Don’t be dazzled by the shrimp.
Cold seafood cocktails and hot new TV shows are the order of next week’s annual “upfront” presentations, when TV giants like CBS and Fox unveil their new fall and spring schedules. If you’re going, you’re likely to hear endless tributes to “Thursday Night Football” from NBC and CBS; all about the return of MacGyver; and a few harsh words from ABC’s Jimmy Kimmel about the state of the media business.
Behind all the glitz and glamour is serious business: Comcast, Time Warner, Walt Disney, CBS, Univision and 21st Century Fox are all pushing to nab more than their fair share of at least $8 billion in advance ad commitments for primetime television (and Viacom, Discovery, Scripps, AMC Networks and a bunch of others want some of that plus whatever Madison Avenue will earmark for cable this year).
The networks have reason to party like its 2011 – the last time the volume of advance ad commitments increased over the previous year. Since that time, the networks have had to bite their hands as digital rivals ate their lunch, with some amount of ad volume migrating over to YouTube, Twitter, Hulu, and the rest.
In 2016, however, digital media is maturing and TV looks ready to pounce. Advertisers are sick of paying for “traffic” jimmied by click tricks and pre-roll ads no one watches. They worry ad blocking software might do for the desktop and smartphone what the DVR did to TV. And they notice that companies once thought of as old-school – like Fox or NBCUniversal – are suddenly getting more digitally savvy, all the while maintaining a better quality of video content. As that dynamic comes to bear, Madison Avenue has increased its spending on national TV – about 5% to 6% in the first quarter and 7% in the fourth quarter of 2015, according to data from Pivotal Research analyst Brian Wieser.
With all that in mind, the big showcases and spotlights ready to launch next week are merely prelude to a bigger show: weeks of horse-trading between TV networks and a phalanx of media buyers representing everyone from Apple to Zyrtec. Word will eventually leak that someone has started to write business and a stream of CPM figures and fuzzy math with ensue.
Help yourself to another of Fox’s sushi platters or try to figure out whether you’re on the list for ABC’s private party for top clients. Meantime, here’s a list of some of the major dynamics taking place behind the scenes of the 2016 upfront marketplace:
This market should move quickly… For months, media companies have crowed about “scatter” advertising, or commercial inventory purchased closer to air date. Why? Prices have risen over what was paid in last year’s upfront by double-digit percentage ranges. When that happens, Madison Avenue typically banks on the upfront, hoping to reserve high-quality ad time at a set cost before everything goes up again.
Clearly some TV executives feel wind at their backs. When asked recently if he could score double-digit increases in the cost of reaching 1,000 viewers (a bedrock element of this annual TV-industry haggle known as a CPM), CBS CEO Leslie Moonves was cool, calm and collected: “Yes, I do,” he replied – even though the networks haven’t scored those kinds of gains in years.
…unless it doesn’t… Hold on there, chief. Senior ad-buying executives insist their clients will not pay CPM increases of 10 % or more – meaning that TV-ad sales folks might find their ambitions capped at 9%, or perhaps 9.5%. “No one wants to bite at paying a double digit,” said one media buyer. “High CPMs are not necessarily double digits.” Madison Avenue knows one reason CPMs are rising is because TV suffers from dwindling audiences – fewer people watching means it costs more to reach 1,000 of them. Digital media, these buyers argue, still have a compelling offer so it behooves TV networks to stay competitive. If the cost of doing business is too high, buyers suggest they will look elsewhere.
TV and digital are no longer two separate things… TV in one corner, and digital-video in the other. For years, it has always been thus. In 2016, there is less distinction between online video purveyors like AOL, Yahoo and YouTube and their broadcast counterparts. Simply put, the boundaries are less defined. NBC has a SVOD comedy service called Seeso. You can stream CBS News via broadband without having to authenticate your cable subscription. Fox entices people to watch “Empire” on Fox.com by noting episodes are accompanied by fewer commercials. TV is digital and digital is TV.
Making matters more complex, many old-school media companies are fusing themselves with new-era digital darlings. Consider NBCUniversal’s investments in Vox and Buzzfeed, or the investments Disney, Fox and Hearst have made in Vice. Or think about Vice’s recent move into TV. The idea that advertisers will move dollars from TV to digital or vice versa is an old one. The new question: Which type of content that airs and streams everywhere will attract the most money from Madison Avenue?
There’s live, and then there’s everything else….Advertisers try to keep prices down, but there is one type of programming that seems to spur them to loosen the purse strings. Live programming, or any type of show that can be turned into some sort of communal event, continues to draw attention –and dollars. Little wonder, then, that CBS and NBC agreed to share rights this season to “Thursday Night Football.” Half a package of live NFL broadcasts is better than none.
What to do about shows that aren’t sports matches? Look for the networks to continue to roll out big-swing specials and news events like live renditions of big Broadway spectacles; “Best Time Ever,” NBC’s now-fizzled live experiment with Neil Patrick Harris; or outsize news “gets” like Diane Sawyer’s interview with Caitlyn Jenner. In other instances, the networks will continue to use social media to transform watching a scripted series into a live communal exchange, or augment those shows with programming extras, such as AMC’s “Talking Dead” and “Talking Saul” after-shows. If it isn’t live, so the new thinking goes, it can’t be worth as much.
Can fewer ads cost more money?…This may be the biggest question the TV networks face in this year’s market. Turner, Viacom and Fox are among the players offering to run fewer traditional commercials. In their place: Special crafted pieces of advertising that play off the programs in which they run. Think about Pepsi’s recent sponsorship of Fox’s “Empire” that put the soda into a plot in the show, or ads for Ford in Fox’s “Gotham” that had one of the actors from the series lead viewers around in one of the automaker’s vehicles. NBCU has offered to cut the ads in “Saturday Night Live” by 30% next season.
The hope is that these ads will command a premium, offsetting any loss of revenue spurred by running fewer of the traditional commercials. Chances are the TV industry will need more than 30 seconds to determine if it can pull this off.