Upfronts: TV Advertisers Demand Changes to the Status Quo

Joe Abruzzese has been selling TV advertising for decades, but he’s not about to let old habits get in the way of potential new money.

This is how advertising on TV was once bought for nearly every marketer from General Motors to General Mills: You figured out how many viewer “eyeballs” you needed to get your ad in front of, you examined ratings projections, and you agreed to have the ads run a certain number of times on a specific network that would guarantee the number of impressions you sought. There was rarely a need to make significant changes later. “You bought Animal Planet, and you got it,” explains Abruzzese, the president of advertising sales for Discovery Communications.

In 2015, however, advertisers are demanding huge changes to the status quo — and Abruzzese knows he needs to pay attention. Marketers want the freedom to change the way they deploy their messages, sometimes with just a few days’ notice. Thanks to rich new veins of consumer data — information gleaned from big-box retailer loyalty cards, or viewership-pattern data lifted from TV set-top boxes — marketers have a better understanding of their real customer. It’s not the guy watching “Deadliest Catch” who might be interested in a car sometime in the next three years who is most appealing, but rather the pregnant 26-year-old woman looking to buy an SUV for family travel. Maybe that means taking money that was earmarked for Animal Planet and moving it over to sister outlet TLC or Discovery Life. Advertisers “may want to move things around,” Abruzzese says. “We need to give them that flexibility.”

Those demands could bring a new wrinkle to one of the foundation elements of the U.S. television business. TV has for decades used its annual spring upfront — when TV networks try to sell the bulk of their ad inventory for the coming programming season — to secure billions of dollars in advance commitments. The upfront sales process was created to help capture new advertising from automakers, which would roll out new models in September. The formula dates from the era when Detroit was king when it came to car sales and ABC, CBS and NBC were essentially the only game in town for national TV advertisers. The upfront enshrined the tradition of advertisers paying a premium to ensure that their ads would be wrapped around big hits like “Happy Days,” “Cheers,” “Dallas” or “American Idol.” Big sales ensue.

Now, advertisers want to treat TV as if it were the Internet. When buying ads online, a marketer can act with finesse. An ad can be served based on a user’s surfing behavior or IP address. With more people using digital streaming to keep up with their favorite TV dramas and comedies, Madison Avenue is placing more pressure on the nation’s biggest media companies to provide similar opportunities for even big pieces of mass entertainment. “They really do have a hunger for more precise targeting,” notes Jo Ann Ross, president of ad sales for CBS.

To meet that need, TV networks are stitching together a new bag of tricks. The practice of shoving cups of Coke, Subway sandwiches and Samsung devices into TV shows is giving way to a new “real time” technique of attaching ads to a show that nod to current events or even the plots and elements of the program as it unspools. As more consumers use DVR playback and video-on-demand to watch programs, the networks are burnishing “dynamic ad insertion” that will let advertisers “swap’” a new ad for an old one, so viewers get news about next weekend’s holiday sale instead of last month’s discount hamburger offer. And all of TV’s major players are rushing to offer particular sets of data showing how, when and where the most likely purchasers of everything from Greek yogurt to fast food might tune in, or how well consumers recalled and remembered the commercials they saw.

The technology involved in enabling such ad-swapping, viewership tracking and demographic data mining is dizzying — and a red-hot growth sector for media. Everybody, it seems, wants to crack the code of tracking viewership of shows (and the ads that fund them) across disparate platforms.

Many media companies are also working to offer new kinds of commercials to viewers who watch shows in new ways. 21st Century Fox recently bought TrueX, a company that makes a new sort of commercial for the new ways people view TV shows — at a time of their own choosing and with the ability to interact. Rather than running an ad and hoping a viewer watches it, the company asks viewers if they might consent to watch something in exchange for their time. “You have a goal to reach these audiences, and on each platform we will have the right ads for that consumer,” vows Joe Marchese, president of advanced advertising products at Fox Networks Group. The idea that one-size-fits-all advertising doesn’t work for every kind of marketer is relatively new in the TV business. After all, Madison Avenue will still fork over the dough for big crowd-pleasers on the order of the annual broadcast of the Super Bowl, AMC’s “Walking Dead” or CBS’ “The Big Bang Theory.”

But TV networks are showing more willingness to deviate from the norm. Why? TV (or “video,” as many ad buyers now prefer to call it) viewing has splintered beyond repair. For every single favorite program — think NBC’s “The Blacklist” — there are umpteen ways to view it. One set of fans might watch the antics of James Spader’s “Red” Reddington on demand a week after an episode’s air date via an iPad, while another might play it back on a DVR two hours after it runs. Of course, a good portion of the audience likely watches it live. Marketers are realizing that each sliver of audience has its own behaviors and demographics. “It’s more important that the message is timely and targeted to the individual, not necessarily the day the show originally aired,” says Marchese.

With that complexity rising, advertisers are holding their purse strings tighter, releasing ad cash closer to the time it is needed instead of buying it in advance. Meanwhile, they are earmarking more funds for competing forms of video. Advertisers committed between $8.17 billion and $8.94 billion for the 2014-2015 primetime slate on broadcast, according to Variety estimates, compared with between $8.6 billion and $9.2 billion in 2013. They put down $9.6 billion in advance advertising commitments for cable, down about 6% (or $577 million), from the $10.2 billion committed the year before, according to the Cabletelevision Advertising Bureau.

Trends have not improved, says Rino Scanzoni, chief investment officer of GroupM, the WPP-owned media-buying firm that plays a large role in the annual television-ad haggle.

“The marketplace isn’t going to feel this urgency to spend all the money” in advance, he says. “I would not be surprised if this was a down year.”

To be sure, a yen for the new doesn’t mean the old is about to vanish. As CBS’ Ross points out, the splintering of the audience leaves marketers trying to put together one kind of deal here, and another kind of deal there. “There isn’t one media analytic tool that will serve all masters,” she says, “and that’s why the transactional part of the upfront will most likely” be based on current standards. Most deals are built on a measure known as “C3,” or a rating that looks at the audience for commercial breaks up to three days after a program airs. Approximately 30% to 40% are being done on another measure called “C7,” says Scanzoni, that examines commercial viewership up to a week after content debuts in linear fashion.

Battleships turn gradually, not on a dime. And this year’s upfront will continue to ring with the cries of ad buyers attempting to limit price increases, and TV ad-sales chiefs vowing that TV is worth more than other forms of media.

Beneath the melee, however, the battlefield and the weapons of choice are shifting rapidly. “The best solutions will bring the advertiser undivided attention,” says Marchese.

With as much as $20 billion up for grabs in the coming weeks, TV networks can’t afford to let old habits die hard.

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