• by Joe Mandese  @mp_joemandese, May 13, 2020

Ad spending during this year's upfront network TV marketplace will decline 33% from last year's, if one occurs at all. Those are the findings of the most recent wave of COVID-19 pandemic tracking studies conducted by Advertiser Perceptions.

The most recent study, which interviewed 151 advertising executives earlier this month, found that, on average, they plan to spend 33% less in this year's upfront than in last year's. Last year's upfront ad spending grew about 7%, according to estimates compiled by Wall Street securities firm UBS, and its rare for upfront marketplaces to decline in volume and it usually only happens during economic recessions.

But with economists projecting the U.S. economy could contract as much as 30% in the second quarter just as negotiations would normally begin heating up for the annual network TV marketplace, the expectation is that upfront demand will crash, as well as the terms, conditions and timing of it.

In fact, 41% of ad executives said they expect this year's upfront to shift from an "advance" to a "just-in-time" buying model, effectively negating the whole concept of the upfront.

Nearly half (48%) of the respondents said they do not foresee committing to more than one quarter of network TV ad inventory in this year's upfront. While upfront advertisers do not necessarily have to buy all four quarters -- normally fourth quarter of the current year through the third quarter of the following year -- it would be extraordinarily rare to have a significant number of upfront advertisers buying only one quarter's worth of inventory.

But network ad executives have already demonstrated a willingness to be flexible in terms of normal upfront terms and conditions, allowing last year's upfront advertisers to extend their deadlines for exercising their third quarter cancelation options -- representing 50% of their upfront buys for the quarter -- beyond their May 1 deadlines.

One reason why advertisers and media-buyers may feel they can change the rules of this year's upfront game with impunity isn't just the macroeconomics of the pandemic and economic recession, but the fact that they now feel viable alternatives for achieving their media-buying goals exists outside the linear network TV advertising marketplace.

Half the executives interviewed by Advertiser Perceptions said they believe they can now acquire enough of their "GRP" -- or gross rating points -- media planning goals by replacing TV inventory with OTT, CTV and/or digital video advertising inventory (see chart at bottom).

Of course, it's also not unusual for the demand-side to posture heading into upfront negotiations with the networks, because upfront deals often are about the emotional sentiment surrounding the risk associated with perceived supply-and-demand for the year ahead.

As one anonymous Fortune 100 advertiser told Advertiser Perceptions, ""We can’t put ourselves in a position to be beholden to things money-wise. But we don’t want to be the advertiser left behind if we hedge our bets and don’t do a big Upfront. If we’re the one left behind and everything’s back to normal come October, we have to go into the scatter market and buy whatever we can at massive price increases."