Forbes: After a Year Of Media Disruption, The TV Upfronts Remain Unchanged. How Long Can It Last?

Jonathan Steuer, EVP, Strategy & Currency, VideoAmp, adds, “The current state of affairs, where high-reach TV inventory is dominated by a small number of large conglomerates, combined with the fragmentation of consumer content consumption options, means a new approach is definitely needed for the upfronts. The marketplace needs to move past negotiations based on broad demo ratings. The absence of data-driven insights when buying TV is a thing of the past. Sights are now set on advanced audiences and holistic, cross-channel investment strategies that extend across a publisher’s full content portfolio. The industry is ready for new currencies that allow for advanced cross-channel forecasting and measurement that benefits both buyers and sellers. This will once again bring media pricing into better synchronization with the business-value of advertising.”

After a Year Of Media Disruption, The TV Upfronts Remain Unchanged.
How Long Can It Last?

With the pandemic several trends in the media industry were accelerated. For example, with the lockdown, consumers purchased far more products online boosting e-commerce sales. In spite of the economic slowdown, marketers, in the second half of 2020 ramped up their advertising budgets by allocating more dollars toward digital media (whose NewFronts began on May 3). The result was a stronger than anticipated ad marketplace for the year. With movie theaters shut down, box office receipts nose-dived, this gave some movie studios the chance to shorten or eliminate (for the time being anyway), “the window” between the theatrical release and home video availability. Podcast and streaming audio listening also grew and video gaming recorded record sales.

The number of streaming video services offering premium content and advertising opportunities increased, gaining subscribers. Meanwhile, with production studios temporarily closed and top-tier sporting events postponed or canceled, the ratings of many programs on linear TV continued to drop (as the median age of the audience grew older). Conversely, with the pandemic, civil unrest and politics, cable news networks (despite the continued prevalence of cord-cutting) generated record high audiences as the evening newscasts became appointment viewing for millions.

With all this disruption occurring in media, more than a few industry analysts believed the television upfronts, that originated nearly sixty years ago, would be replaced with a more updated method of buying network TV ads. Once again, however, the networks have scheduled their upfront presentations for mid-May, although the presentations will be virtual for the second year in a row. In recent years, upfront negotiations have generated an estimated $20 billion in ad dollars for broadcast and cable television.

There are a few reasons why the upfront has been appealing to advertisers, best program selection and meets scheduling requirements; the audience is guaranteed; there is product placement opportunities and the ability to cancel a buy. Additionally, the upfront market has typically been a more cost-efficient buy than the quarterly scatter market. Most importantly, with upfront, the networks have been able to sustain their ad rates despite losing viewers.

For decades, the upfront has had its critics wanting to change the way national television advertising is bought and sold. Among the more common complaints heard has been the timing, the TV ad marketplace is tied to the antiquated 12-month broadcast season which starts in the latter half of September, with negotiations starting as early as late May. Detractors argue that no company has a fiscal year matching the upfront making it difficult to budget. A better solution would have a calendar year upfront beginning each January. Another issue is the advertising time is bought too far in advance and the designated program has been replaced by the time the ad is scheduled to run. Yet another complaint registered has been the difficulty in estimating and budgeting the ad marketplace over the next 12 months.

The upfront marketplace is different every year. For example, the 2003 upfront was a seller’s market and was completed in just three days with sizable ad rate increases for the networks. In contrast, 2009 with a sluggish economy, resulted in protracted negotiations that lasted into August with ad rates declining. The 2020 upfront, with the pandemic and lack of scripted original programming, was described from horrendous to simply awful. With a return to normalcy, the networks are hoping for a “business as usual” 2021 upfront.

Besides, the sharp declines in ratings over the past year, factors for the 2021 upfront will be the emergence of advanced, data driven TV analytics as a part of negotiations. Similar to digital media, there will be a greater amount of audience-based buying (instead of traditional ratings). More cross-platform media buys that combine the audiences of linear and digital TV is expected. Additionally, the emergence of “hyper-targeted” addressable TV will present another opportunity for marketers. Nonetheless, going forward, marketers will have more media opportunities (and insights) on where to invest their ad dollars besides national TV.

This makes the 2021 upfronts vitally important for TV ad marketplace and there may already be some changes in store as the upcoming year of negotiations approach.

Looking at the 2021 upfronts, Pete Doe, the Chief Research Officer, Xandr notes, “Brands are continuing to allocate budgets to advanced advertising and in many cases calling for more immediate, concrete performance metrics. Attribution, or measuring the effectiveness of a campaign in a more direct way, originated in digital but is increasingly becoming a requirement for TV.”

Scott Shiller, Global Chief Commercial Officer, ENGINE, says, “The industry should move away from the old school upfront events and pour that money (and there’s a lot of it) into content creation and consumer education. But at its core, there’s nothing ‘wrong’ with the upfronts. It is a futures market — and the future is always bright.

Strategically, the upfronts represent an opportunity for marketers who wish to plan their media year ahead of time. As long as there are national marketers and big-reach media properties, this will always be the case. Growing businesses will always need to reach and engage with their consumers. The transactional component varies year to year. In each upfronts season, there are nuances. This year, the big questions are about the role of streaming media and audience targeting in the negotiation. The new elements each season are typically the loudest — 90% of the discussion that in reality represents less than 15% of the actual commits.”

Shiller concludes, “I believe that in an ideal world, the industry would embrace these new elements sooner and follow consumers’ lead. For the industry, the newest media typically requires more justification than existing media, but for consumers, there’s no difference between CTV, OTT and linear TV — and we will all be better if we transact that way.”

Jonathan Steuer, EVP, Strategy & Currency, VideoAmp, adds, “The current state of affairs, where high-reach TV inventory is dominated by a small number of large conglomerates, combined with the fragmentation of consumer content consumption options, means a new approach is definitely needed for the upfronts. The marketplace needs to move past negotiations based on broad demo ratings. The absence of data-driven insights when buying TV is a thing of the past. Sights are now set on advanced audiences and holistic, cross-channel investment strategies that extend across a publisher’s full content portfolio. The industry is ready for new currencies that allow for advanced cross-channel forecasting and measurement that benefits both buyers and sellers. This will once again bring media pricing into better synchronization with the business-value of advertising.”

Jo Kinsella, President, TVSquared adds, “Today, convergent TV is a dynamic marketplace that is driven by collaboration, transparency and outcomes. In the last year, especially, advertisers have leaned into measurement and attribution for real-time, cross-platform analytics on impression delivery, frequency, reach extension, audience activation, online/offline outcomes and more. They look at these insights daily and optimize buys on a frequent cadence to reach the right audiences across platforms and screens. With that in mind, the upfronts have a lot of work to do to meet the industry where it is now. Advertisers have seen what’s possible with TV, and a growing number are unwilling to forfeit flexibility and optimization with their media spend. The upfronts, to stay relevant in years to come, need to adapt to help advertisers further their goals for TV.”

Although there may be some slight changes, the upfronts will continue as long as the networks benefit from it financially. They control both content and commercial inventory and getting committed ad dollars well in advance is a benefit. The ad marketplace forecasts for 2021 project continued robust growth for digital media while national TV is projected for slight ad revenue increase. When the upfronts no longer generate the ad dollars needed, they will be replaced.