Upfront 2015: Time May Be Running

Analysis: With advertisers drilling down for smaller groups of consumers, Madison Avenue could see less need for TV's big arena

Madison Avenue and the nation’s biggest media companies are about to go to war over something that may not exist in its current form just a year from now.

Advertisers tend to commit between $8 billion and $9 billion to broadcast primetime TV advertising, and another $9 billion to $10 billion every year as part of a grueling haggle known as the “upfront.” They try to lock up the best TV has to offer, which for decades has been commercial space attached to programs that run between 8 p.m. and 11 p.m. That three-hour block, commonly known as primetime, has long been recognized as the best opportunity to reach the most viewers. Marketers may well submit themselves to the same process in 2015.

What happens next year, however, is anyone’s guess.

Senior executives at both TV networks and some of the industry’s biggest ad-buying firms see a time looming when primetime TV is no longer viewed as TV’s most desirable real estate. Instead, these executives say, a new flow of consumer data and a dizzying array of video-viewing behaviors will prompt advertisers to carve out ad plans that put their pitches in front of very specific groups of people: first-time car buyers, for example, or longtime orange-soda drinkers, or expectant mothers. Chasing those targets, rather than viewers of big-ticket shows like “The Voice” and “Scandal,” could well transform primetime into a cultural artifact like Rubik’s Cube or Donkey Kong – something that was certainly fun while it lasted, but is no longer of the moment.

Advertisers and TV networks have long talked about Nielsen ratings guarantees and a pricing metric known as a CPM (a measure of the cost of reaching 1,000 viewers) as part of the upfront, where U.S. TV networks try to sell the bulk of their ad inventory for the coming season. Now, “technology is pushing that to the back burner,” says one media-buying executive. If advertisers are more interested in capturing very select kinds of audience, the buyer says, they will be less concerned about what time a show comes on the air, and more interested in how and when the viewers they desire more choose to watch it

This emerging attitude adds a new wrinkle to the annual TV-advertising haggle, which in 2014 came under severe pressure from new forms of digital and social media. 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 earmarked $9.6 billion in advance advertising commitments for cable, down about 6% or about $577 million from the $10.2 billion committed the year before, according to the Cabletelevision Advertising Bureau.

In 2015, TV networks ought to have some wind at their backs: Oil prices are low, giving consumers more discretionary income. The jobless rate has fallen to new lows. The Nasdaq briefly rose above 5000. And yet, evidence that TV-as-usual can no longer continue is stacking up. For the first nine weeks of 2015, total live-plus-same-day ratings were down 10.7% across broadcast and cable, according to Cowen & Co, analyst Doug Creutz, while viewership by people in the advertiser-coveted 18-49 audience fell 13.3%.

Meantime, ad-revenue growth is seen falling at the four big broadcast networks in 2015, according to research from Michael Nathanson, an independent media-industry analyst, and rising just 2.5% at U.S. cable outlets. “Money is shifting out of TV budgets towards online video, search, mobile and display,” he wrote in a March 4 research note. “It’s now a foregone conclusion that the U.S. national TV market has decelerated sequentially and precipitously over the past year. With 2014 now behind us, the question turns to how quickly digital will take share from TV and, more immediately, how will the weak second half of 2014 impact the development of the 2015 upfront.”

Big Media is already in shift. At 21st Century Fox, executives recently combined the ad-sales forces behind the broadcast-based Fox and cable siblings like FX. Viacom earlier this month consolidated all the advertising outreach for its cable networks save BET under a single executive, Jeff Lucas. Time Warner’s Turner once sold CNN separately from TNT and TNT separately from Cartoon Network. Now it, too, has a single person – a former senior ad buyer, Donna Speciale – supervising its entire effort. NBCUniversal and ESPN have been early backers of the technique.

The moves come because the way TV advertising works is in complete flux. Not too long ago, a big-spending marketer like Coca-Cola or Procter & Gamble might have been happy to cobble together a schedule on, say, ABC, that the network guaranteed would make several million viewer impressions across top shows like “Desperate Housewives” “Dancing With the Stars” and “Grey’s Anatomy.” Now, thanks to the rise of technology that allows viewers to watch as they want, the ability to generate mass tune-in – and mass reach for advertisers – is severely crimped. To be sure, the networks’ shows still have very passionate fanbases, but getting people to watch in a way that makes financial sense for a sponsor like Burger King or L’Oreal is getting more frustrating.

“Things like packaging inventory and audiences using ratings points – that’s a mechanism that doesn’t align very well with a world where more and more opportunities and choice are available,” said Tim Hanlon, a longtime student of the future of TV advertising and founder and chief executive of Vertere Group, a Chicago-based media-industry consultant.

Media companies will have to pitch themselves as being able to help advertisers chase after narrower groups. By placing all their media under one roof, as it were, companies like Turner, Fox and NBCU can pick out the strands of audience the advertisers most want, and not force them to buy ads that may be seen by millions of people, but only a tiny number of the customers the advertiser truly desires.

In this new market, selling ratings guarantees won’t always work. “We have to be able to process the information that we receive from our customers and package them into ideas,” said Bruce Lefkowitz, who was recently named executive vice president of advertising at Fox Networks Group, in a January interview. Already, NBCUniversal’s CNBC has announced it will no longer rely on Nielsen data for its daytime business-news programming, starting in the fourth quarter of 2015. Sponsors will have to partner with the network based on a new source of data that looks more closely at CNBC’s core audience of financial professionals.

In some ways, these maneuvers sound a lot like what new TV outlets do when they’re just trying to get started. When audiences are more niche, there’s freedom to experiment. Consider the 2005 case of Viacom’s VH1 Classic. At the time, the network was firmly in start-up mode and was not measured publicly by Nielsen. To get ads, executives allowed advertisers to do things that played directly to the outlet’s audience of aging rock fans. During a show that featured both new and old videos from rock artists, Procter & Gamble ran current and classic ads for Pepto-Bismol. Matzo-maker Manischewitz sponsored “Matzo & Metal,” a one-time-only special that depicted rock stars sitting around a Seder table with traditional holiday foods (some made by the advertiser).

To generate more of the same, a passel of media companies has already come out with a new sales pitch that contains more wonk than glitz: We can certainly talk about our programs, but just look at the data we have at our fingertips. Yes, there are sitcoms and dramas, but how about these analytics? And can’t you use them to augment your TV advertising with new stuff that plays directly to the types of people tuning in?

Time Warner’s Turner in January offered new technology that would let advertisers forecast sales results based on how they deploy advertising on the company’s various outlets. NBCUniversal pledged in January to bust out from set-top boxes and other sources to identify the best inventory across the company’s cable and TV networks for specific advertising categories. Scripps Networks earlier this month said it would use set-top box data and consumer-purchase patterns from the Nielsen Catalina Solutions unit of Nielsen that can suggest what shows are most likely to draw potential buyers of, say, Greek yogurt.

The yogurt answer says a lot about what type of TV will be most important in the future. Scripps found that weekend mornings on Food Network represented the place where the most people interested in Greek yogurt might be found. Not weeknights.

The exception to the rule, say media executives, will be live “event” programming – live sports and spectacles that can include everything from the Super Bowl to a three-hour 40th anniversary celebration for “Saturday Night Live.” Any type of show that can get people to watch all at once, at the time it airs in traditional fashion, will be worth more in Madison Avenue’s eyes.

“It’s clear that a live ‘American Idol’ is going to be more valuable” than a typical sitcom or drama, said Hanlon, because the latter are “more subject to time shifting and delayed viewing.”

In the new TV business, primetime might be any time. And maybe a network can convince an advertiser to pay a premium for helping to locate that best moment. Anyone who thinks a show airing a 9 p.m. on a Thursday night automatically warrants TV’s best prices needs to sift through the same data advertisers have started to use in greater abundance.

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