TV networks are overdue on their bills to advertisers. Those debts have continued to pile up in the fourth quarter, further tightening the already constrained TV ad market and pushing networks to prioritize wiping their ledgers. “There are networks coming to the table saying we have to get this off our books,” said one agency executive.
As traditional TV viewership has slipped over the past several years, TV networks have fallen short of the viewership guarantees made to advertisers and have accumulated debts in the form of make-goods, or inventory owed to advertisers in order to make up for the viewership shortfalls.
These so-called “liabilities” have stacked up even more in the fourth quarter with lower-than-expected viewership for major sports, college football games being canceled and networks’ traditional fall programming pipelines being disrupted by the coronavirus crisis. “Ratings are down significantly and probably to a greater degree than anyone had modeled,” said a second agency executive.
In addition to wanting to show they can deliver on advertisers’ audience goals, networks stand to sacrifice revenue the longer that they carry a debt. “In some cases, they have liability from two years ago. That stuff is at 10% to 15% cheaper CPMs than the new inventory. So just getting it off their books is beneficial because they’re giving it away at the discounted 10% to 15% rate,” said a third agency executive.
One way that some networks are looking to settle their debts is by simply offering to give advertisers their money back rather than set aside inventory to make up for the missed guarantees, according to agency executives. To be clear, such cashback offers are not entirely new; the first agency executive said that for years they have been able to negotiate for clients’ money back if networks didn’t deliver on their upfront guarantees. However, other agency executives said broadcast and cable TV networks have become more willing to make these offers.
Historically, networks would be able to find additional pockets of ad inventory to offer to advertisers, such as linear slots they set aside to sell in the scatter market or impressions from their streaming services and digital properties. But with pent-up advertiser demand squeezing the scatter and streaming ad markets, “now they’re running out of other areas,” said the third agency executive.
Advertisers are not all that interested in the cash back offers, though. While some clients are willing to take the money and spend it elsewhere if they are under a time constraint — like a retailer in the holiday shopping season— others expect to receive what they are paid for and are willing to wait. “They can’t say, ‘We can’t deliver; here’s your money back’ and push us into the scatter environment,” said the second agency executive.
However, advertisers may not be willing to wait for all that long. Although some are still owed for ad buys placed one to two years ago, ad buyers are becoming less tolerant of adding to their tallies. And while the networks’ streaming inventory would seem to offer a release valve make up for the linear misses, not all advertisers see that as an equal trade because of the concurrent reach of linear TV. “We want like for like. For the most part, we want linear impressions [for make-good inventory],” said a fourth agency executive.
As a result, advertisers may soon reach a point where they are no longer willing to spend new money until their old debts are settled. “I’ve had conversations with all of the top sales executives at the media partners [to tell them] ‘Hey, we’re watching this closely and we will prioritize future deals and also look at exercising [cancelation] options where we have to if you can’t hit the guarantees our clients need,’” said the second agency executive.
Member ExclusiveFuture of TV Briefing: The market for TV and streaming shows is in a correction period
This week’s Future of TV Briefing recaps the conversations from last week’s Digiday Future of TV Programming Forum, during which production and development executives discussed the state of the programming market amid the economic downturn.
Why Anheuser-Busch prefers PMPs to programmatic guaranteed deals for streaming ads
Programmatic private marketplaces provide a means of maximizing reach without overexposing audiences, explained the brand's head of media Juliana Wurzburger during Digiday's Future of TV Advertising Forum.
Inside NBC News’ coverage of election night 2022
For this year's U.S. midterm elections, NBC News enlisted teams across its organization to cover results across traditional TV, streaming and digital platforms like TikTok.
SponsoredWhy cookie deprecation is deflating performance and inflating costs for advertisers
With the full deprecation of third-party cookies on the horizon, advertisers and publishers are navigating a challenging and quickly evolving landscape. The sunset of the third-party cookie continues as usage and lifetimes fall. Their deprecation is preventing brands from effectively measuring the effectiveness of media campaigns in real-time at highly granular levels. As the industry […]
Future of TV Briefing: Overhead during Digiday’s Future of TV Week Town Hall
This week’s Future of TV Briefing recaps the top talking points from yesterday's Future of TV Week Town Hall.
Roku reports continued ad slowdown in third quarter and predicts a fourth-quarter downturn
The advertising slowdown that Roku saw in the second quarter of 2022 deepened further in the third quarter.