Steep Ratings Declines Create Potential Prime-Time Cash-Back Scenarios

Massive, worse-than-expected TV viewing declines are causing headaches for broadcast networks and advertisers -- resulting in a probable make-good inventory shortage and possible rare TV network cash-back payments to marketers.

Steep prime-time ratings declines -- 20% to 30% for the TV season-to-date -- resulted from the delayed start of many TV productions, forcing viewership to sink dramatically.

That, in turn, is forcing TV networks to give make-good inventory back to advertisers more than usual to meet ratings guarantees made during the spring/summer upfront.

TV networks typically hold back a set amount of advertising inventory for sale in a given season to "make good" these ad deals. In rare instances, when ratings drop substantially, networks run out of inventory and have to return cash to marketers.

“[Networks] are challenged with inventory constraints -- partially due to limited original [programming] in the fourth quarter,” Gibbs Haljun, total investment lead of GroupM's Mindshare, told Television News Daily. “They are exploring all options to meet commitments.”



Cash-back isn’t necessarily what TV networks or advertisers want.

“It is a disaster,” says another veteran media agency executive. “We don’t want cash back -- we have nowhere to put it.”

Another agency executive was less concerned.

“I would not say they are running out or giving cash back at this point, but that remains to be seen in 2021 as this continues,” says the executive. “Streaming could be an alternative, but they just can’t make up for all the under-delivery.”

The executive says connected TV and OTT platforms are being used for make-goods in some cases, with approvals from media agencies and advertisers.

New advertising streaming on-demand platforms (AVODs) are particularly attractive to new TV consumers, specifically because the overall number of commercials are far less than on live, linear TV networks.

In addition, many agency executives are weary of replacing intended linear TV advertising with connected TV commercials, not believing they are getting the same media value.

Representatives from four major broadcast TV networks -- ABC, NBC, CBS, and Fox -- did not respond to Television News Daily by press time.

Adding to this situation is a dramatically different upfront selling period for the 2020-2021 season, which was completed just before the fall season began.

This year, the market witnessed an eye-opening 15% decline to $18.6 billion versus the 2019-2020 upfront market of $21.9 billion, according to Media Dynamics. Much of this is due -- like fewer original fall program episodes -- to the pandemic.

The upfront TV ad buying market in spring/summer period is where major brand advertisers commit to buying an estimated 70% to 75% of networks prime time and other inventory throughout the upcoming TV season.

4 comments about "Steep Ratings Declines Create Potential Prime-Time Cash-Back Scenarios".
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  1. Ed Papazian from Media Dynamics Inc, December 18, 2020 at 11:39 a.m.

    Wayne,one would hope that the TV networks were savvy enough to anticipate most of the rating shortfalls in making their guarantees. But, if not, I would expect them to add another "30" to each hour of prime time fare---hence generating more GRPs to use as make goods--as the more likely option than turning to AVOD. They are trying to make their new AVOD services low ad clutter places where advertisers can attain better demos and targeting in general---but with higher CPMs. Turning this into  free spot, make good, venues flies in the face of such a strategy. If you start loading up your breaks and giving away AVOD spots you are going to have a hard time, later, trying to sell these at premium CPMs---which is what the long term plan calls for.

  2. Jonathan May from HorseTV Global, December 18, 2020 at 2:03 p.m.

    "we have nowhere to put it.”  I don't seem to notice that as an issue, if anything network channels have turned advertising into the programming, with an occasional break for real programming.  I can sit here and channel surf and I get Commercial... Commercial... Commercial...Commercial, ad infinitum.  Drives me straight to the OTT Channels.  They seem to be doing a good job of finding places to put their ads when there are more commercials than real programming.  When people will PAY to receive no commercials, giving birth to SVOD channels, you know you have a problem.  Not that they care of course, there will always be a market for free- but you will trade your sanity for it.

  3. Zach Rosenberg from Zach Rosenberg Consulting, Inc. replied, December 18, 2020 at 2:40 p.m.

    Well said!

  4. Craig Mcdaniel from Sweepstakes Today LLC, December 18, 2020 at 8:37 p.m.

    Whether to agree or disagree, the politics of the elections cast a shaddow on the numbers. One could say Fox has more brand loyality and NBC has the least.

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