The TV upfronts will never be the same again
This is the latest of a weekly column about the big changes and challenges facing media and marketing leaders. Be sure to join Digiday+, our membership program, to get access to this column and all Digiday articles, research and more.
The coronavirus crisis has brought new attention to the many oddities of the advertising and media industry. Take the annual $20 billion U.S. television upfront marketplace, which has been severely disrupted by the crisis. The upfronts have long been derided as a relic of the past, yet little has changed over the years. Now, the TV industry is forced to adapt — and going back to the old way is going to be difficult.
Presentations have shifted from glitzy Manhattan theater shows to virtual events. Some networks are foregoing digital showcases altogether in favor of smaller presentations tailored to specific clients and agencies. The fall programming schedule is up in the air, with productions on hold and uncertainty around the return of live sports.
As for the negotiations themselves, the leverage is certainly not in the networks’ favor. May 1 through May 15 marked the deadlines for when TV advertisers could cancel a percentage of their annual upfront commitments for the third quarter. Many chose to exercise that option. Big advertisers including General Motors, General Mills and PepsiCo have reined in their commitments this year, according to The Wall Street Journal. Advertisers expect to spend 20% less in the U.S. upfront marketplace this year, according to an IAB survey of 390 buyers, planners and advertisers.
The upfronts have worked in pretty much the same way ever since the 1960s. The model — in which networks created a short window for advertisers to lock in a restricted supply of inventory around the most attractive programming in the fall — has been replicated in TV markets around the globe. A good upfront negotiation helps advertisers mitigate the amount of money they need to spend in the scatter marketplace, where ads are bought nearer to the time they air, usually at a premium. Legacy upfront advertisers are working off a lower base price that was set years, if not decades, ago, meaning new advertisers enter the upfront marketplace at a disadvantage.
But this year, with little visibility about the future economy, more ad dollars have shifted to scatter, connected-TV and other online platforms. For the TV networks, flexibility — not usually a core characteristic of the upfronts — has been key this time around, particularly around cancelation options for advertisers whose businesses have been severely impacted by the crisis.
Around half of the U.S. TV ad market’s volume has moved from the upfront to scatter, Dave Morgan, CEO of Simulmedia said, citing conversations with clients and big agency buyers.
“The large network groups will get pretty good deals done, but likely will have to be generous with options,” said Morgan. “Buyers will sign up for volume — and pretty good pricing — as long as they have a lot of outs.”
It all begs the question why, in the 21st century, the majority of the TV advertising marketplace should continue operating around a model that was invented in 1962
“I question it and the longer things operate a particular way, the less likely they are to return to old ways, which had ton of shortcomings given underperformance on ratings,” said Pivotal Research senior internet and media analyst Michael Levine. (He also feels the same way about business travel.)
Some media and ad industry veterans are still keen for the upfronts to remain in some form. In the earlier throes of the outbreak in March, Michael Kassan, CEO of MediaLink — also owned by Cannes Lions organizers Ascential — raised the possibility of hosting this year’s upfront negotiations at Cannes in the summer. You can imagine who would have been on hand to set up all the meetings. “It was blocked on everyone’s calendar anyway,” said MediaLink CEO Michael Kassan. Cannes Lions 2020 was pushed back to October and eventually cancelled altogether in early April.
Kassan still thinks there’s a possibility of a calendar-year upfront negotiating period that would take place in the fall, for all of 2021’s inventory, rather than the artificial broadcast year.
“What the marketers are struggling with is they want the flexibility they think comes with the calendar year, but they want the orderly marketplace that comes with the upfront — there’s a bit of push-pull going on,” said Kassan.
On May 11, NBCUniversal held a virtual “one industry” virtual event — the same date it had been due to hold its annual upfront at Radio City Hall in New York City. With the upcoming schedule uncertain, execs talked remote attendees through its “One Platform” ad buying tech. Mark Marshall, NBCU president of advertising sales and partnerships said he’s keen to return to an in-person upfront marketplace.
“We think this is a chance to make a significant change in the way we’ve transacted in the business,” said Marshall. “In addition to the 90-minute show, it’s a great forcing mechanism to get us all in the same room to figure out what works, what are the needs of marketers — but I don’t know if it will look the exact same,” Marshall told me.
The nature of TV ad buying has transformed dramatically since the swinging sixties, when the upfront market was created largely to cater to automakers who released new models in the fall. Upfronts presentations now focus as much on “addressable” ad targeting and measurement products as they do on upcoming comedy dramas and reality shows.
Meanwhile, as AdExchanger reported last week, prominent veteran TV buyers like GroupM’s Lyle Schwartz and Omnicom Media Group’s Chris Geraci have recently left those agencies. In 2020, TV is tech and there are plenty of newcomers waiting in the aisles to take advantage.. The disruption to the upfronts this year had been “liberating” for some advertisers, said The Trade Desk CEO Jeff Green on his company’s first-quarter earnings call this month, adding: “I hear it from brands and agencies every day. For them, the upfronts are a bit of a burden.”
Still, inertia is an incredibly hard habit to break, advertising veteran Bryan Wiener, now CEO of ecommerce analytics platform Profitero, told me. Advertisers always had and still will care about the NFL and the Grammys, where supply is constrained, but for years the upfront had been about bundling in less desirable shows with those tentpole events.
The coronavirus crisis “is an event that will break the upfront and it will never return to the way it used to be,” Wiener said.
Get ready for the great unbundling.
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