January 25, 2023
Commentary
A Proposal To Change TV's Upfront For The Better
- by Ed Papazian , June 18, 2019
Clearly, there are many reasons to retain the upfront system, not the least of which is the ability of major corporate buyers to lock up otherwise perishable commercial positions for all their brands in programs or program genres of their choosing for every month of the upcoming season.
For advertisers who buy time in the upfront, access to what they need when they need it is key — not only because of the shrinking availability of GRPs due to continued rating fragmentation, but also in order to merchandise their buys to their distribution set-ups well in advance, showing their sales force, franchises, dealers, etc., how well the brands are being supported by commercials in big-time network shows.
The sellers, particularly the broadcast TV networks, are also wedded to
the upfront, not only as a hedge in anticipated ad revenues relative to ad spending on program content, but also as a method of controlling the marketplace — its pricing, total ad revenue
volume, etc. Since the broadcast TV networks get first crack at most upfront deals, this enables them to manipulate program packaging and CPM pricing to their advantage as the action unfolds.
Despite the advantages that the upfront system offers to both sellers and buyers, the one major flaw in this annual ritual is the negative impact that corporate time buying has on
the ability of each brand to target audiences more selectively.
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Major multi-brand media directors do their best to allocate the fruits of their corporate time buys to each brand — hopefully reflecting each brand’s targeting needs, but since the buys are based on a single, conglomerate demo like adults 18-49 or 25-54, it’s inevitable that many off-target commercial placements are forced upon each brand, often with a lower CPM to make accepting these buys more palatable. There’s no other way to go about this, since these big-umbrella demos are the only way sellers can guarantee total GRP delivery to the buyers.
Is there a way for brands to break free of the restrictive effects of corporate upfront time buying, with its emphasis on garnering
the lowest overall CPMs, even at the cost of disregarding the mindset and demographic targeting needs of the brands? Likewise, is there a way for the time sellers to maximize their total ad revenue
yields in the upfront while controlling marketplace pricing and still offering advertisers the buying flexibility they crave?
The answer is yes, and here’s how it would
-- or could -- work.
Early each spring, the corporate media people at the major TV advertisers -- in consultation with their agencies -- provide their brands with anticipated
quarterly cost-per-rating point (CPP) modules for the upcoming upfront. These are by network type, daypart, and in some cases, program genres or specific thematic cable channels.
Invariably, the CPPs are based on the single audience guarantee metric favored by the corporation -- usually adults, men or women aged 18- 49 or 25-54. Using these modules, each brand determines how many GRPs it requires by month or quarter for each network type, daypart and any other buying option available.
Special needs -- an emphasis on a particular demo (e.g., 18-34) or a certain show type -- may also be included, but it is unlikely that these wishes will be fully considered once the corporate buy is set in motion. Later, when the buys are allocated to the brands, an attempt may be made to satisfy their requirements.
But what if there were two upfronts?
The first upfront would be for individual brands only, with each buy negotiated
separately, with selective audience metrics used as the basis for their audience tonnage guarantees. Needless to say, CPMs/CPPs would be higher than in the traditional upfront, but in return, a brand
could focus on targeting likely product users, particular mindsets, more refined demos (or combinations thereof) as its buying currency.
When the corporate media people ask the brand reps to state their upfront needs, each would have a choice -- to pay higher CPMs and put all or most of their share of ad dollars in the first, more selective upfront, or to go for less well-targeted but cheaper GRPs in the second, traditional upfront. Some combination of the two would also be an option.
The second upfront would follow the first by a matter of weeks and operate
much as it does now, with most buys made on a corporate basis, using the standard conglomerate, umbrella demos as their GRP currency. The primary goal of this upfront would continue to be achieving
lower CPMs.
By the time both upfronts were completed, the sellers would have had an opportunity to maximize their total ad revenues through skillful negotiations and
packaging, coupled with premium pricing for the selective first upfront buyers, along with the lowball pricing for corporate tonnage deals that typify the second upfront.
Of
course, the buyers would have more work to do under a two-upfront system, so their fees may increase somewhat, and the sellers would have to get involved in more complicated negotiations involving
metrics and research they are less familiar with in the first (selective) upfront. However, the net gains for both sides could be tremendous.
Say the first upfront netted the sellers $8 billion but yielded CPMs 40-50% higher than the norm, while the second upfront garnered $12 billion and generated the usual CPMs. The combination of the two would earn the networks a net revenue gain of 15-20% over what might have been gained with a single corporate buying upfront.
Is such a change in the upfront possible? Certainly, but only if advertisers -- CMOs in
particular -- take the time to really get involved and push for change. If not, then the upfront will go on, largely as before, with both sides not really doing what’s best for their
corporations’ bottom lines.
2 comments about "A Proposal To Change TV's Upfront For The Better".
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Ed, why not simply and make this all happen during 1 transaction- have each brand build their upfront ask based on their marketing target, compile that across brands to create the corporate buy, negotiate it once, then once the inventory is secured allocate back based on the marketing targets and try to keep all brands as whole as possible.
I think it's high time we killed age/sex demos. They've long outlived their relevance.
A good question, Howard.
I suspect that the way audience quarantees are made is the problem. Brands that negotiate their own buys would utilize audience metrics that were specific to thier makreting needs. If a seller tried to make a corporate buy with 30 brands involved, anywhere from 15-30 different audience guarantee metrics might be at play. This would create a nightmare for the seller trying to deal with over and under deliveries with so many different audience definitions at the same time as trying to satisfy an overall corporate buying guarantee. Also, each brand that bought its own time would want to negotiate its own makegoods---if these were owed----using its own metrics---again posing a huge problem for the sellers who would also be obligated to make the overall corporate buy meet its broadly defined goals.
I agree that age/sex GRP guarantees are outmoded, but they are a necessity for corporate buys as the seller needs a single GRP tonnage "currency" to evaluate audience deliveries, not many highly varied metrics all going in different directions. The mistake that many make in criticizing age/sex "demos" like adults aged 18-49 or women aged 25-54 is thinking that these are targeting specs. Actually, they are nothing more than broadly defined compromise metrics designed to expidite buyer-seller negotiations over audience guarantees. Of course, we could always drop audience guarantees entirely---that would eliminate much of the problem but I suspect that the buyers would object rather forcefully to this suggestion and I would probaly agree with them.