Another TV Upfront season is upon us -- that time of the year when TV networks and media owners are locking up new deal commitments with advertisers and their media agencies for the upcoming 2022/23 programming season.
Nothing encapsulates this time like the Masters’ slogan, "A Tradition Unlike Any Other."
An industry tradition that has been radically upended, fueled by post-COVID-19 consumer behaviors, economic volatility, inflationary concerns, industry consolidation and data fragmentation, the 2022 Upfronts are guaranteed to be different and challenging.
Our internal estimates indicate that this year’s Upfront market will reach $22.1 billion for the 2022-2023 season compared to $19.9 billion last year -- an increase of 11%.
With so much uncertainty, it’s important that marketers are armed with some necessary insights to plan for this critical period.
1. The advancement of alternative video audience measurements and new challenges for marketers
The big picture: Nielsen, the legacy TV measurement currency, is facing stiff headwinds from its competition and media owners.
Viewership is no longer linear or siloed on traditional TV sets. Consumers are watching both long-form and short-form content across multiple devices and streaming services.
Along with Comscore, iSpot.TV and VideoAmp, including Nielsen, all the key audience and video measurement companies are working at breakneck speed to advance their cross-channel measurement capabilities, reflecting the dynamics of the digital media ecosystem.
With all the major media companies investing heavily in their respective streaming services, it’s a top priority for the C-suite to establish an industry "certified" cross-channel/screen measurement system and non-Nielsen currency to integrate and capture all viewership within their portfolio for first-mover advantage. This will allow marketers to obtain conclusive evidence that their advertising investments are contributing to results.
NBCUniversal is partnering with iSpot.TV. The newly formed Warner Bros. Discovery will be partnering with Comscore, VideoAmp and iSpot.TV.
While we do not expect monumental shifts with overall negotiation strategies this summer, this year will certainly be a litmus test for all parties.
We project that in 2023, 10% to 15% of Upfront deals will be negotiated on non-Nielsen alternative currencies.
2. Measurability is everything and is becoming flexible across platforms
Why it matters: Initiatives such as those mentioned above -- including NBCUniversal and iSpot.TV -- will allow advertisers to procure media inventory cross-platform, with ad impressions served across all creative assets, including linear TV, connected TV (CTV) and AVOD services.
There will be a shift from legacy GRP planning and negotiations to impression-based planning, similar to how digital media is transacted.
The measurability of non-linear platforms allows for incremental reach through de-duplication across cross-channel platforms and unified data measurements.
However, the deployment of anything new and limited beta testing bring unexpected challenges and complexities.
While the benefits of CTV have been well-documented by many sources and reports, ad fraud, overexposure and frequency capping limitations currently permeate the CTV supply chain.
What they’re saying: Linear TV viewership and ratings continue to deteriorate, with many viewers only tuning into live and on-demand programming.
With all traditional broadcast networks offering ad-supported streaming platforms as part of their offerings, such as Disney (Hulu), Paramount Global (Paramount+) and NBCUniversal (Peacock) reach can still be achieved with disciplined planning.
Simply relying on TV to drive reach is untenable in today’s fragmented environment. Marketers should pursue a balanced cross-screen planning approach and holistic data strategy for reach and frequency.
In addition, it's important to note that the audiences targeted on linear TV might not be the same on CTV. Untapped, underserved, underrepresented, high-potential CTV opportunities can be uncovered through effort, timing, research and forward-looking planning.
While all the major media owners and agencies will present bundled cross-platform packages and benefits, remember that legacy siloed operations still exist behind Upfront presentation curtains.
These bundled deals are like mutual funds. Deconstruct the Upfront deal components and commitments, and calibrate with agency partners to meticulously evaluate each component. This will ensure the right balance between cost and quality metrics.
3. The cost of advertising on TV will increase
By the numbers: As revealed in our Annual Inflation Report released back in January, even with declining audience viewership, TV inflation in the U.S. is expected to rise this year due to supply and demand.
The domestic economy is rapidly returning to normalcy, even with geo-political and energy market volatility. This Upfront cycle will also be heavily impacted by the U.S. midterm elections.
The competition for flagship events like the NFL and FIFA World Cup and limited premium inventory will be high, as marketers continue to seek out safe bets for mass reach at the right frequency. Inflation impact will be felt across the marketplace.
Where it stands:Traditional linear TV inventory is becoming increasingly competitive due to emerging industries. TV advertising spending has historically been dominated by traditional advertisers in consumer products, automotive, telecommunications, food and beverage and pharmaceuticals.
In recent months, there have been increased media expenditures from emerging industries with sizable marketing budgets, such as cryptocurrencies, FinTech, gambling and electric vehicles. "Non-traditional" market drivers are paying above industry norms and market rates for high-value, high-demand video inventory.
Combined with a lack of premium inventory and ratings erosion, the inventory is becoming increasingly competitive, leading to higher costs. The quality of media-planning strategies will be paramount in today’s marketplace.
Be smart: When proceeding to the advanced stages of the negotiations with media owners and networks, marketers should ensure that their deal terms and negotiated costs are protected against market factors that the agencies can directly plan, control and influence to offset market inflation with negotiations at the highest agency levels to drive economies of scale.
Like a seasoned institutional investor, the agency should provide its clients with the right investment and cost containment strategies to achieve the greatest value.
Many Upfront deals will be finalized faster than in previous years, possibly several months earlier than usual. For marketers to lock in prices within internal and/or external benchmarks, Upfront planning cycles will need to be accelerated.
Between the lines: There is significant value to audience deficiency units (ADUs). Upfront "guarantees" are part of standard deal terms and media owners’ commitments to advertisers and agencies. However, even with the most advanced forecasting models and planning methodologies, under-delivery on performance is to be expected.
Shortfalls force TV networks to give clients audience delivery units (ADUs), or "makegoods."
In the simplest terms, ADUs are like store credits. No one likes them or remembers having them. Most, if not all, advertisers will experience under-deliveries from their TV partners. Managing ADUs is tedious and often overlooked by both clients and agencies.
But with careful management, ADUs could potentially be an ancillary benefit during Upfront negotiations -- especially with network partners that advertisers consistently spend with year-on-year.
These are owed inventory and impressions from a previous period that have not been delivered within the "guaranteed" period.
Advertisers should coordinate with their agencies to develop a clear ADU leverage strategy in advance of the negotiation period.
Heading into Upfront negotiations in such a fragmented and fluid marketing landscape is sure to bring consternation even for the most seasoned marketer.
Marketers should ensure they have access to independent counsel and impartial insights to inform their negotiation strategy, and by benchmarking rates, setting precise media targets and quality guardrails, all aligned into a cross-channel integrated strategy that will deliver the highest media ROI and transparency.