NBCUniversal secured a whopping 10% increase in volume of advance advertising commitments for its coming programming season, the clearest signal yet that advertisers are moving money back into television after a long period of experimenting with digital and social media.
During a conference call with investors Wednesday, NBCU Chief Executive Steve Burke said the company enjoyed one of its strongest “upfront” markets in recent memory, with NBC nabbing a 10% increase in volume and the company’s cable networks securing a 5% increase in volume of advance ad commitments. During the upfront, U.S. TV networks try to sell the bulk of their ad inventory to Madison Avenue. Overall, NBCUniversal secured more than $6 billion in advance commitments, according to a person familiar with the situation.
In 2015, the company secured approximately $2.3 billion for its primetime entertainment schedule. Based on the figures Burke provided, NBC could have secured approximately $2.53 billion for shows including “The Voice,” “The Blacklist” and “Blindspot,” according to Variety estimates. The network’s volume rose 12% when sales of sports and late-night programming are included in the tally, according to a person familiar with the matter.
Under Comcast, NBCU has made a priority of trying to raise the prices it gets for advertising and retransmission to levels enjoyed by rivals like ABC, Fox and NBC, Burke said. When Comcast took majority ownership of the company in 2011, he said, the gap stood at about 20%. “We have closed the majority of that gap. The biggest progress we’ve made in a single upfront was the progress we just made.”
To get there, NBCU had to press hard against ad buyers. The company pushed for a 12.5% increase in the rate of reaching 1,000 viewers, a metric known as a CPM that is integral in these annual talks between Madison Avenue and TV networks. The move was an aggressive one, and the rates are belived to be higher than those sought by other networks. In 2015, NBC won CPM rates of only around 5%, reflecting a less robust market.
Indeed, NBC is the last of the big English-language broadcast networks to acknowledge completion of its upfront process. The company had been locked in tough negotiations with WPP’s GroupM, a large ad-buying firm that represents Unilever and American Express, among others, and which was holding fast against paying such rate increases. According to buyers, NBCU may have been willing to take narrower rate hikes in other parts of its portfolio, including cable and different broadcast dayparts, in exchange for the high primetime CPMs, The practice is one many of the networks employ.
NBCU was able to win strong increases in other parts of its portfolio, Burke said. The company said it won CPM increases of around 13% at USA; 12% on E!; and 10% on Bravo.
Burke said NBCUniversal networks sold between 75% and 80% of their available inventory, leaving the rest for what is known as TV’s “scatter” market, when ad time is purchased much closer to air date.
The executive credited NBCU’s strategy of emphasizing advertising packages across its holdings, rather than being content with just selling ads on NBC or a single cable network. “We put all of our channels together,” he explained. “Now, if you want to buy from any part of the company, we have a discussion about every part of the company.”
But he also suggested that advertisers are looking more fondly at TV than they have in some time. “I think big advertisers realize that digital is an interesting part of the mix, but if you have a major product launch, you really have to look at big events on broadcast and cable that can provide the kind of reach and depth” an advertiser might want.
Separately, Burke suggested NBCUniversal might take a more serious look at its portfolio of TV networks and cut back smaller outlets that do not have full distribution – particularly if more consumers opt for narrower “bundles” of channels through subscription video on demand. “There are just too many channels,” he noted. “As the discussions with multichannel video programming distributors gets more and more contentious, you want to make sure your big networks are fully supported, and you are more willing to allocate. You can take some of the programming and fees and ad sales and move them” to operations at stronger networks. Burke said he expected NBCU and other media companies to consider “trimming” as the years progressed and consumer habits change, noting the company had in the recent past shut down cable networks like Style and G4.