Upfronts: What You Need To Know About 2014’s Ad Haggle

The business behind the glitz includes an aggressive Peacock and an Eye on football

TV Upfronts
Mario Wagner

The fancy drinks and celebrity shout-outs don’t mean anything.

Next week, thousands of advertisers, media executives, actors, agents and producers will converge on New York City as the biggest TV outlets in the nation unveil their fall schedules to the world. There will be dazzling video displays and piles of free food. And while these glitzy presentations are supposed to mark the start of the so-called “upfront” market, when Big TV tries to sell the bulk of its advertising to Madison Avenue, the real wheeling and dealing won’t begin in earnest, most likely, until well after the caterers at Thursday’s NBCUniversal cable presentation break down the desert tray.

To be sure, upfront haggling can occasionally start early. Viacom has for the past few years opened its teller window while the broadcasters were still showing sizzle reels, all part of an effort to steal ad commitments from others by agreeing to lower-than-expected price increases. And ABC in 2005 surprised its rivals by securing early advance ad orders for “Desperate Housewives,” “Lost” and “Grey’s Anatomy” while others were just getting started.

Generally speaking, however, the programs and press events serve as prelude for the real show: The horse-trading that results in Madison Avenue committing between $8 billion and $9 billion to broadcast primetime and millions more to daytime, latenight, cable and Spanish-language TV. Word leaks out that someone has started to write business and the numbers that spray out in the press are followed closely even as players roll their eyes and wonder how fuzzy the math has become.

This year’s session looks to be as much fun as those of 2013 and 2012, which is to say not very. For three consecutive cycles now, the volume of ad commitments secured by the five English-language broadcast networks has been flat to down, with last year’s totals ranging between $8.6 billion and $9.2 billion. And while the economy continues to improve in the wake of the 2009 recession, a host of new-tech video alternatives gives potential TV sponsors a little more leverage in the game.

So help yourself to another plate of Fox’s sushi or CBS’ sliders. You’ll need your strength to follow the financial back-and-forth sure to follow. Below, a few important signposts to consider as you try to figure out where the ad money behind your favorite TV shows is moving for the 2014-2015 season:

Proud Peacock: Expect NBC to chirp about its ratings surge among viewers between 18 and 49, the kind advertisers say they covet. For the first time in a decade, NBC is first in this crucial ranking and the company’s parent, NBCUniversal is likely to use its status to push for hikes in the cost of reaching 1,000 viewers, a critical measure called a CPM that is the bedrock measure for upfront haggling. With its ratings in free fall for the last several years, NBC has not been able to keep up with its rivals in this area, and it likely sees its success with”The Voice,” “Sunday Night Football” and “The Blacklist:” as a time to even up the playing field – and get clients to buy broader ad packages across siblings like USA, E! and Fandango.

If only it were so easy. Advertisers will likely push back on paying big hikes, because doing so will give the other networks impetus to seek large gains as well. Besides, NBC’s victory is lopsided. All its hits air in the first half of the week while its Thursday night – an important one for marketers who want to drive weekend spending habits – remains largely fallow.

Takeaway: NBCU likely deserves better consideration from its advertiser set, but if it holds out too long for the increases it wants, it may give CBS, Fox and others a chance to steal business early in the process.

Thursday Night Scrimmage: By adding eight NFL games to its Thursday-night lineup, CBS suddenly has a lot more viewers to sell on a day of the week movie studios and retailers have long viewed as must-have when it comes to advertising. The network shelled out what is estimated to be $250 million to $300 million for the deal and likely expects to reap the outsize sums advertisers pay for a 30-second spot in NBC’s Sunday NFL offerings.

Will all the Eye’s clients feel the same way? Some advertisers may balk at paying hundreds of thousands more for a massive NFL crowd when they were already forking over big bucks for the people who watch “The Big Bang Theory.” One chief marketing officer who has explored the CBS football option is taking a wait-and-see attitude. This executive said he is not convinced Thursday is as great a day for football as Sunday or Monday (when ESPN airs its games). But that could be aggressive talk for the bargaining table.

Takeaway: With programming that lures massive live audiences so hard to find in today’s era of timeshifting and video on demand, CBS’ Thursday night football can’t be ignored. But it can be too pricey for some wallets.

Ad Surge or Slump?: A number of ad categories have been powering their way through the last several quarters. The question for upfront watchers is whether that pace can continue.

Buyers and sellers both say they have been impressed by the rate of ad spend coming from automobile manufacturers, retailers, consumer electronics giants and financial-services firms. But they are not convinced their rate of ad spend can maintain for another year.

Among the companies suggesting in recent weeks they’d like to tamp down marketing outlays: Dr Pepper/Snapple Group. Procter & Gamble,and Hershey – suggesting that the consumer packaged goods category, one of TV’s most steadfast, may not be as robust in the upfront market. General Motors in April reported a lousy first quarter in which profit tumbled 88%, owing to expenses for recalls.

Other categories look healthy: The movie business is seen having more releases in months to come, while Sprint’s recent return to a big ad campaign has TV executives hoping for continued spend among Verizon. T-Mobile and AT&T. The thought that Apple could launch something new in months to come prompts hope for continued outlays from rivals like Samsung.

TV networks must hope for a year stocked with new-car launches and continued battles among Apple and Samsung.

Takeaway: At the heart of this all is the American consumer. If advertisers feel shoppers have economic wind at their backs, they’ll invest more heavily in TV. But if they think customers are still feeling pinched and cautious, they’ll treat TV the same way.