Why Are There Still Upfronts When There Are So Many New Ways For Viewers To Access T/V?

With the arrival of spring we look for the first robin, the first tulip, and whether the national television upfront will happen again this year.  Year after year advertisers have been willing to lay down ever-increasing amounts of money at ever-increasing CPM (cost-per-thousand) pricing during cable and broadcast television’s upfront buying season. Here large advertising buyers commit to ad units within specific, high-demand programming at guaranteed prices to insure they get their share of premium inventory at a predictable cost. Bottom line, the laws of supply and demand create this rush to buy every spring. 

But wait a minute. Aren’t the number of total “T/V” hours watched by viewers (let’s expand the term “television” here to multiplatform “T/V” or “television/video”) increasing? Aren’t viewers now able to access television online, through connected TV and on mobile and tablet platforms?  Doesn’t TV Everywhere (which allows cable system operators to justify their paid subscriptions and pre-empt Netflix, Hulu, Roku et al by offering programming on other platforms than the home TV set) produce more sellable inventory or supply, which would in turn reduce costs?  Combined with an economy that is still in slow growth mode and would tend to suppress demand, wouldn’t the basic economic laws of supply and demand suggest this would be a formula for lower pricing and less incentive to buy upfront? 

For television, the term “supply” does not describe the audience size or ratings that a given T/V program or schedule achieves. These programs merely contain the purchased advertising.  T/V “supply” is rather something much more abstract: it is the attention of a target consumer within the time that the advertising message is available.  Though we don’t often see hard numbers provided by major media companies, common sense tells us that it is harder to actually get a target viewer’s attention with a T/V message these days given the increase in ad-avoidance technologies like DVR, advanced remote controls, connected TVs and second–screen options where attention is shifted to e-mail, sports scores, other attention-getting media content and even other non-TV ads. 

So if the supply of consumer attention is declining, those traditional TV spenders who are strategically committed to telling their story in a national footprint via sight/sound and motion deliberately or intuitively need to purchase more ads each year.  This anxious desire for buyers to secure their media plans through the upfront marketplace continues unabated. 

At some point, the upfront, linear television “exposure-opportunity” marketplace frenzy will no longer be necessary when television is purchased through a verified “exposure-engagement” model.  Those media providers with the “best” programming and attention-capturing capabilities will prosper.  And advertisers will receive more value for their spending.

There is little to fear of this change to a more accountable, on-demand system. Television/video is in a great place for all parties to thrive in the emerging, multiplatform, interactive, ad-supported T/V business model.  Quality supply will become even more valuable, as will each advertiser’s very investment in advertising:

  • Advertisers love accountability – the ad they have paid for will actually be seen.
  • Engaged, on-demand ads rather than exposure-opportunity ads will be at a premium.
  • Demand for viewer engagement in quality programming will be strong.
  • Consumers won’t sit for the current 20 minutes of non-content programming within a one hour T/V program (see my MediaPost article on VOD ad-loads). Reduced clutter will benefit consumers, advertisers and even media providers.
  • Wannamaker’s “theorem” that half of advertising is wasted (we just don’t know which half) will no longer rule the day.

When exactly this more accountable marketplace will arrive is still up for debate and the subject of future columns.  Consider, though, that all is not lost as the business model evolves. In fact, there is so much to be gained by all parties involved.  Till then, have you gotten your upfront invitation yet?

Tags: tv, upfront, video
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3 comments about "Why Are There Still Upfronts When There Are So Many New Ways For Viewers To Access T/V?".
  1. Jason Krebs from Maker , April 3, 2012 at 2:03 p.m.
    We agree that the march towards accountability continues. We don't charge the advertiser until a viewer literally and physically engages with the video ad creative itself. Accountability, engagement, results, at scale!
  2. Philip Moore from Philip Moore , April 3, 2012 at 3:14 p.m.
    Accountability spells the end for T/V ratings services. Big data is applied to so many concepts these days that it's almost meaningless. However, one thing that is certainly happening is an explosion in the collection of transaction data by companies big and small. Time stamped transaction data can be fed into media allocation systems to optimize traditional media in the same way that DSPs can optimize digital buys. The feedback for DSP is cost-per-acquisition, which is more of a direct response model than a branding model. Yet the purpose of branding is to drive revenue, and when you can plug revenue into the media planning process, particularly with carefully crafted experimental design, it is possible to determine the ROI of traditional media. So now, I don't have to assume a relationship between eyeballs today and revenue in 3/6/9 months. I can actually feed the revenue numbers into the system and use statistical modeling to derive the revenue impact of the advertising over whatever lag period I want to test for. When I know which ads on which programs account for specific revenue, I could care less what the program rating was for that show.
  3. Scott Reilley from SR Consulting , April 3, 2012 at 3:32 p.m.
    In general, John's argument is sound exploring the traditional view of supply and demand on the sell/buy side. It is, however, a different supply and demand model from the consumer side. We can agree that supply of video content and devices to consume are expanding daily. Looking at consumer demand, we find a different story. According to Nielsen (for what it's worth) and other sources, the average American consumers 40 hours of video content per week. 35 of those hours are with the TV device (Live, DVR, VoD). 3 hours are with connected gaming systems (X-Box, PS, Wii) using services such as Netflix, Hulu, HBO ToGo, TV Anywhere apps from operators and YouTube. 1 1/2 hours are spent with tablets using the same services at the gaming platforms. At 30 minutes is video on the Web and Mobile comes in at less than 10 minutes. The adage of 'If we build it, they will come' applies more to the buy/sell side with opportunities, analytics and 'shiny new toys', it doesn't yet seem to be the case with the consumer, despite the press to the contrary.