Streaming investments are rising, but media buyers drive hard bargains over CPMs and fees

That doesn’t fit the overall narrative we’ve heard from marketers and media agencies, most of which report steadily increased spending on streaming and CTV advertising, even in an upfronts season coinciding with treacherous economic conditions.

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Just this morning, Hyundai launched a campaign featuring actor Parker Posey toying with the carmaker’s Palisade hybrid model. Kate Fabian, director of marketing comms, said the aim is to reach a demographic of female car buyers looking to add more comfort to their commute; Netflix and Amazon Prime will be key channels.

“Streaming allows you, at any given time, to talk to an EV audience, talk to a sedan audience, talk to an SUV audience. You’re able to get smarter with your dollars,” said Fabian. It’s a familiar story, one shared by marketers like Sarah Bertrand, head of PR and communications at Pure, a dating app looking to broaden its foothold in New York and Los Angeles. She told Digiday the app is running ads on streaming platforms like Max, Paramount and Roku. 

“We saw the opportunity to really target a broader audience that might not be doom-scrolling, that might be more attentive,” she explained.

While brands like Hyundai shift more of their linear spend into streaming each year, brands like Pure — previously priced out of linear — are taking advantage of its comparatively lower barrier to entry. “Because there are fewer barriers … a larger number of brands are able to enter the streaming space and reap the benefits of a premium placement,” said Olivia Hawkins, vp of media strategy at media agency Craft & Commerce, in an email.

Paul DeJarnatt, vp, head of digital at indie media agency Novus, said its clients’ streaming budgets have risen by double-digits year over year. “Even with significant increases to budget, we haven’t seen diminishing returns yet. Our campaigns continue to show excellent performance as measured by both brand lift studies and MMM,” said DeJarnatt.

Demand isn’t the problem for streamers — this is about margin. Advertisers and their agencies have been agitating for streamers to bring down the price of inventory since Netflix debuted its ad offering with cost-per-thousands (CPMs) at $60 a pop. They’ve been largely successful in that mission.

With more and more streaming ad dollars in the U.S. allocated via upfronts deals, a glut of streaming supply and premium CTV operators cutting CPM rates to $25-40 in order to compete, it’s been a buyer’s market.

One holding company media buyer, who exchanged anonymity for candor, estimated that streaming budgets had increased between 10-15% among their clients. With an enormous range of streaming, CTV and FAST partners hoping to net advertiser cash, however, individual players have been willing to skim on margins in order to secure investment.

Streaming companies “understand that there’s still a share game going on,” said the buyer.

That’s shaken out in a few different ways. Agencies commonly negotiate for lower CPMs in exchange for agreed-on spending commitments, which are locked in with varying degrees of flexibility depending on the streamer. “Reducing rates was our north star,” said John Mergen, chief media officer at The Shipyard. 

“[We’ve] been able to effectively negotiate reduced rates up to low double digits, as well as additional discounts for new clients,” said Kate McPhee, group director of integrated investment at Crossmedia. Spending on streaming ads by the agency’s clients now averaged 20-25% of overall budgets, she said.

One media buyer, speaking on condition of anonymity, told Digiday that Disney and Amazon – which reportedly closed its upfronts market at the end of August – typically asked for year-on-year commitment increases of 20-30%, in exchange for lower CPMs.

As more streaming dollars are arranged via the upfronts (just now closing, after a slower than expected year) a larger proportion of CTV spend is vulnerable to this kind of negotiation. Interpublic Group estimated that half its upfronts dollars went to streamers this year; at non-holdco agencies with less traditionally minded clients, that’s likely higher. Spending commitments don’t just unlock lower CPM rates; agencies will also often look to whittle down the size of the fees streamers might seek to attach to media buys, such as the standard “tech fees” or those levied for additional audience targeting. 

“All those taxes, so to speak, can keep you from having working media dollars. They’re helpful because of the capabilities that they unlock, but they’re arbitrary,” said Juliet Corsinita, head of convergent video and audio at PMG. “They add up over time, right? Even a few percentage points make a huge difference across a lot of volume.”

“They absolutely should be open to negotiation… we have definitely poked in those areas and been successful,” she added.

In some cases, agencies prioritized kinder opt-outs of spending commitments, to give themselves flexibility in the event client spending doesn’t reach agreed-upon thresholds, or to allow more time to reach that target. “We’ve been pushing for greater flexibility on the streaming side,” said Alicia Weaver, vp of media activation at Mediassociates, who added that such off-ramps have proven easier to procure from streamer partners than from broadcast companies.

Given the rate of change within TV and advertising, agency buyers and CMOs know that current conditions might not endure for long. But for the moment, they’ll exploit streamers’ patience and hammer out the best deals possible.

“It’s volume over rate,” said the holdco buyer. “We’re capitalizing on that where we can.”