Remnant isn't what I thought it was

“Lazy thinking is the enemy of truth” is what my college professor used to tell me. I was always looking for the quick answer or easy approach to move on to “more important” things.

The good news is that “lazy thinking” is just human nature, and everyone does it. Psychologists have known this for years and have lots of fancy words to describe it, such as heuristic, fallacious reasoning and cognitive biases. So, I now take solace in the fact that I’m not being lazy, just using a heuristic to solve problems. Fortunately I can easily avoid this by simply asking more questions!

So, what does this have to do with remnant television inventory? Here’s how I used to think about it:

1 – Remnant is leftover inventory

2 – The networks don’t monetize it in the upfront or scatter marketplace

3 – Remnant = low quality

4 – It’s not valuable

Where does my thinking go off the rails then?

Number one – check, totally true.

Number two – partly true, but that’s inconsequential.

Number three – is where I start to get lazy. So, let’s question that: Is it really low quality? Asking this, we immediately go to the network’s ad sales model. 75-80% of inventory is sold in the upfront, and the rest is held back to sell in scatter at higher rates. Those two models have something in common – advertisers can get out of all or a portion of what they’ve reserved. For the networks, this is just the cost of doing business; they’re fine given the massive volume that doesn’t get canceled. And, advertisers expect to be able to cancel reserved inventory when the need arises. To advertisers, it doesn’t matter how “good” the inventory quality is; when they need to recoup dollars for other expenses or creative isn’t ready, it’s canceled. This creates a sizable pool of unsold airtime.

And thus, remnant inventory is born. So, I was wrong about remnant being low quality.  

Number four – I sense a theme, so probably wrong here, but let’s go ahead and ask: So, is it really not valuable?

Well, what do networks do with remnant inventory? They do what any other business sitting on perishable inventory does – sell it to whoever will buy it. The alternative, running dead air or an exorbitant number of house/promo ads, just isn’t acceptable.

Technology has spawned an industry built on this. By far the most common category is travel, where consumers can get steep discounts on perishable inventory like flights and hotel rooms. In media, we have ad exchanges.

The TV marketplace has remained relatively unchanged though. It’s not a technology-fueled open marketplace like digital, search or social. With only months to weeks before airtime, the pool of possible buyers is greatly diminished. With such limited access to buyers, networks must discount inventory significantly to create demand. This produces discounts of as much as 90%.

If I can pay 90% less for the exact same thing, that’s the epitome of value. As suspected, I’m wrong again!

And there you have it. My seemingly sound assumptions have been completely eviscerated by critical thinking. But, as much as I hate being wrong, I love knowing the truth. So, whenever I feel myself getting lazy and making assumptions, that’s just when I know it’s time to ask another question.