Scatter Ad Market Crashes In April, Another Weakening Signal For Upfront Demand
- by Joe Mandese @mp_joemandese, May 11, 2020
In another sign of weakening ad demand
-- and a troubling indicator for 2020-21 upfront network TV ad negotiations -- the delta between upfront and scatter ad prices narrowed to its closest point in recent memory in April, according to a
Media Daily News analysis of data from SQAD.
With just $17,218 separating the average scatter ad unit price from that of what advertisers bought in the upfront, April's ad pricing removes one of the major arguments for buying network TV ad time upfront: price protection.
The data, coming as advertisers and media buyers are poised to exercise third-quarter upfront cancellation options, is another negative signal of plummeting demand heading into the annual upfront ad marketplace, which many now believe could be pushed back to the fourth quarter and drawn out as advertisers and agencies try to get a handle on their own budget forecasting for the year ahead.
"All three networks saw double-digit declines in scatter from the first quarter into April 2020," SQAD noted in a report provided to MDN, adding: "Changes in the upfront ad values are consistent with seasonal trends."
Historically, ad demand spikes in the fourth quarter heading into the annual holiday shopping season and ebbs somewhat in the first quarter of each year, although the third quarter typically has the weakest overall demand.
SQAD, which derives its data from estimates provided from reporting media buyers, said it will publish additional estimates on the volatility of the second quarter 2020 marketplace once it has tabulated May and June data.
Source: SQAD MediaCosts national database.
Joe, to make sense of these numbers one must factor in the size of the upfront versus the scatter markets. If you take primetime as your base the second quarter upfront spend was probably close to $6 billion gross before cancellations. The expected scatter sales was, in normal times, probably going to be $2.5 billion, or a bit more. With scatter CPMs now declining by 25-30% that results in a loss of, say $700 million for the sellers---the broadcast TV networks and cable. Add in expected cancellations for the third quarter upfront of around 25% and that's another hit of about $1.2 billion but in this case they should be able to unload a fair amount of the cancelled time at discounted rates resulting in a net loss of, maybe, $450 -500 million. The third quarter scatter market will probably be weak but not so bad as the second quarter, so that issue is still in doubt. As for the next upfront---which may evolve as a rolling nine- month upfront, if the networks hold back GRP inventory and don't panic, they may recoup some of their second quarter losses. Yes, the situation currently looks bad---but it's not a doomsday scenario as some seem to think---providing the sellers play the game cleverly.
these comments point to a much larger issue with television, ads upfronts and GRP in general, stated in the last sentence.
Its all based on a game that must be played cleverly
not a fair open market where true demand-price discovery, is in the open.
What is not fair, when you agree on a price and guarantee to hold it for the year, knowing what your media agency fees are?
What is open about programmatic when a varying number of ad-tech companies clip the ticket with basicaly zero transparency, meaning that an unknown proportion of the ad-spend is actually spent on the ad at an unknown unit price at the time of commitment?