Future of TV Briefing: Ad buyers want to fix the TV ad market in this year’s upfront

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This Future of TV Briefing covers the latest in streaming and TV for Digiday+ members and is distributed over email every Wednesday at 10 a.m. ET. More from the series →

The Future of TV Briefing this week explores the correction that may be in store for the TV ad market in this year’s upfront negotiations.

  • The TV ad market needs fixing
  • Addressable TV’s big break
  • Discovery+’s strong start, PBS’s streaming pivot and more

The TV ad market needs fixing

For years, fewer and fewer people have tuned into traditional TV, while TV networks have asked for more and more money from advertisers who continue to crave the big screen’s broad reach. These conditions match the law of supply and demand. But heading into this year’s annual upfront negotiations, agency executives plan to demand that TV networks — as well as advertisers — take a harder, more realistic look at the supply of ad inventory.

“This year, there’s a stark reality to what the marketplace is and the fact that there are significantly less impressions. There needs to be some forced change this year,” said one agency executive.

The key hits:

  • The TV ad industry needs to reckon with the years-long linear viewership declines, according to agency executives.
  • TV networks need to offer advertisers more realistic viewership guarantees.
  • TV advertisers need to be more open to TV networks’ non-linear inventory, especially the videos they post to platforms like YouTube.
  • These changes will be a focal point for this year’s upfront talks, although changes are unlikely to happen overnight.

The primary shift that agency executives are angling for in this year’s upfront talks is a recognition that the erosion of linear TV viewership is not going to reverse. Six million U.S. households canceled their pay-TV subscriptions in 2020, shrinking the overall pay-TV subscriber base to the smallest it has been in nearly three decades, according to research firm MoffettNathanson.

In light of that erosion, TV networks need to lower the viewership guarantees they make to advertisers, particularly for programming that is not live sports or broadcast networks’ prime-time shows but also for that more prized programming that has also suffered viewership declines in the past year. By that same token, advertisers need to be more open to TV networks’ digital inventory, not only the TV shows they stream on their connected TV apps but also the videos they post to platforms like YouTube.

“It starts with an acceptance on both sides that this is where the world needs to work toward, and it’s a retraining of everyone’s thought process to start with,” said a second agency executive.

For both TV networks and advertisers, the foundation of that retraining is financial in nature. TV networks have erred on the side of overestimating viewership when making guarantees to advertisers because they didn’t want to leave money on the table if viewership surpassed expectations and they ended up effectively giving away impressions for free. But for the most part, viewership isn’t going up anymore. 

“We have definitely seen a buildup of under-delivery. Networks are continuing to face struggles with the ratings, and fluidity [redirecting linear campaigns to streaming and digital inventory sources] is definitely a big push in terms of making up for linear under-delivery,” said a third agency executive.

Meanwhile, advertisers have bucked against the higher prices that networks charge for streaming impressions versus linear impressions as well as the digital videos, like late-night show clips, that networks try to use to make up for linear viewership shortfalls. However, advertisers’ steadfast demand for linear TV inventory above all else has contributed to an ever-tightening TV ad market and the continued pileup of network debts to advertisers for the viewership shortfalls, given that there is less available linear inventory to quickly wipe those debts clean.

However, just because the TV ad market appears primed for a correction, that doesn’t mean that this year’s upfront negotiations will immediately trigger a sweeping overhaul. “A correction sounds great in theory,” said the second agency executive. This person doesn’t believe the current situation of relying on incorrect viewership estimates and trying to make up for the shortfalls is sustainable. “But there’s not an easy fix,” they said.

For starters, as much as networks may know that linear viewership isn’t going to grow anytime soon, they are likely reticent to lower their viewership estimates for the fear of leaving money on the table. And connected to that, as much as advertisers don’t want to keep accumulating owed impressions, they also don’t want ad prices to go up if supply goes down, which agency executives expect would happen if the networks lower their viewership estimates.

“It will be a difficult upfront, but I think that both sides are equally incentivized to make some of these changes,” said the first agency executive.


“The dirty word in linear TV is cash back. We would look for cash back, and for networks, that was not an option. That’s changing.”

Agency executive on TV networks’ willingness to give advertisers money back for viewership shortfalls

Stay tuned: Addressable TV’s big break

The addressable TV advertising market is like California’s earthquake outlook. So many people have been saying for so long that The Big One is coming, but it still hasn’t (as a California resident, this is perfectly fine with me). But unlike the Golden State — fingers crossed — the addressable TV ad market is ready to rumble.

The foreshocks have already started. Nielsen and Vizio have spent the past couple years developing technology to enable traditional TV networks to run ads targeted to individual households, which is typically limited to the two minutes of local TV ad inventory on linear. Meanwhile, pay-TV providers like Comcast have similarly been striking deals with TV networks to make the networks’ national ad inventory addressable.

But the addressable TV market seems poised for a seismic step-up.

  • Roku announced on March 1 that the connected TV platform owner is acquiring Nielsen’s advanced video advertising business, including its technology to deliver household-targeted ads on linear TV. The technology will enable Roku to sell household-targeted ads that can run across its CTV platform as well as linear TV networks (so long as it has the networks’ approval), according to a Roku spokesperson.
  • Roku’s news follows NBCUniversal’s announcement on Feb. 25 that the Comcast-owned media conglomerate has struck a deal with Charter to enable NBCUniversal to convert its linear TV inventory into addressable TV ad impressions when ads are served to Charter’s pay-TV subscribers.

Because addressable TV advertising mirrors the targeted advertising that companies are accustomed to on digital platforms like Facebook and Google, as more traditional TV ad inventory becomes addressable, “the more you’ll see digital-first clients turning to the television screen,” said one agency executive.

Given the limited supply of TV inventory with linear viewership dropping, though, that potential influx of demand could further constrain the TV market, shooting up ad prices and putting more pressure on advertisers to secure that inventory in the upfront market.

Numbers don’t lie

34%: Percentage of linear TV and streaming show episodes that were directed by women during the 2019-20 TV season.

6 million: Number of paying subscribers that AMC Networks has for its streaming services.

30%: The percentage increase that Disney is reportedly expected to pay to retain the rights to Monday Night Football.

$1.8 billion: How much money TPG is paying AT&T for a 30% stake in DirecTV.

12.2 million: Number of active accounts for Vizio’s smart TV platform at the end of 2020.

What we’ve covered

Bleacher Report’s House of Highlights wants its creator-led challenges to rival live sports:

  • House of Highlights’ live online competition series pits social influencers against one another.
  • The publisher has not yet sold ads against the show.

Read more about House of Highlights here.

Why Re/Max is leaning into addressable TV:

  • The real estate brand started buying addressable TV ads after noticing a drop in cable TV subscriptions and cord cutting-driven rise in audience fragmentation.
  • TV and video account for 35% of Re/Max’s current media budget.

Read more about addressable TV here.

How eko’s partnership with Walmart is making interactive video more mainstream:

  • Walmart-backed eko and the big-box retailer are expanding their interactive cooking video program.
  • Walmart said the program’s beta version had an 8.7% click-through rate.

Read more about eko here.

Why direct-to-consumer brands eye Snapchat as they diversify from Facebook:

  • Advertisers’ spending on Snapchat has grown to account for 10% to 25% of media budgets now.
  • The rising interest stems from a need by DTC brands to broaden beyond Facebook and get ahead of the potential fallout from Apple’s forthcoming IDFA change.

Read more about Snapchat here.

AC Milan’s endgame for content:

  • The Italian football club has formed its own production arm to develop, produce and distribute programming, including commercials and social videos.
  • The new 40-person unit is overseen by AC Milan’s marketing and digital director.

Read more about AC Milan here.

What we’re reading

Discovery+’s strong start:
Discovery is showing up skeptics who dismissed the cable TV conglomerate’s prospects of competing in the streaming wars, according to The New York Times. Discovery+ has also accrued 12 million paid subscribers. An unknown share of those subscribers are people who receive a six-month-long free trial of Discovery+’s ad-free tier via their Verizon wireless accounts, though, but the fact that however many people have taken advantage of the offer suggests that there is a sizable appetite for Discovery+ and that Discovery’s claim that its focus on factual programming (reality TV shows and documentary programming) differentiates meaningfully enough from general-interest streamers like Netflix.

PBS’s streaming pivot:
Like every other TV network, PBS is having to figure out how to shift its business to streaming, and that includes developing a revenue stream from digital donations, according to Protocol. The public broadcaster started accepting donations on Amazon’s Fire TV platform last fall. PBS is also kicking the tires on the free, ad-supported streaming TV market in addition to distributing its programming on platforms like YouTube.

Advertisers’ ad-free streaming strategies:
The popularity of ad-free streaming services like Netflix and Amazon Prime Video means that advertisers risk missing out on a large chunk of audience attention. As a result, marketers like Pepsi and KFC are increasingly pushing into producing their own programming, according to Variety. Brand-sponsored shows are nowhere near new, but they continue to be a hard sell. In addition to the difficulty of creating a show that would win audiences’ interest — let alone one that’s also designed to sell product — there’s the added challenge, in the era of results-minded performance marketing, of evaluating whether those eyeballs led to product sales. After all, Netflix isn’t exactly known for sharing viewership information.


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