Tales From Upfront 2017: Looks Like More Money for Now

News grows, sports soft, what happens to scatter

A surprisingly strong upfront is just about over but, as always, exactly what happened in the $20 billion market for commercials during the next TV season isn’t perfectly clear.

There remains a significant gap between what network sales executives are saying about substantial increases in volume and high-single digit price increases on a cost-per-thousand viewers [CPM] basis and the flat-to-slightly up budgets buyers say they brought to the table.

Broadcast primetime sales appeared to be flat, even according to most of the networks, which says bigger gains in morning, daytime and late night time periods.

Sports, especially the seemingly invulnerable NFL, was soft, while the increasing viewership of news had several networks worried that eyeballs they can usually count on in post-election years could be permanently affixed to the soap opera surrounding President Trump.

Here’s a breakdown of the market’s big issues:

What Sales Execs Are Saying:

“I think everyone’s walking away from this upfront relatively pleased,” says one network sales exec. There was enough volume for the sales side to be OK. CPM increases were palatable for both sides. These 5%- to 8% markets, they’re not so bad.”

Broadcasters pointed to big gains in non-primetime periods. One cable executive noted that buyers were seeking stable ratings at low prices early in the market. Spending by Procter & Gamble and some new pharmaceutical drugs were enough to make a big impact on those day parts. “I don’t even think the networks realized how fast they were going to sell out there or they would have priced it even higher,” adds another exec.

The concern is that the extra money that showed up in the market might have come from scatter budgets as buyers looked to cash in on reasonable upfront pricing. Some networks sold more inventory than usual in the upfront, which could create a squeeze during the season if ratings continue to erode. “A lot of networks could be out of sale before you know it,” says one executive.

What Buyers Are Saying:

“Our budgets were down and we still believe the volume in the marketplace was down versus last year,” says a top buyer. “I think the networks wanted to sell a certain amount of inventory in the upfront and they got more money than they expected.”

Another buyer said it was surprising to see big growth in broadcast dayparts like daytime. “The lesson is that linear TV for some product categories still works pretty darn well,” he says.

The Word on Wall Street:

“We had expected total volumes to decline about 3%, but we think broadcast TV ultimately will post 3% growth to $9.2B while cable will grow 1% to $9.6B,” says analyst John Janedis of Jeffries. By his calculations, total dollars written were at the highest level since the '13/'14 upfront.

The Score for Sports:

“We’re seeing some softness in sports overall,” says one big buyer. The weakness was most evident in NFL football where lower demand by automakers, movie studios, Viagra and Cialis going soft with the expiration of their patents, and last year’s inexplicable ratings drop all contributed. Despite the pressure, NBCU says sales for its NFL games on Sundays and Thursdays were up 5% in volume.

As Fox pushed its enhanced college football package, it seemed there might be pressure on ESPN.

“There’s no other entity that’s as focused on sports, so when the sports market gets a cold, they have the flu,” says one buyer. “They’re still number one, but it’s arguable that they are not the must-buy they once were.”

While the NFL might be soft, ESPN also has basketball coming off a hot season and a digital business that is growing as viewers seek news and highlights online. The network declined comment.

The News on News:

The high ratings for news had an impact on the market. “I think everyone’s realizing now that news isn’t going to go away. This is now a permanent shift in viewing patterns,” says one cable news exec.

Even with the influx of news viewers, which impacts other networks’ ratings, it is unclear how many ad dollars will move to news.

“While some advertisers might be taking advantage of the inflated ratings in the news landscape, there are quite a few choosing to disassociate themselves from the negative essence of the commentary, as they don’t want it to reflect on their brand,” says one agency exec.

But big ratings are big ratings. A source close to Fox News says it is ringing up nearly double-digit volume increases compared to last year’s election year upfront.

Bottom Line:

“I still think the biggest takeaway from this upfront though is P&G bringing money back to television,” says one network executive “They’re such a bellwether account that I don’t think they’re the only one. I think it’s starting to create a new equilibrium of TV and digital.”