WASHINGTON, D.C. — NAB Executive Vice President of Legal and Regulatory Affairs Rick Kaplan 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.
On behalf of the National Association of Broadcasters, I would like to thank Assistant Attorney General Delrahim, Lee Berger, and the antitrust division staff for holding this workshop and inviting us to participate.
Few issues are as vexing to television broadcasters as how narrowly the Department of Justice defines the video advertising marketplace.
DOJ has the same view of the broadcast TV marketplace today as it did in the 1970s, 80s, and 90s. Never mind that cable and satellite providers now offer hundreds of channels of high-quality content. Never mind that the internet has thoroughly upended the way consumers access and engage with video offerings.
And never mind that, if we polled the first 100 people walking past this building as to whether they could distinguish between broadcast TV and cable, satellite, or OTT video, we’d be lucky to find even just one.
So where is the disconnect?
I thought it might be helpful for us to briefly look at DOJ’s stated rationale for its unwavering view. Perhaps then we can assess why, despite changing times, DOJ’s position is the only thing that has managed to remain the same.
Sight and Sound
DOJ typically begins its complaints by noting that broadcast TV is unique because its “spot advertising combines sight, sound, and motion in a way that makes television advertisements particularly memorable and impactful.”
Of course, this premise, while flattering, would be very difficult for DOJ to demonstrate in court. But even if it could, one would think that the same rationale would apply to cable, telco, and DBS advertisements, right?
DOJ says no, while those are technically TV, too, those alleged competitors don’t count because TV stations have a greater reach than these other platforms.
The term “reach,” however, in this context is tricky. DOJ is not saying that the entire market watches broadcast TV; rather, “reach” describes how many people can theoretically watch broadcast TV. The relevance of this metric escapes me, because theoretical viewers don’t sell spots or earn ad revenues; only actual viewers do.
In fact, MVPDs also “reach” nearly 100% of homes in most DMAs. You can subscribe anywhere you live, just like you can purchase an antenna in most areas of the country and receive broadcast TV. So, “reach” isn’t really the issue.
DOJ uses a broadcaster’s purported “reach” to argue that broadcast TV advertisements “more effectively introduce and establish the image of a product.” This is DOJ’s way of suggesting that broadcast advertisements serve a different purpose than say, cable ads. If everyone in a DMA can see an ad, perhaps that is a good way to generate brand awareness. But again, DOJ conflates “reach” with “viewers”. DOJ never addresses the fact that only a small percentage of potential viewers watch in the first instance.
Beyond this incongruity, DOJ’s view is also noticeably lacking in support. Upon what does it base this social scientific claim? Also, why ignore other forms of advertising that might achieve that purpose as well? Wouldn’t a guerilla street marketing campaign do the same? How about a widespread local media buy on Google? What about naming rights to the local high school football stadium? DOJ ignores these other available options that undoubtedly broaden the relevant the marketplace.
DOJ does separately get around to discussing actual viewership and claims that broadcast TV has superior “ratings points.” This statement, however, tells us nothing about who participates in the relevant product market. For advertisers, the bottom line is getting quality impressions at the best price. A highly-rated TV program may be more expensive. Think about the Super Bowl. However, since there is fierce competition in the marketplace, if that program is too expensive, advertisers can and would reach the same number of – if not more – people with a plethora of less expensive options. MVPDs and digital advertising alone offer seemingly endless cost-effective opportunities for advertisers.
Speaking of digital, digital advertising on its own has completely changed the game. Digital takes things to a whole new level: it’s ubiquitous, targeted, has low barriers to entry, and it runs the same advertisements broadcasters do.
Unfortunately, to date, DOJ has refused to budge even in the face of the digital revolution. Without missing a beat, DOJ has already repeatedly rejected requests to include digital in the broadcast TV marketplace, explaining that online ads “can be skipped, minimized, or blocked.”
I will let you in on a little secret: you can also do those things with broadcast TV. It’s called grabbing a snack from the fridge, disappearing to the bathroom, or even just hitting “fast forward” on your DVR remote. In fact, in most cases, it is harder to do an end-around a digital ad, because often you can’t even get to the highly-desired content without first playing one or more advertisements.
So far, DOJ has failed to recognize what droves of advertisers have: digital advertising can provide quality impressions less expensively because the targeting and tracking capabilities of digital ads make them more cost effective. After all, advertisers have limited and finite ad budgets and today can spend them on digital platforms targeting the consumers they really want to reach.
Hopefully, DOJ’s decision to hold today’s workshop suggests that it is finally poised to evolve from its antiquated view of the marketplace. We now live in a digital world, and broadcasters are no exception.
There is a very high cost to the American public if DOJ fails to update its broadcast TV market analysis. We can no longer operate in a bubble. With the dramatic decline of newspapers, broadcasters are one of the primary investors in local communities. Broadcasters take their public interest responsibilities seriously. But local stations must compete successfully for ad revenue to meet their obligations and commitments to cities and towns across the nation.
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