A New York Times story says Bob Iger of Walt Disney is coming back to take the reigns of the company in a quickly evolving pandemic period -- just weeks after giving up his CEO role.
According to the story, he told associates recently about ending expensive old-school television practices, like advertising upfronts and producing pilots for programs that may never air.
Now, we take this to reference the TV program development process -- not the actual upfront advertising market, where some $20 billion is plunked down by major TV advertisers to buy a year’s worth of traditional TV messaging.
The story didn’t into specific details. But we assume few TV networks groups would pass up the ability to garner millions/billions of dollars in ad revenue, actually upfront ‘commitments” by advertisers -- even in a much softer market. (Following the 2008 financial crisis, the 2009 upfront market was down 12.5% in dollar volume, according to Media Dynamics)
All this might be different -- a big momentous time now that the TV upfront advertising market, typically held in June, is certain to be delayed for several months. One Wall Street estimate says this year's upfront will be more “flexible,” with way less inventory sold -- 40% to 60% of a network’s ad inventory sold versus the more typical 70% to 80% range.
For years, TV networks media-buying executives have had a lot of complaints about the upfront ad market -- essentially a futures markets that protects one advertising pricing interest throughout a TV season.
Part of this is as an aging advertising sales process to secure a weakening supply of premium TV ratings points. Another comes from a still glutted number of TV advertising messages on the air.
Additionally, the upfront market doesn’t provide near real-time ability to adjust or ramp up an ad campaign in response to the marketplace or the economy. Digital media -- even with its glitches and shortcomings -- has that. There is still limited tracking of business outcome/attribution metrics among many TV networks.
Now the positives: Media agencies not only get to secure top premium TV pricing at a good price, but one where the upfront market protects their long-term price yearly “bases.”
This means while cost per thousands viewer prices (CPMs) may see 5% to 7% annual increases, a regular, year-in, year-out, major brand upfront marketer’s actual CPM is typically pegged to its existing historical base price model.
Another advantage: Though declining some in recent years, overall TV networks continue to maintained a big reach factor still recognized as a major advantage over other media for brands in targeting U.S. media users and customers.
No doubt traditional TV platforms have been weakened as media users have slowly drifted to other media -- first, to syndicated and cable TV in the early 1990s, later to the growing digital media platforms begun in the mid-2000s.
Now we are in an uncertain media marketplace, where even big digital media companies, like Facebook and Google, are estimating sharply lower pricing in coming periods. Facebook says a recent period witnessed a big 25% plummet in its CPMs.
From all this, one wonders if a drastically different TV marketplace is ripe for a dramatic change to its main TV advertising marketplace.
Wayne, I agree that Iger probably does not contemplate abandoning the upfront selling concept as this allows the broadcast networks, in particular, to control the CPM pricing marketplace. Why give that up no matter how many GRPs are available? What really needs to be done---but this will not happen if advertiser CMOs continue to slumber on thinking that agency "creative" is all that matters----not media-----is a reordering of the upfront into two separate types of upfronts---one the current, low CPM, audience tonnage version; the other a brand-specific better targeting upfront which rewards the sellers via higher CPMs and rewards the brands via catering to their specific needs. With this kind of flexibility, each brand ---if allowed to by top management at the advertising companies----could go whichever way it chose---or use both methods, in effect splitting its budgets so part of the audience tonnage was guaranteed at a reduced CPM while the other part zeroed in on buys that were more brand---not corporate---oriented. Since I doubt that advertiser CMOs will wake up and back this kind of change and the agencies, as always, will follow their lead, the only hope lies with the sellers as they would benefit since their ad revenues under a two-upfront system would probably increase.
I would like to think that Bob Iger was referring to ending the expensive lavish upfront presentations and parties which may have out lived their utility, rather than the practice of selling a significant portion of inventory upfront, which for certain advertisers and networks remains relevant.