The End Of Upfront Bull: Why Analysts Are Bearish About TV's Long-Term Ad Marketplace

While it may seem like a given that the upfront network TV advertising marketplace will likely be down in both volume and pricing this year, at least one analyst is predicting the disruptive effects of the COVID-19 pandemic could be the last straw for sustaining TV’s long-term market share and that the main beneficiary will be online media -- especially Google’s YouTube, as well as the CTV (connected TV) marketplace.

“We have been perpetual online bulls for years and have felt that whatever path TV advertising would take, its often forecasted decline would take far longer than bears have been predicting,” Pivotal Research Group analyst Michael Levine writes in a report sent to investors this morning, adding, “That said, crisis can often drive fundamental change. And the longer business practices change – i.e. business travel is also likely to have structurally changed – the greater chance things are likely to be more permanent.”



Levine’s note, which includes results of some recent straw polls Pivotal conducted among ad execs and media buyers does not bode well for this year’s upfront, and while that’s not surprising, he makes the case that it will also be the catalyst for a far more fundamental shift from legacy TV markets to digital media’s much more flexible options.

Two-thirds of ad executives responding to Pivotal's market checks said they expect the “nature of the TV upfronts” to change fundamentally because of the current situation.

“We thought we would try and get this note out ahead of Google’s earnings where, while we believe YouTube is likely facing significant headwinds in the short term, to the extent this is true, we believe that it will be one of the biggest beneficiaries from this dynamic,” Levine explains about the timing of his report, adding: “With this view in mind about linear TV, we have strong growth forecast for YouTube revenue in 2021 -- solidly ahead of 2019 levels.”

He goes on to note that “to the extent the TV market goes predominantly scatter,” Pivotal also projects that the CTV advertising marketplace will be “a strong positive beneficiary.”

In a separate note sent to investors this morning, BMO Capital Markets analyst Daniel Salmon concurs that YouTube will take a marginal hit in its near-term advertising revenues, estimating its first-quarter sales will be up 21% vs. an earlier consensus estimate of 23.7%, which was already down from an earlier estimate of 24.2%.

But he does not forecast a longer-term impact due to the disruption of the COVID-19 pandemic, noting: “YouTube’s advertising revenues will be an important datapoint for investors to watch. While the COVID-19 pandemic has driven a surge in viewership on YouTube, CPM declines have been significant and will more than offset higher impressions.”

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