With the pandemic having accelerated consumers’ and advertisers’ shift from linear to streaming, even as legacy broadcasters and MVPDs launched multiple new streaming services, this year’s upfront is bound to be precedent-setting.
During one of the panels at last week’s MediaPost Outfront Forum, five chief investment officers from major agencies shared their views on the issues likely to drive the action.
Here are some highlights from the discussion, moderated by MediaPost West Coast Editor Wayne Friedman.
With about a quarter of all TV viewing time now on streaming platforms, but just 4% of available advertising time on streaming platforms, streaming inventory is clearly of real value.
But judging from this discussion, the buy side is prepared to tangle on the core underlying dynamic: broadcasters’ desire to maintain overall pricing and revenues, despite linear’s declining viewership, by pushing advertisers to shift 20% to 30% of linear budgets to higher-CPM CTV and premium video platforms, as they also leverage the sell-side advantage of currently limited linear inventory supply.
Panelists pushed back on the premise that triple-digit price inflation during Q1’s broadcast scatter market, as reported by SMI, means that linear pricing hikes will prevail in the upfront — in no small part because of the wider universe now available through CTV and streaming.
“Unit cost outputs are based on ratings as well as prices, so inflation on unit costs doesn’t necessarily translate to inflation in overall CPMs,” said Gibbs Haljun, total investment lead at GroupM’s Mindshare. “Coming out of the pandemic and a depressed economic period, when we’re seeing greater economic growth, it’s only natural that prices [in general] will tend to go up. But [for linear TV], the challenge isn’t about inflation, it’s about value. Is the value there for a prime-time program, particularly if it’s delivering under a point-eight rating?”
“If you’re going to pay a $60 CPM, are you getting the value for that CPM, and how are you going to recalibrate whether the price is worth the audience being delivered?,” concurred Maureen Bosetti, chief partnerships officer, Initiative. “There’s value in different places, but it all goes back to who you’re trying to reach, and if you’re going to get the right scale and audience composition [from that platform].”
“If you’re going to follow the consumer, you’ve got to follow the content,” said Cathy Shaffner, Empower’s chief investment officer. “Yes, the linear supply is down and demand is up, but the other supply has grown — we can go get content in many more places. So we’re looking to buy linear differently and add in more players like YouTube, Tubi, Pluto and the rest. We need to help brands understand that if the CPMs are higher in some [platforms] but you’re reaching the audience you need to reach, the value is there. We have to get away from [the traditional] one-to-one comparisons of CPM percentage increases.”
“There’s a huge part of this that no one wants to talk about, at least from the sales side, which is that there are two sides to this: supply and demand,” stressed John Muszynski, chief investment officer, Publicis Media Exchange (PMX). “We all know that supply on the linear side is down tremendously, but no one’s talking about demand against specific vehicles. They’re talking about demand in general. We need to understand that this is a bifurcated market. We’re going to have a very different market for linear television than for the digital market.”
“The only reason we had the kind of scatter premiums that we did [in Q1] was lack of supply,” Muszynski added. “We didn’t see that on the digital side. So I get really nervous when people talk about inflation in this market and lump everything into one bucket. In fact, we actually have not two but three distinct marketplaces, because within linear we have a separate set of supply and demand dynamics going on in sports. Talking in general terms plays into the hands of the seller.”
“I think there’s going to be a big surprise in the upfront: Budgets will be up, but linear budgets will not be up,” he said. “If you’re following the consumer, there’s going to be less demand against the linear product. The problem is that the shortfall in supply is greater than the decrease in demand. But demand is up only in certain areas, and flat or down in others. We’ve got to take that into account.”
“This won’t be a typical marketplace, where the rate of inflation is the same for every client,” said Jason Kanefsky, managing partner, marketplace intelligence, Havas Media. “You’re going to have multiple rates of inflation across different quintiles that advertisers sell against. The numbers will differ based on their historical business base.”
Are clients more willing to accept CTV’s higher CPMs versus linear after the pandemic’s transformative effects?
“One of the pandemic’s outcomes was an acceleration of changing consumer patterns, but also in client understanding and belief that the landscape has indeed changed,” said Muszynski. “We have seen great acceptance from our client base. They understand that it is a dramatically different landscape than three to five years ago. We see a clear shift in dollars toward these other more targeted, strategic options now available to us."
"Not only can we create a more competitive environment from a price standpoint; we can create a more strategic look at delivering our targets. We can move from age/gender to a strategic behavioral target. We already have the data overlays to put in place. It’s no longer an easy comparison of price for linear versus price for digital. There are other values that come with moving to these other platforms that allow us to do a better job of reaching clients’ targets.”
How do buyers begin determining how to reallocate dollars?
“It’s about where do I find my audience, how do I go after that audience, how do I determine the value for that audience?” said Haljun. “That’s even more important than the rating. For instance, networks are trying to push ‘adults 18-plus’ guarantees [rather than guaranteeing the more specific 18-to-49 target, which they’re struggling to deliver]. That’s moving backwards — and we don’t even have the tools to determine the value equation of that shift.”
“Even if I’m buying a better audience, I may want to buy on an 18-plus CPM, because I know I’m going to get a better deal on my targeted demographic or audience in that bucket of inventory,” he said. “But the biggest challenge is that I don’t necessarily know that I’m going to need these networks next year. I may have sources of inventory that we haven’t really tapped into at this point.”
“Taking an audience-first approach requires understanding where your audience is across every video platform,” said Bosetti. “Yes, linear inventory is down, and yes, there’s supply contraction in primetime, but we have more video options than ever before — the Rokus, the Amazons, Samsung, YouTube, etcetera.
"It’s obviously critical to understand all of the opportunities against those audiences and where we can find them. Then, if it makes sense from a cost standpoint for certain clients to agree to an 18-plus guarantee, knowing that we want to target against a high-value audience, and the cost/value equation makes sense, we can convert to an 18-plus guarantee. But we’re not going to do it if there’s an inverse relationship and the cost is going up dramatically. There’s a lot of opportunity out there to find those audiences — and to do it in a much more efficient way, to be honest.”
Muszynski suggested that in return for helping broadcasters meet their guarantees by agreeing to accept an 18-plus standard in some cases, buyers should require that available data on linear audiences be used to help clients get closer to their targets.
Empower’s Shaffner added that buyers should use the point as leverage to negotiate for a narrower gap between the CPMs of linear versus streaming services and other digital extensions, among other demands.
Haljun noted that publishers may be undermining their own negotiation positioning by making content available on multiple streaming platforms.
“If I can get it on multiple platforms, you’ve created an aperture where content and audience is everywhere, so I don’t necessarily need an individual network’s digital extension at a premium, because I can buy it at a discount from 14 different places,” he said. 'I’m going to look to get the best value I can, and that may mean that one year I do a deal with Partner X and the next year I shift all my money to Partner Y. Another factor is that YouTube and Amazon can ask for every one of our dollars, and be able to deliver [our targets] without a problem. I’m not saying I want to give all of my money to them, but they’re asking.”
Does ad-supported streamers’ lower ad load — typically about four minutes per hour versus about 16 minutes in traditional TV — make AVODs more attractive to advertisers?
“Four minutes an hour is obviously more attractive from a consumer experience standpoint,” said Haljun. “But the important difference is that you have frequency caps. Nobody is really frequency-capping linear TV. If you are watching a movie [on linear], particularly in cable rotation, you could potentially see the same spot three or four times within a two-hour block. The caps on all digital platforms limit that to some extent… That’s attractive, but it also limits what you can spend on an individual platform for a brand on a per-day basis. So that narrows the opportunity from an impression-delivery standpoint.”
What about the biggest question of all: How much money do these executives think will flow from linear to CTV this year?
“I haven’t guessed that number yet,” said Kanefsky. "But I did an estimate on how much money HBO Max can take, and it's clear that a lot will depend on how much [of the current user base] goes from SVOD to AVOD.”
Buyers can begin to create a model for how much money can be moved by projecting what percentage of the roughly 45 million U.S. homes with an SVOD service will downgrade to an AVOD to save money, and calculating how many impressions that will generate, he said.
“But if it’s YouTube, the number is infinite. They have plenty of impressions to go around,” he pointed out.