This year's upfrontfeels much different than the last couple. Scatter has been exceedingly hot and that’s boosted ad revenue for most of the programmers the last few quarters.
Second-quarter scatter has long been a bellwether for the upfront, but even during the fourth quarter and first quarter, scatter market volume and pricing have encouraged senior media executives such as CBS’ Leslie Moonves and Discovery’s David Zaslav to comment on how strong they expect pricing and volume to be in the upfront.
But the upfront is also being shaped, as usual, by additional factors. There’s been a perception that last year, marketers put a lot of money into digital, they didn’t get the returns they were expecting and many brought money back to TV.
At the same time, the media-buying world has been turned upside down by a continuous parade of big brands with billion-dollar budgets reviewing their account and switching agencies. Among the biggest companies conducting reviews were Procter & Gamble, Unilever, General Mills, Johnson & Johnson, BMW, Visa and Volkswagen.
While those accounts shifted, some buys might have been delayed, pushing money into scatter where prices were considerably higher. There could be a priority on getting money down in the upfront, if only to control costs.
There was also a consolidation at advertising agency holding company Publicis. After many years of having its big agencies—Starcom, Mediavest and Zenith—negotiate upfront deals separately, Publicis has formed the Publicis Media Exchange and will have media buying veteran (and B&C Hall of Famer) John Muszynski handling the negotiation for its biggest clients with the top networks.
In some ways, Publicis’ new approach resembles those of GroupM and Interpublic Group, which centralized their agencies’ upfront negotiations years ago.
Another change last year came when longtime Magna Global exec Todd Gordon left to join programmatic company Tube Mogul. He was replaced by David Cohen, who has been with Universal McCann.
Some network sales execs note that the increased concentration on the buy side reduces the bulk of the upfront to five agencies talking to a half-dozen media companies. In a year when there’s a buyers’ market, that could make life tough for the networks. But this year, when it looks like a sellers’ market, there’s not as much pressure.
To get a clearer picture of the forces facing the upfront, B&C business editor Jon Lafayette asked a series of questions to some of the most influential media buyers. Here are the edited responses of those who participated.
TV executives are unanimously talking about how hot the scatter market is and how that will translate into a strong upfront. Are you advising your clients to put more money into this upfront? And what pricing do you foresee and how can you moderate the increases?
David Cohen, Magna Global: We believe the scatter market strength has definitely been driven by the lack of supply due to ratings declines. In primetime alone, we have seen 2 years of ratings decline [-17%] against adult audiences. We’ve seen media partners come in and out of sale as they try to make advertisers good due to ratings shortfalls. Magna predicted this trend, as we saw clients requiring greater flexibility and holding out for the calendar year upfront and scatter markets. We believe that at the end of the year, spending will still be flat to only slightly up vs. a year ago.
These dynamics, coupled with the impending reduction of advertising loads (in cable) will lead to an inflationary upfront market. We are predicting high-single-digit increases, which is forcing a re-evaluation of other options for clients. With fully 30% of video consumption happening outside of linear television—over-the-top, subscription video-on-demand, online video—we believe the market is ripe for a significant share shift out of linear TV and into other video channels.
Chris Geraci, OMD: Our guidance, with regard to upfront budget levels and price projections, is client-specific, complex and proprietary. However, I can tell you that our approach to the upfront market is zero-based and primarily forward-looking. While a strong scatter market in one broadcast year may indeed have direct correlation to the marketplace dynamics of the preceding upfront, it does not automatically indicate strength in the approaching market. This is especially true in an environment where the landscape and the consideration set of video options are changing so rapidly.
Mike Law, Amplifi : Some things never change…during the pre upfront season the sales side has always talked about the strength of the market! The dynamics of the market are that supply on linear TV is shrinking and demand at this stage appears to be flat. This lends itself to an inflationary market. We need to be flexible with our dollars and think about where video supply exists across all screens to help mitigate inflation. We work with our clients to spend dollars when the time is right, be that upfront or scatter.
Are clients really moving money from digital back to TV? What digital video products provide an alternative to TV?
Cohen: We are not seeing a movement from digital budgets back to TV, in fact—for the first time ever—we are predicting that digital budgets will exceed television budgets in the U.S. Full-episode players, VOD, OTT, YouTube, Facebook and other high-quality video networks are viable alternatives to traditional TV.
Geraci: The question really shouldn’t be whether money is moving from digital ‘back to TV,’ but how much fluidity exists in the video marketplace with regard to delivery platforms. We continue to move toward a platform-neutral view of premium quality video content and don’t think we are alone in that view. That perspective, shared across the marketplace, encourages the movement of spending to the content and environment best suited to an advertiser’s message and communication strategy. We do have specific, proprietary standards for digital-based video that once met, can place it within the boundaries of premium video, which also includes television and cinema.
Law: There is a flow of dollars between TV and digital video happening, and just like with the mix of broadcast and cable budgets 20 years ago, clients are shifting dollars based on what their needs are and trying to find the right balance. We have to remember how new digital video is as a channel; therefore, it is natural to have a lot of movement within the space as we learn how to best maximize its potential.
On the whole, there is still a shift towards digital video—the underlying story is where those dollars are being spent outside of TV and that is where we are seeing more change. With the growth of mobile video, it is important to really understand what screen your ads are running on and how you best use that screen. Platforms that are truly built for video seem to be creating the most TV-like experience, but it is really about management of each screen to maximize its effectiveness.
There’s so much talk about data-driven ad products. How interested are you in buying TV based on data and how do you evaluate the different offerings from different media companies?
Cohen: Our Advanced TV business represents the fastest growing offering in our portfolio. We are very interested in utilizing our AMP data asset to think about buying audiences on television differently. While each of the large television players have rolled out their own custom data solutions and programmatic offerings, we prefer a single view across media partners when possible. We are very active in the market, testing and learning today, and anticipate this will continue into 2017 and beyond.
Geraci: The fact is, TV has always been purchased based on ‘data.’ While that has long meant a standardized metric, primarily based on age and sex demography, there are now ways to supplement TV audience measurements with enhanced, and often advertiser-specific, data. We are currently examining the offerings in the marketplace, and are certainly interested in bringing a deeper level of understanding, and more precise targeting of television audiences. However, media owner-based systems provide a better way to optimize only the spending against the assets within their respective stables. Ultimately, we look forward to a marketplace environment where open source platforms allow us to make the best decisions on our clients’ behalf, and based on the data most relevant to their specific goals.
Law: We have always used data to inform our buys, it just seems that now we have more data than ever and the ability to be much more granular with it, which means we need to be more organized in our approach. We want to use data to drive both efficiencies and effectiveness. Each product in the marketplace has its own strengths—scale, automation, flexibility—but the key for us is consistency. We want to define our target the same way across all channels in order to create a single benchmark for success.
Have the new Nielsen ratings affected the market? Will business continue to be conducted on C3 or C7 buys or is there some new metric being discussed?
Cohen: C7 deals have been happening for a couple of years now, and it really depends on the client’s business as to whether or not it makes sense for them. For some businesses that have time-sensitive messages, it will never make sense. However, for clients that have more flexibility, there may be a financial incentive to do so. The difference between C3 and C7 in primetime is still relatively small [5% or less]. What will be interesting is when Nielsen syndicates its view into playback that extends to day 35 as we’re likely to see a much bigger difference between C3 and C35. Of course, we are ultimately interested in more custom consumer targets and specific commercial ratings [vs. averages over a longer period of time]. We are pushing the industry in this direction.
Geraci: In terms of Nielsen Total Audience, there will not be business conducted with this data set for the 2016-17 upfront. The product is still in development and only participating media owners are seeing their own data at this point in time. Nielsen’s timetable has them releasing data for agencies and clients by the end of Q2 2016. There simply will not be enough time to understand and vet the data in advance of the negotiation window. The new Nielsen Sample Expansion data launched in January 2016 has not produced meaningful changes to the existing ratings. Most of the impact is felt in terms of the stability of the ratings. We are only seeing changes in the thousandths of a rating point range at a high level. While C3 will likely continue to be the primary currency for television, as it is the most scalable across the wide range of advertiser requirements, there continues to be strong rationale to consider the C7 metric for advertisers with less restrictive time constraints on their messaging.
Law: For now, the majority of all business will be based on C3 and C7 metrics. Both the Nielsen and comScore total audience products have promised to help us better understand the full picture in terms of viewership, but they aren’t ready for primetime as a marketplace currency. We will also look at other potential audience-based measurements either as currency or as an optimization layer, but overall currency will remain the same.
Will programmatic TV be a big factor in the 2016-17 season? Does automation create more work or less work for you?
Cohen: Programmatic TV will be a bigger factor in 2016-17 than it was last year but still represents a relatively small piece of the overall TV market. We are not seeing that programmatic TV is reducing the amount of work needed to deliver solutions for clients today. We are absolutely optimistic that eventually, technology and data solutions will make the automation promise a reality in both the digital and television markets.
Geraci: Perhaps the most overused terminology in all of media, ‘programmatic’ in a broad sense will be a factor in the 2016-17 TV marketplace. While we will not see widespread adoption of fully automated transactions of commercial inventory on a national level, more and better technology with regard to evaluation, optimization and maintenance is on the horizon and certainly a step in the right direction. Until TV-based media owners put significant portions of quality, national inventory into a sales systems with pricing reflective of demand [biddable format], we don’t see the full realization of programmatic truly taking hold in the national television marketplace.
Law: Using data and automation to power our TV buys will continue to play a role in our approach to the marketplace. We are taking the time do this right. As we look at what our clients are trying to accomplish, we will work with them to determine if transacting through a programmatic solution offers the best chance for a successful campaign.