With big mergers among programmers, and a continuing shift of viewing towards over-the-top, the dynamics of this year’s upfront may be look somewhat different than in past years. But not too different.
B&C posed a series of questions about the upfront auctions to some of the most important media-buying executives who’ll be involved in making decisions on how to spend about $21 billion of their clients’ money over the next couple of months.
The biggest concern for sponsors remains the climbing price of TV commercials on a cost-per-thousand viewers (CPM) basis, even as ratings for primetime programming continue to erode.
Most of the media buyers see opportunity in the larger programming organizations that are being assembled, in part because they will have greater scale and more data, which could lead to more targeted and effective advertising.
Here are the questions we posed to these market movers, along with their answers.
B&C: With Disney buying 21st Century Fox and AT&T digesting Time Warner, how will consolidation affect the upfront market?
Chris Geraci, president of national video investment, Omnicom Media Group: The continued consolidation in the media landscape will no doubt play some role in this year’s upfront marketplace. Fundamentally, the changes in ownership will have obvious impact on who agencies and advertisers interact with when transacting with certain components of these particular companies. Consolidation will also reconfigure some of the negotiating positions and the leverage that will be brought to bear in negotiations. While these are the near-term implications that will be felt in the 2019-20 market, the longer view of consolidation should be grounded in its effect on the amount of ad-supported content available in the marketplace.
Mike Law, head of U.S. media investment, Dentsu Aegis Network: We believe that the consolidation in the marketplace creates a tremendous amount of opportunity. It delivers deeper solutions with our biggest partners, allowing us to utilize data at scale and within the most premium content. If we can fully leverage the breadth and depth of the biggest media partners, we can deliver more impactful campaigns for our clients. This results in conversations shifting beyond buyer and seller and rate of change, toward a focus on marrying together marketing and media to give brands the ultimate ability to succeed and grow.
Dave Penski, global CEO, Publicis Media Exchange: Rapid, massive media and technology consolidation and partnerships are blurring the lines between traditional and digital, and we’re seeing more digital inventory become a part of upfront conversations. However, consolidation has had minimal effect on the market compared to other factors, such as new entrants in the OTT space, declining ratings and cost pressure from marketers.
Lyle Schwartz, president of investment, North America, GroupM: This year, there will be minimal impact as the combined entities are just starting to align their teams for working together. The conversations we’re having are more about the resources that will be available to us in the future — new products and tools that can enhance clients’ messaging on their platforms — within the best content. Disney, AT&T, NBCUniversal and even CBS seem to be prioritizing their streaming products.
B&C: Are you concerned that you will have fewer opportunities to put your clients’ messages in the best content?
Geraci: Assuming this relates to the direct-to-consumer subscription services becoming more prevalent, there is legitimate concern that this will continue to shift viewing time away from advertising-supported content. Although the companies mentioned all seem to remain committed to their ad-supported businesses, at some point they will need to make decisions based on business results and hopefully find a balance that can deliver on both their subscribers’ expectations as well as on the traditional advertising monetization of the content they produce.
Law: Not at all [concerned]. The content being delivered across streaming platforms is as premium as we find across the broader ecosystem. The challenge for us and our clients is finding the right balance between data and content to deliver an exceptional experience to consumers, and ultimately measuring the impact against business results. It is imperative that as viewership moves, our spend moves along with it.
Penski: Power is in consumers’ hands more than ever before — and prioritization of streaming services answers consumer demand for the ability to consume content anytime, anywhere. This does not equate to fewer opportunities to put clients’ messaging out, it simply gives way to new opportunities. Viewers want quality content and, just as importantly, quality advertising experiences. Creative quality and ‘fit for content’ experiences are going to be critical to success in an increasingly crossplatform marketplace. What’s most important is striking a balance between user experience and value to advertisers, which will be a continuous effort.
Schwartz: This is not a heavy concern. There is growing ad inventory in ad-supported streaming content and this provides us another way to engage brands with viewers — often with enhanced data about the audience we’re reaching. As more new streaming services are introduced and come online in the future, massive consumer defection from ad-supported content in favor of non-ad-supported content would create concern about our ability to reach certain audiences, especially more affluent ones. However, our access to premium ad-supported video content has only increased to this point.
B&C: Speaking of streaming, more viewing is taking place over the top and via connected TV. To what degree will these eyeballs be bought and sold in the upfront, and how will that affect where you put money? Will OTT eyeballs cost more, less or the same as traditional eyeballs?
Geraci: While I’m not going to make inferences on pricing in this forum, I can say that the majority of what we are doing in OTT begins with the content originator, and with OTT simply acting as a distribution platform where the price/value relationship is tied to that ad-supported content. In the larger sense, we continue to move toward a truly platform-agnostic approach to everything we do in the upfront marketplace and OTT is a component of this. The overarching expectation is that by adding OTT-specific apertures to a media mix, incremental reach is being delivered. That said, we do need to approach some of the players in this arena with caution, given their reluctance to share granular delivery detail.
Law: There is no doubt that money will continue to move to OTT and CTV channels and, yes, it will be part of the upfront marketplace. That being said, the evolution of how and where we spend our money is not about a single upfront transaction, but rather our ability to remain flexible all year. Viewing habits are changing more rapidly than a once-a-year upfront marketplace, so having the ability to be flexible with our partners is critical to success. When it comes to cost, we will pay what is ultimately defined as the right value to drive business. It is not about costing more or less!
Penski: I don’t see us looking at things as traditional versus nontraditional when it comes to eyeballs. At the end of the day, what we look for are the most effective and engaging impressions for our clients.
There is no doubt creation and distribution of content is being disrupted, lowering the cost of entry and enabling new, nontraditional players to compete. We’re seeing that both traditional TV networks and digital-first publishers are going direct to consumers via OTT offerings and we expect those [direct-to-consumer] OTT subscription numbers to climb in coming years. We’re also seeing [subscription video-on-demand platforms] unveiling new offerings to combat consumer fatigue around subscription options, as evidenced by Roku’s recent move to bundle subscriptions on its platform.
Schwartz: In thinking about this, start with the question, what is the strategic use of OTT? For some clients or campaign opportunities, it’s about greater personalization through addressability and targeting and/or the opportunity to interact on multiple platforms. Buying upfront is always a function of scarcity; buying upfront is valuable when inventory is scarce. Any price differential between linear and OTT is part of our negotiations. With our clients, we’ll review the opportunities to evaluate and determine value against their strategic communication objectives. Ultimately, the market always decides the right pricing.
B&C: How much of upfront spending will go towards data-based or audience buys? Is advanced TV advertising still an experiment or is it ready to go at scale now?
Geraci: Data-driven linear TV will continue to grow and has become a truly meaningful component of the media mix for many advertisers, but I’m not sure if there is a clear demarcation of when it will be ‘at scale.’
Law: We will continue to see dollars move towards audience-based buys, but similar to years prior, we have always used data to make the best decisions possible and maximize impact. The key change is that we continue to have more data to help us find the right audiences, we have more inventory to deliver that against and, ultimately, we have better data on the back end to prove out the delivery beyond just age and gender and in terms of business outcomes. Even though linear TV ratings are shrinking, we have tools that enable us to derive more value from our buys while expanding the definition of TV to include all video platforms.
Penski: This year, it seems we are getting towards a real inflection point for addressable dollars. We have always used data/audience-based buying for all our clients; we just transacted on a currency that did not reflect or guarantee this. This is one of the prevailing myths that using data-based buying is a new concept. Clearly, as we move toward 2020, there will continue to be more personalized advertising for marketers to address their consumers on a true one-to-one scale. The increases here will be higher than any other channel.
Marketers are hungry for new opportunities in the OTT space. There is a lot more inventory available, and we’re seeing that their willingness to test and learn has increased — there are big benefits to being ‘early adopters’ and testing and operationalizing the space is on the rise. The proliferation of advanced TV has encouraged broadcast and digital/programmatic teams to work together like never before, creating a more holistic way of buying across channels.
Schwartz: We believe that more and more buying will go beyond the traditional demographics. At GroupM, data has always been used in the negotiation, even if it wasn’t data that the seller was presenting to us. We performed our own analyses, and we’ve been doing data-enhanced buying for more than seven years. In our view, advanced TV advertising has been out of the experiment phase for a long time.
B&C: Ratings continue to fall. Prices (CPMs) continue to rise. How are clients reacting? Is traditional linear television still effective and worth buying?
Geraci: For linear TV in general, its effectiveness as a broad reach vehicle remains despite the continued fragmentation of audience. Making more precise use of it, including activation against addressable targets when appropriate, can ultimately reduce the out-of-pocket dollars allocated to linear and thus alleviate some of the pressure we currently see in this environment.
Law: Let’s be clear, TV works. People love TV, but how we define TV has changed, so the way we buy TV must change, too. No one likes to pay a higher price, and mitigating inflation is a critical part of our overall remit. We need to work with our media partners and clients to define success in today’s fragmented world and show value beyond a single legacy metric.
Penski: No client wants to pay more for less, but the upfront is still the best place to buy prime real estate. Based on prevailing models, clear metrics and a core place to reach audiences, traditional linear television clearly works and drives value.
Schwartz: No one is happy paying higher prices and receiving less value. We are always looking at opportunities to enhance our clients’ communications with innovative approaches that increase value for both our clients and the consumer audiences our partners build. Our recent success with Bravo’s Project Runway, Paramount, TRESemme and Maybelline is a great example.