TV Analysis: Treat the numbers as faint economic indicators, not cold, hard cash
By my estimation, this is the fourth or fifth time in my career I’ve written a piece pointing out how the numbers that emerge around TV’s annual “upfront” season are not to be trusted. Those may be the only reliable figures in this entire article.
The “upfront,” that process through which Big TV tries to sell the bulk of its ad inventory for the coming season, is closely scrutinized by investors and the media. And why not? At least $9 billion in ad money is supposedly up for grabs in broadcast prime-time alone as Coca-Cola, Procter & Gamble and AT&T place their bets on TV networks, new programs and new strategies.
But the numbers that emerge each year around this much-ballyhooed process are tough to stand on their feet. CBS, Fox and the rest deal with umpteen sets of ad-buying shops and sponsors, so no one can really confirm whether the numbers that leak out each year are bona fide. Only the networks themselves know what they take in and there’s little reason for them to discuss it in on-the-record fashion (more on that later).
Take Tuesday’s report that NBC had wrapped its sales after a prolonged effort (in recent years, most broadcast networks have completed the process by mid-to-late June). Multiple accounts stated NBC had secured approximately $2.1 billion in advance ad commitments for its prime time schedule. If you compare that figure to last year’s NBC upfront totals – $1.72 billion to $1.74 billion – the Peacock would appear to be enjoying an increase in volume of as much as 19% or 20%.
The results are impressive – a greater volume of advertising in a difficult market – and there doesn’t seem to be any question the Peacock has a little new wind under its wings. And yet, while speaking to investors Wednesday in a conference call to discuss NBCU parent company Comcast’s second-quarter earnings, executives said the network generated a 13% increase in upfront sales, excluding ad inventory sold around the next broadcast of the Olympics. If that’s the case, then NBC could have sold between $1.94 billion and $1.97 billion.
Which numbers should be used?
The mere fact the question has to be asked points to the flaws of attempting to bring light to a shadowy process. The numbers that are leaked each year can mean whatever the networks want them to mean. Do they represent advertising promises secured for just prime time? Do they include ads sold for sports events that run in prime time? Who would know? For many years, ABC would attempt to add to its totals by including ad time sold for the Oscars and “Monday Night Football” before it moved to ESPN. And NBC’s numbers this year include football sales, which in the past have accounted for as much as $100 million.
Someone’s serving up a big pie, but few can really be certain of the ingredients.
Try to track upfront totals from year to year and you’ll find it exhausting. Each news outlet has its own history covering the annual haggle, and each has its own totals upon which to base the following year’s results. Some publications had NBC securing $1.8 billion in 2012 upfront volume. When I covered the process for Advertising Age last year, I had them at $1.72 billion to $1.74 billion. Who should you believe?
In the end, it doesn’t matter. Upfront volume figures don’t come close to representing money in the bank. As part of a process that goes back past the days of “Bonanza” and “The Beverly Hillbillies,” advertisers make a commitment in May or June to buy a certain amount of ad inventory come September, holiday time or at some moment in the spring. But those commitments can be yanked or reshaped depending on how shows move around on a particular network’s schedule, or on the advertiser’s whim at several points during the length of the TV season.
“The process is a reservation system, not an actual handing over of checks,” said media analyst Michael Nathanson, formerly of Nomura Securities, in a June research note. “Whatever commitments are made can be changed, to a degree, at a later date.” Indeed, many Wall Street analysts have found little correlation between the numbers that emerge in May and June and the revenue figures ABC and its brethren book at the end of the fiscal year. Nathanson referred to the process of discovering upfront numbers as “garbage in, garbage out.”
The TV networks clearly like the fog. There’s little attempt to get the same figure published by every media outlet covering the process. And there’s rarely ever a document issued by the publicly traded parent companies who own the TV outlets (in an event that has yet to be duplicated, ABC in 2005 put an upfront number in a press release and parent Disney filed it with the Securities and Exchange Commission). With greater confusion comes less accountability and one less worry for TV outlets who these days have so much else on their plates – ratings issues and technology shifts among them.
There’s no reason to clear things up. No TV or media executive can look good promoting numbers that ultimately have little bearing on verifiable finances.
That’s why the upfront is best viewed as a loose referendum on advertisers’ interest in the boob-tube. The numbers that bubble up each year are directional indicators, not cold cash in a corporate bank account. Though there are some faint signals to be gleaned about the media economy, the math being used in the upfront is fuzzy at best.