TV Upfronts
Mario Wagner

Madison Avenue and TV appear to be entering into an on-again off-again relationship.

Advertisers still want to use TV, but they are trying to be coy about their intentions. Media-buying executives estimate the volume of ad commitments made to Fox, NBC, CBS, the CW and ABC declined during TV’s recently completed upfront market, when big advertisers earmark dollars for the networks’ new fall programming. Of the five English-language broadcast networks, only CW secured an increase, according to buying executives.

Based on guidance from buyers, Variety estimates the five networks secured between $8.02 billion and $8.69 billion for their primetime entertainment schedules, compared with between $8.17 billion and $8.94 billion for the 2014-15 season. The performance marks the third consecutive upfront in which volume committed for primetime has fallen. If trends continue, ad commitments could dip below the $8 billion mark next year – the first time they would do so since recession-wracked 2009:

2010: $8.1B to $8.7B

2011:  $8.8B to $9.3B

2012:  $8.8B to $9.3B

2013:  $8.6B to $9.2B

2014: $8.17B to $8.94B

2015: $8.02B to $8.69B

Source: Variety estimates

The figures are to be taken with a healthy dose of skepticism. The networks rarely offer hard figures about the commitments they secured and how those compare to past performance. Making things more complicated, the deals being done during this annual process can be tweaked over time. Ad commitments aren’t a substitute for advertiser cash. At best, the TV upfront is a directional proxy for how appealing TV is to advertisers as a promotional medium.

The 2015 market started off slow and never really gained the momentum it had in an earlier time. In 2003, advertisers managed to assign around $9.3 billion in upfront commitments to six broadcast networks (UPN and the WB had yet to merge into the CW) before the end of May. In 2015, the process closed in early August, when Disney executives noted during a conference call with investors that ABC had pushed for price increases even as advertisers held back dollars.

TV remains filled with commercials — indeed, some Wall Street analysts believe there are more ads on the air than ever, as TV networks run the same ones again and again in order to meet viewership guarantees while the consumer’s gaze migrates to the screens of mobile devices. And some TV ads continue to make a significant impression on the buying public. Consider the shock created earlier this year when General Motors’ Chevrolet ran an ad just minutes before the kickoff of Super Bowl XLIX on NBC that made it seem as if the live feed of the sporting event blacked out.

Advertisers, however, have new distractions. A number of major media-buying accounts were put up for review just before the upfront got under way in May and June. More types of media, ranging from video-on-demand playback to mobile screen, are available and competing for the ad dollars once allocated specifically for TV. And at a time when marketers are trying to create experiences for consumers to which their ads can be attached in relevant fashion — think of a party weekend sponsored by Budweiser or a charitable event — advertisers would prefer to spend against specific initiatives as needed rather than committing millions of dollars in May for a program that may or may not run next March.

The TV networks will rely on “scatter” advertising — commercial inventory purchased close to air date — to get them through the cycle. “People are just waiting longer to make their buying choices,” said Leslie Moonves, chief executive of CBS Corp., during a recent call with analysts and investors. “But right now, we’re seeing the scatter ad market accelerate rapidly in the third quarter with double-digit gains in pricing. We see that extending beyond Q3 and are confident that the strength and stability of our lineup will lead to increases throughout the season.”

Ad-buying executives say ABC held out the longest for what would have been top-of-the-market price increases, and may have sacrificed volume as a result. ABC pressed for increases in the rate of reaching 1,000 viewers — a measure known as a CPM that is integral to these annual discussions — of just under 6%. But some advertisers balked at paying such an increase in a buyers’ market, and moved elsewhere.  According to some estimates, ABC’s primetime volume could have declined by as much as 6% to 8% to between $1.67 billion and $1.88 billion.

ABC followed a path it has carved for the last few years: trying to maintain pricing while relying more heavily on “scatter.” In 2014 the network pressed for CPM hikes of between 4% and 5%, and secured between $1.8 billion and $2 billion in ad commitments.

CBS may have benefited from ABC’s stance. The network may have taken some of the dollars ABC might have received by offering more favorable pricing terms. CBS volume is estimated by ad buyers to have fallen between 6% and 8% in 2015 to between $2.19 billion and $2.48 billion.  In 2014 CBS secured commitments estimated to be between $2.38 billion and $2.64 billion. CBS sought CPM increases of between 3% and 5%, according to people familiar with the situation, compared with 6% in 2014.

NBC secured the same amount of ad commitments for its primetime entertainment offerings as it did last year, according to a person familiar with the situation. Excluding primetime sports like “Sunday Night Football,” the network likely secured around $2.3 billion for primetime and latenight, though some ad buyers have speculated volume may have declined. NBC sought CPM hikes of around 5%, compared with increases of between 7.5% and 8% in 2014.

Fox saw volume decline in this year’s upfront. Fox secured commitments totaling between $1.43 billion and $1.56 billion this year, according to a person familiar with the matter, compared with between $1.51 billion and $1.61 billion in 2014. The network agreed to roll back CPM rates by as much as 2% from 2014, according to media buyers, a function of Fox having some of the highest costs of reaching 1,000 viewers in the business after enjoying viewership upticks in recent years due to the rise of “American Idol.” In 2014 Fox sought CPM increases of between 2.5% and 3.5%.

The only network to truly buck the trend was the CW. Thanks to a radical programming overhaul that has taken place in recent seasons — less emphasis on teen-girl adventures, more reliance on super heroes and sci-fi — the network has broadened its audience, and advertisers proved willing to give it more money in exchange. CW secured ad commitments totaling between $425.6 million and $458.9 million, according to Variety estimates, compared with between $380 million and $399 million in 2014. The network was also able to secure a CPM increase of more than 4%, compared with price hikes of between 3% and 4% last year.

Madison Avenue still needs TV, but the two parties seem to be interested in seeing other people. Rather than plaster an ad campaign across various networks and hope for the best, advertisers are working more precisely, identifying the demographics of the people who watch particular shows and events and trying to make a direct appeal to those specific customers.

When TV brings in the big audiences, advertisers cheer. Going forward, they are more likely to attempt to hitch themselves to the niche communities that grow around everything from CBS’ new “Supergirl” drama” to ABC’s “Muppets,” and that will give rise to permanent changes in the way they support the medium.

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