Commentary
Does Divided Upfront Mean Scatter Becomes Center Of TV Ad Market?
- by Dave Morgan , Featured Contributor, April 23, 2020
It’s pretty clear we won’t have a normal upfront this year. As Horizon Chief Investment Officer Dave Campanelli recently told MediaPost’s Brand Insider, “I don't think there's literally any chance the upfront happens on that normal May/June timeline.”
It’s pretty clear the large buying agencies don’t have consensus among their clients on what to do. On IPG’s earnings call earlier this week, CEO Michael Roth said it was hard to predict clients’ ad spending plans: “If you want to, call them schizophrenic. One day they cut things dramatically, the next day they feel it's a good time to build brands and get messaging out there.”
I strongly suspect that TV ad spend not committed to the upfront — or being saved by advertisers and dropped to their bottom line — is going into scatter, possibly with plans to change future upfronts forever. “I've heard people talk of placing 4Q into scatter and shifting everything to a calendar upfront,” Campanelli said in the same interview cited above.
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Which means TV ad sellers are in a good spot to sit back and wait. Most want more certainty on their fall and winter programming, from live sports to prime time, before they try to do massive deals at wholesale prices. In the meantime, they will get better pricing in scatter, have plenty of inventory to sell with so many more viewers at home sheltering and watching TV — and can do one-by-one deals with individual clients (and their agencies) that choose to break ranks from a group-managed upfront.
As ViacomCBS president and chief advertising officer Jo Ann Ross told Variety earlier this week, “We will be ready whenever they want to come to us.”
This year’s upfront will devolve into three parts:
The first will be smaller upfronts over the summer by some large agencies on behalf of a subset of their clients.
Second will be one-off, client-specific deals done network by network over the course of the calendar year to serve the particular needs of that advertiser.
Third will be a massive shift of spending from upfront into scatter, with the majority of all TV advertisers opting to spend most of their money closer in time to their campaigns launches when they have more certainty on consumer attitudes and inclinations, their own business capabilities and the inventory they are buying.
Given where we are today, as well as the recent changeovers in leadership at a number of large buying shops, I think the above scenario has a very good chance to play out. If it does, here are three big implications for the market:
Upfronts will never be the same again. If the upfront breaks into parts, all the king’s horses and all the king’s men won’t be able to put it back together the same way again. Too many market participants, even if only a minority of them, will find that a broken upfront is better for their businesses.
Perpetual scatter will become the new center of the TV ad market. It will be years before TV networks have as much predictability about their future programming and ratings as they had in years past, if they ever have it again.
Mid-year annual upfronts won’t make as much sense anymore. And most of the sellers will learn that they can make more money in scatter. And, as they invest in more technology to drive their predictive analytics, yield management and automation, they will then realize they'll have more certainty and control in a more just-in-time selling world.
TV and digital ad spend will be much more closely aligned. Virtually no appreciable pure digital ad spend is committed in big upfronts like TV. The more that TV ad spend shifts to just-in-time, the more it can be coordinated with search, social, digital video and OTT campaigns. This will make video ad buying more truly holistic and make it much easier for clients, agencies and media owners to plan, buy, measure and optimize all their advertising.
What do you think? Will scatter be the new center of the TV ad world?
Dave, the upfront, when you add in the other dayparts is a $30 billion plus deal which allows the broadcast networks and some of the larger cable players operating under the broadcast TV networks' banners to control the pricing for a huge amount of national TV spending. In "normal times", that is. While the short term prognosis is for flexible scatter sales at much higher levels than usual which will allow the sellers to charge CPMs that refelct the currrent situation as it develops, once a vaccine is developed for the virus and the economy gets sorted out---say over the next 18 months---I expect a return to usual regarding the upfront concept with many advertisers going along and returning to their old ways. That's the nature of both the beast and the ability of humans, locked into familiar habits, to change. What I hope for---but it would take a miracle---would be for the sellers to reshape the upfront so it satisfies brands who want to tailor their TV buys for their specific needs as well as the corporate bean counters who judge TV time buying by CPMs and eyeball tonnage for the compoany as a whole. Yep---my much discussed two-upfront idea. But being a realist, that's more of a dream than something I see actually happening---even though it would net the major time sellers a significant increase in ad revenues.
Ed, I agree that human nature of the TV ad market participants would be want to go back to the ways of old, but how about the fact that there has been massive turnover over the past year or two of so many of the folks who built and protected the upfront. I don't know that keeping an integral upfront is part of the nature of the people now calling the shots at seveal of the largest buying groups and seveal of the largest TV ad sellers. Dave
We are witnessing a changing of the guards at the top of several key agencies to more digital lead leadership so there is hope for change on that front...I am forever an optimist.
Two things I see in favor for an upfront approach is first the economies that bulk buying has on CPM's and many advertisers are willing to commit to gain those savings. Although I do see many opportunities to provide increased flexibility even in the bulk buys.
The second being how in the world are agencies going to staff properly to a more labor- intensive scatter market approach? There is so much pressure already on FTE's I am feeling bad for my longtime friends who will have to tackle a more scatter focused approach. OUCH.
I don't think that the traditional upfront is quite dead yet. Tracey's two points make sense. That said, the idea of doing this Q4 as scatter and then moving timing for the Upfront to a calendar year would make sense. The current broadcast year is a relic of the past, dating to when the big American auto companies introduced their new models in the fall. It made sense for the networks to launch the TV season when what were then likely their biggest clients had shiny new cars to show off. Those days are gone and most clients plan on a calendar year, regardless of how they buy. Even those with non-calendar fiscal years don't necessarily align with broadcast years. Futher cable (and now streaming) debut programming throughout the year and even the networks launch programs outside of late September. I say good ridance to the broadcast year.
Great points Tracey ... for sure, if scatter is to become a much bigger part of the overall buying pie, there will need to be much more enabling automation so that it can be bought without adding more full time equivalents to get it done.
Thanks for the wise perspective Neil. You make a very good case, similar to Campanelli, that a calendar year upfront might very well be the end result of this year's upfront dislocation. It would certainly be a good thing for TV networks too as they wouldn't have to artifically build their programming schedule around the old way of dong it.
So let's say that the national TV networks shift to a calendar year upfront starting in January---when calendar year budgeting advertisers are traditionally low spenders as they ease into a new year. Does it make sense for the new shows to be introduced in January---even if viewing levels are above the norm due to the colder weather---but advertiser spending is well below normal? Probably not. So sometime in February is probably better. So far, so good. Except if you are selling all four quarters what do you do about the fourth quarter---a key period for many marketers and a generally high viewing period? Do you lock in a new lineup of programs and time slot shuffles that far in advance---without knowing how your February introductions fared? How Do you guarantee fourth quarter audience tonnage when neither the sellers nor the buyers has a clear fix on who has been winning---and losing--in the Nielsens and nobody knows what the new shows will be?More likely, in my opinion, is a temporary nine-month upfront sale covering the period January-September 2020, followed by a return to normal with a 2020 June upfront for a fourth quarter start as before.
I should add that TV fall-summer "seasons" began almost as soon as the national networks got organized---roughly in the early 1950s. At that time 70% of the shows were controlled by advertiser sponsors and while cars were a major category, so were cigarettes---about 10% of the dollars---- and many other product classes were big spenders. In those days, sponsors got no audience guarantees and were stuck with the responsibility of providing content for time periods they had selected---in conjunction with the networks---for 52 weeks out of the year. This required a common starting point---early fall-- so production could begin on most shows which were scheduled in specific time slots with known lead-ins and competition. I arrived on the scene in time to watch the transition from sponsor- to network control, and nobody was complaining about how the season was defined so long as all of the major programming decisions were made at about the same time so everyone knew exactly where they stood.
As always, I am much persuaded by the synthesis of Dave's and Ed's viewpoints, two of my longterm gurus. I'd add that - as they both know - upfront buys save the advertisers money, and provide benefits to the networks in terms of Wall Street, and make life easier for buyers and sellers. At TRA we simulated Ed's more brand-centric upfront idea by a combination of rolling up brand skews and quarterly brand allocation optimization, which everyone should be doing. Without the upfront (even if it shifts to calendar based) the networks might find it harder to invest as much in new programs. Unless the rules have changed recently, upfront buys are cancellable in whole or in part by September, so making upfront deals while still in the dark about pandemic timing makes sense to me. The networks should make more of the value of context so that there is more obvious value to lock in the contexts best for given brands/ads for longer periods.
Ed - I completely agree with everything you said. It would be very weird to secure an upfront in Q1 - the lightest quarter and would likley discourage negotiation from a seller who wants to see the big Q4 dollars of old.
With all of your experience - I wonder why the upfront wasn't planned for a Q3 launch? I think we all often focus on Q4 and the holidays, but Q3 has always been the huge viewing time coming out of the summer and into back to school with all the new network content releases...Always something I have wondered. Especially in our time when summers off in July and/or August are long a thing of the past and people work through the summer much more. Just curious! Thanks!
Thanks, Gabriel. The concept of "seasons" came well before the upfront existed---by about ten years. That was because sponsors controlled up to 70% of the networks' primetime content and a large percentage of their other shows as well and sponsors needed to lock up time periods for "their shows" among those offered by the networks and get their shows produced. In those days, the average wage earner worked 40-45 hours per week and vacations were much shorter than today, with the result that just about everybody took their vacations in July or August and the whole family planned to take off or do something for this event. Also, it was warmer in the summers than it is now---due to climate change--and the three TV networks as well as all sponsors, went into reruns almost in unison around the end of May. As a result, viewing levels during July and August were far lower than the fall and winter---unlike today where the differences are much smaller. Faced with this few sponsors wanted their shows to make their debuts in the summer and the networks agreed with them. Consequently, everyone opted for a fall start and most of the primetime shows aired their first telecasts within a one to two week period---usually starting in mid- or late September.
The upfront came about as the networks took over their own programming function and went to Hollywood to license filmed dramas which were much more expensive than the mostly live fare that sponsors favored-- game shows, sitcoms, varieties and drama anthologies. Advertisers could still buy into shows as full or "paticipating" sponsors, but now the networks decided when the shows would run and they had the ability to dump any show any time when its Nielsens tanked and replace it---or make time slot changes. So "sponsors" now became merely time buyers and as such they began to negotiate like buyers. Gradually this led to audience guarantees at first only for the fourth quarter and only for household ratings. But over time this changed until it became what we have today---and it's no longer a way for the networks to protect their investment in programs as they stopped buying 30 or more original episodes of most series and now often contract for only 8-13 at a time, which allows them the flexibility they need to minimize the risk of failure.
Continuing my comment, I beileve that the fear of low viewing levels in the summer months is no langer a factor as the availablilty of vast amounts of viewable content plus changes in our life styles, work habits, the weather etc. have resulted in a major flattening of the old seasonal viewing pattern. I can also see an increase in new show introductions throughout the year but that should not prevent starting the fall with a big bang and many new shows, time slot shifts, etc. as we have been doing since the 1950s. It also makes sense regarding audience guarantees as the seller and buyer both know how the season is starting, what the shows are, how they stack up regarding competition and leadins, etc---even though these factors are far less important with 185 channles per home than in the past when three networks captured 90% of the primetime audience. What I'd like to see is a shift to a two upfront system---one for individual brands catering to their needs---but at higher CPMs; the other for the corporate buying CPM chompers---as this would be a boon both to those brands that want it and the sellers who would increse their ad revenues. But I'll save that for another commentary.
Thanks Ed for giving us all such great perspective and context for how the seasons came to be and where the upfront needs to go. I am hopeful that a split upfront might be one of the consequences of the impacts of this terrible crisis we're in.