RSG Media

RSG Media Applies Advanced Mathematics to Lift Television Ad Revenue

Tuesday, April 15, 2008

Major Media Companies Borrow a Page from Airlines to Improve Ad Flights and Lift Profits...

LAS VEGAS---Seeking to boost ad sales revenues amid a flattening market challenged by a burgeoning number of channels and online competition, major television networks are doing something unusual. Instead of just relying on creative forces to generate hit shows they are turning to the innovations of decidedly unglamorous mathematicians and software engineers at RSG Media to boost their profits using Yield Optimization—a science more commonly by airlines and car rental agencies than in Cable & Broadcast. The results are substantial.

In an industry where networks have an ad sales inventory in the billions of dollars, even a 1% lift can mean tens of millions of “found money” contributed directly to the bottom line without a new show or hit in sight. In this light, what RSG is delivering is attracting real attention.

“These are things we’ve been doing in other industries for years,” notes Prof. Sridhar Seshadri of NYU’s Stern School of Business. “What’s new is that in the past year or so we’ve finally made breakthroughs in the field that let us handle a problem as complex as forecasting, pricing and targeting Television Ad Sales at speeds fast enough to make our results useful to the people doing the work.” It is not just the math, but RSG's unique software engineering capability that makes the new breed of applications instantly usable.

Most people are familiar with Yield Optimization from airline tickets. Airlines adjust their prices to make sure that they fill as many seats as possible. After all, the airline cannot sell a seat once the plane leaves the gate. At the same time, the airline wants to a fair price for each seat. In the same way, TV networks want to ensure that they sell their entire inventory of ad units and maximize their revenues. But the Ad problem is even more complex than simply selling out the “flights”.

Like airline flights, which have exact times and routes, networks often sell their inventory for airing at different times of the day. The difference is that each ad spot needs to be placed to deliver a certain number of guaranteed impressions among specific demographics. Thus, the problem is complex not only because the actual placement is difficult to achieve but also because the value is determined after the show has aired.

The show’s rating adds complexity because the network does not want to either over-deliver or under-deliver impressions. If a show does less well than expected, the network has to offer the advertiser a “make good” or Audience Deficiency Unit (ADU). That is, they have to give the advertiser a free unit to make up the difference; a unit that the network would have otherwise sold. If the show performs better than expected, then the network is giving away impressions for free.

A Scientific Approach

This is where the field of Yield Management & Optimization enters the picture. For decades airlines have used these techniques to manage complex pricing and capacity management problems.

What makes RSG’s approach so successful is that they have created separate modules, applying Yield Management & Revenue Optimization techniques to each part Ad Sales Lifecycle to mirror the business processes in the industry. By addressing each critical areas seamlessly integrated they have found new ways to use existing ad inventories more effectively and extract significantly higher revenues.

“It was actually a really nice surprise,” said RSG CEO Mukesh Sehgal. “For the last 15 years we’ve been building advanced ad-sales systems for the top networks, so we know we would have been happy with even just a small lift. It turns out that we’re very happy with the results we’ve been getting.”

The RSG YieldLogic™ system also gives network executives new data to formulate key strategies. Now executives quantify the cost and value of constraints. An advertiser may still want exclusivity, but now managers can determine just how much that exclusivity is costing the network—and charge accordingly.

RSG’s new approach will not single handedly solve all of televisions woes, but it offers a rare piece of good news to the industry.

RSG’s Modules include revenue optimization for:

• Pricing & Forecast
• Reserve Planning (Upfront vs. Scatter)
• Deal Planning
• Delivery Management
• Deal Maintenance
• Stewardship

About RSG Media Systems

RSG Media Systems, www.rsgmedia.com, calls on over 22 years of experience designing innovative business applications for major media and entertainment industry clients to deliver products such as YieldLogic™ and RightsLogic®, an enterprise program and rights management product suite that includes tools to manage deals for content from conception through scheduling to any related financial transactions. We combine strategic vision with deep technological understanding to provide our customers with pragmatic user-centric systems that create immediate and measurable value. Our clients describe us as thought leaders who identify and capture industry best practices.