Haggling in the 2014 “upfront” market has yet to begin in earnest, and the reason isn’t hard to determine: Buyers and sellers are stuck on price.
With advertiser budgets expected to be down from last year, media buyers are pressing TV networks to accept a lower rate of increase in a key element of “upfront” negotiations, when TV networks try to sell the bulk of their ad inventory for the coming year. The measure, known as a CPM, expresses how much it costs to reach 1,000 viewers and is used as a way to examine the value of TV advertising.
According to executives on both sides of the table, advertisers and their representatives are pressing for TV networks to accept a lower rate of CPM increase, while the networks are pushing for CPM rates to stay on par with those of 2013 – or even move a little higher.
At issue in these talks is the way advertisers value what has been their go-to medium for decades. TV has long been Madison Avenue’s favorite way to talk to consumers, but the availability of cheaper streaming video via digital means has prompted advertiser eyes to wander. After notching sizable CPM gains in 2011 as the economy showed post-recession improvement, the networks now find themselves having to balance their need for ad revenue with their sponsors’ interest in testing new frontiers.
To be sure, there is some sense emerging that “upfront” talks may get into faster gear in the next few days to come. Already, according to one ad buying executive, anticipation is building that Fox may begin to start signing deals with some of the movie studios that make up one of its strongest categories of ad support. And some large cable players could be on the verge of doing business, according to people familiar with the pace of talks.
Yet others caution that advertisers are still registering what cash they are willing to spend in 2014 while networks continue to respond to calls for broader ad packages from clients – clear signs that not everyone on either side is ready to commence.
Advertisers seem to have gained the upper hand in recent “upfront” sessions. TV networks that pushed last year to stay even with or surpass 2012’s CPM hikes found their upfront process slowed. In 2013, ABC sought upfront deals that called for an average CPM hike of 7%-8%, compared with 6% to 8% in 2012, and was penalized for it, according to ad buyers with knowledge of the discussions.
Others willing to accept a lower rate of CPM increase found easier footing. Last year, CBS did deals with an average CPM rate increase of 7.5%, compared with 8%-9% in 2012; 13%-15% in 2011; and 9%-10% in 2010. Fox did deals in 2013 with an average CPM price increase of 5%-7% compared with 7%-9% in 2012; between 9.5% and 12% in 2011; and 8%-9% in 2010.
For its part, the CW did upfront deals in 2013 with an average CPM increase of between 5% and 6%, compared with the 5.5% to 6.5% it negotiated in 2012. In 2011, the CW did deals with CPMs rising on average 10%-12%, and in 2010, with an average of 7.5%.
The burden is on NBC to try to break through at the bargaining table. The network has newfound momentum thanks to the success of “The Blacklist,” “The Voice” and “Sunday Night Football,’ and Steve Burke, chief executive of corporate parent NBCUniversal, has made no secret of his desire for NBC to secure pricing more in line with those of rivals after the Peacock suffered through several years of significant ratings shortfalls. In 2013, NBC sought CPM increases of 7%-8% compared with 5%-7% in 2012. In 2011, NBC’s CPMs rose around 9%, and they rose around 7% in 2010.
A decline in the rate of increase in this year’s upfront would mark a protracted tough period for the broadcast outlets. For the past several years, they have faced steady competition from digital rivals as well as advertisers’ interest in investing advertising in social media, mobile devices and so-called second-screen behavior in which viewers turn from TV to tablets and back again.
TV still reaches the most consumers at any given point in time. But advertisers feel they can use cheaper forms of video to supplement their couch-potato activity. Whether they act on such impulses remains to be seen, but such sentiments will likely make this “upfront” one that moves in steady increments forward, rather than one that wraps in a few days’ time.