The TV ad upfront isn’t just about packed theaters, tightly staged presentations with prime-time talent, and late-night parties with endless trays of hors d’oeuvres and drinks. It’s the starting gun for buyers committing to spend more than $20 billion on TV ads (for a couple of hundred advertisers in aggregate), to be aired across a score of TV networks over the subsequent twelve months.
The upfront may be known for its pageantry, but it’s really about positioning: a fight for relative supremacy and a year of bragging rights among the top buyers and networks. Who got the best prices? Who got the most volume? Who sold more than they can deliver? Who got left with scraps and will now need to fight it out in the scatter market?
So the upfront is about so much more than the billions of dollars committed in the process. It is the top of the waterfall for the entire $70+ billion annual TV ad spend. Everything that follows the upfront -- scatter, sports, local, syndication, DR, etc. -- flows from the precedents the upfront sets.
What happens in a year like this when “rescheduled upfronts could be the new normal”? When top buyers like Horizon Chief Investment Officer Dave Campanelli says, “I don’t think there's literally any chance the upfront happens on that normal May/June timeline”?
Here are my thoughts on what might happen without a market-defining upfront, as well as who some of the winners and losers might be:
This upfront will be fractured. The lack of a collective “starting gun” for this season or pilot shows in production, or any sense of where live sports will be in the fall and winter, will lead to a fractured upfront. It will not roll out like a symphony of stringed instruments, followed by brass and percussion. It will happen section by section in a cacophony.
This will be a big benefit to buyers and sellers with strong leadership positions who have led through disruptive moments like 9/11 and the financial crisis. It will be tough for newbies.
It will be every network (and client) for themselves. Almost everyone in the TV ad business is taking a hit in the second quarter, and most expect no better in Q3. Those TV companies will do anything and everything to get as much money committed and spent as possible.
Don’t expect networks to sit back. This will put many agencies (and their clients) in a tough spot to commit against the unknown schedules of the future -- or pay the price in pricey scatter as things become more known.
I suspect this will cause individual clients to fend for themselves. Some will want to commit now. Some will want to wait out the year. Some will want to sit out two quarters and shift their upfront commitments to a calendar year -- leading to even more fracturing of the upfront.
Scatter moves from the back of the process to the front. For sure, more money will be spent in scatter over the next year. There will be just too much uncertainty for it to play out any other way. Scatter won’t be just the stepchild of many clients’ primary TV ad buys, but will become a primary TV ad buy in itself. This will benefit networks, agencies and clients with more audience and viewing intelligence and more trafficking automation. It will hurt those without it.
What do you think? Who wins and who loses if we don’t have a market-defining upfront this year?
Frankly, Dave, while it may be a painful second quarter scatter market for the national TV sellers if the upfront is delayed to the fall the networks, which form a unified front----unlike the advertisers--- may not fare as badly as some think. Why? Because they will hold back much more of their GRPs than usual to play the scatter market and adjust pricing on a flexible basis quarter by quarter, rather than making huge CPM concessions a year in advance were the 2020-2021 upfront sale held, as usual, in June.
That said, most of the "experts" seem to be seeing a long term adjustment to bring the economy up to speed, even if the virus takes a break during the upcoming warm weather months. So, long term, it's anyone's guess about what will happen when TV viewing levels return to normal----with continued GRP attrition mainly to SVOD. It may well be that AVOD ramps up as a substitute for "linear TV" for many advertisers. It's possible that the networks will grasp the opportunity and rework the upfront for "linear TV" so it offers more flexibility and this allows them to recoup on the CPM/ad revenue front to some degree. As AVOD increases with the networks heavily involved, it may join their premium "linear TV" content in some sort of cross platform upfront scenario---again, the lure being greater flexibility and targeting for the advertisers and higher CPMs, hence ad revenues, for the sellers. Exactly when all this will happen and how ad-free Disney+, Netflix, etc. will respond, of course, remins to be seen.
Ed, you hit the nail on the head. If the networks "form a united front," the market won't go nearly as sideways as it is likely to go without it. Whether that front is established, and discipline is maintained, is everything. Can't wait to see how this plays out.
Of course, if they don't, it will then be very interesting to see if the ad-free VOD services decide to become AVOD and welcome ads into the fold.
Heard two bright minds weigh on the "will SVOD includes Ads" front. One, Rich Greenfield, said "never". The other, John Kosner, formerly of ESPN, said he'd be surprised if there was not some sort of ability to accept a limited ad load in return for shaving off part of the bill. Then the 200 person call laughed after Rich made a joke / good point -- not a single person on that call was going to choose to pay less money if it meant even a single ad was shown.
Brian, obviously the results will never be either that no one opts to subscribe to an ad-free SVOD platform or that it works for everyone. The truth lies somewhere in between and that's all that those who wish to go the ad-supported route---especially the TV networks---are counting on. If you assume thet you will get only 100,000 ad-supported subscribers for such a platform---out of 80 million SVOD-capable households---then don't do it. If, however, you do proper pre testing and you find that 25 million subscribers is possible over a two- year stretch, then the poifit potential soars and, by all means try it. Also, remember that many of the evolving AVOD platforms will include basic cable channels and local station programming, especially local news. In other words, they are competing with the traditional "pay TV" option, only with fewer channels and lower prices. A consumer who wishes to pay for fewer channels via cable or staellite distribution, but still get 40-50 of them, perhaps including a 24/7 news channel, some kid's content, some sports, lots of other types of shows---dramas, sitcoms, reality shows, game shows, etc. as well as "original" content like the latest reincarnation of "The Sopronos",Star Trek", MadMen" or "Game Of Thrones"---which may be offered as a hook to lure AVOD subscribers, can select two or three of these services and, maybe two of the ad-free ones and be total family satisfied---while dropping "pay TV".
Brian, I agree that folks say they don't want ads. But, in the only large experiment running today, Hulu has lerned that they can mkae more overall revenue per suer with a disouncted model that charges less and includes ads. Given the current econimic situation, I expect that discretionary income is going to be much tighter for a lot of people. Thus, we are likely to see more ad supported options. Also, when you see a company like Disney take down even more debt for this crisis, it is also possible that the streaming service owners may not want - or be able -to offer ad-free services for less overall revenue betting on a long-term payout. They might not offer as many options.
A "united front" sounds like collusion to me
Some have made that argument Michael ;-)
To clarify - I should've included the word "Netflix" in my comment . I guess in my head Netflix = SVOD!
The quarantine has fast tracked a non ad supported viewing experience by 5 fold. It's going to be tough to introdue ads when this mess is over. Let's be honest, the thought of ads in the middle of a Netflix show was unappealing prior to the pandemic quarantine....post quarantine, it's like getting an atomic wedgie, nobody wants one.
Michael, the pandemic has increased consumption of all forms of TV/video and your assumption that there has been a five- fold rise in ad-free content is not supported by any facts I have seen. An increase--sure, but people---even Netflix people--- are watching more ad-supported TV and, in terms of time spent, it still dwarfs ad-free TV. One could use such findings to claim that more than ever before many people---especially younger folks and afluents---- are learning how wonderful ad-supported TV is---I'm jesting, btw---and as a result, if Netflix were to go that route lots of its subscribers, who have now been exposed to more regular TV than is normal, would jump at the chance---to save a few bucks on their monthly bill. I'm not making that connection, however, as the truth lies somewhere in between both assumptions. If Netflix offers an ad-supported platform at some time in the future an unknown percentage of its subscribers---probably fairly large but hardly 100%----will welcome it. And Netflix, if it attains a respectable level of scale on the venture and understands how to package the ads and sell them, will, at long last, have a second and potentially important revenue stream to help pay off its huge and mounting debt obligations
We have to consider the fact that we are heading into an election year which will create demand that would, otherwise, disappear due to the economic implications of the current situation. Also, some sectors simply cannot stay on the sidelines and wait this thing out. As we see a continued decline in ad-supported TRPs, I would anticipate that those marketers who "have" to do business will still try to secure this inventory in the best way possible.