeting customers and audiences, not programs. They can buy from a local broadcaster, the cable interconnect, and now a plethora of targeted digital options. For instance, they can go on to Facebook and through self-service, place that same video ad against a very broad menu of targeted audiences of every generation and geography. The same identical dynamic holds true with YouTube. Based on Facebook and YouTube’s annual video advertising revenue numbers, it’s undeniable how local ad dollars are flowing to their platforms.
But it goes far beyond Facebook and You Tube. At our own company, we have created a company called Premion that provides local advertisers the ability to place their same video ads inside high quality long-form video programming, like Discovery, and A+E, on their digital platforms, as well as their distribution on a number of popular OTT services such as Sling, Sony PlayStation Vue, and many others. Through Premion, we reach consumers on their smart phones, their p.c.’s, and their connected TV’s. It’s our fastest growing business for a reason, because that’s where consumers are going, and the local ad dollars follow the consumer. Many of our competitors are now offering similar services, and there are numerous digital ad exchanges and demand side platforms that are available to any local advertiser to reach their target customer with highly targeted video ads.
The advertiser will assess the relative price offered for their video ad from each of broadcast, cable, and digital, and buy any combination of all three, two or one. It is one highly interchangeable video market. So in other words, if broadcasters raise their prices, advertisers can, will, and do, take their dollars elsewhere. Their customers are on all three of these platforms, and can be reached on each, but they’re now all reachable on digital, with the small exception of a small percentage Americans over the age of 55, like myself, who advertisers don’t covet.
In summary, advertisers over digital platforms now show ads that look exactly like traditional TV ads, over platforms that are growing viewership rapidly and enjoy extremely broad reach, along with the ability to focus on particular locations or other characteristics. These ads are powerfully competitive with over-the-air broadcast ads in the local ad market. And this competition will only grow.
I hope you find this perspective useful. And I hope the Division will consider these factors in analyses of future proposed transactions. I look forward to answering your questions and participating in the discussion today. Thank you.
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