You will be redirected back to your article in seconds

Upfront 2016: TV Networks May Gain Upper Hand For First Time In Years

After years of difficulty, TV is tuning in something it hasn’t had in a long time: pricing power.

In the weeks to come, advertisers are likely to hear about new Thursday-night football games on NBC, an attempt to revive the fortunes of MTV, and the vision of a new entertainment chief at ABC. They will encounter something else, as well: For the first time in four years, they may have to capitulate to demands that they pay higher rates of increase to reach the TV audiences they need to buy their laundry detergent, hamburgers and smartphones.

TV continues to face audience erosion brought on by streaming video that beams across the rival screens of laptop computers, mobile tablets and smartphones. In 2016, however, TV has more wind at its back. Advertisers purchasing so-called “scatter” inventory, or ad time bought closer to air date, have found that prices have risen steeply since they bought similar ad time in the upfront market, when TV networks try to sell the bulk of their ad time in advance. When that dynamic occurs, it typically augurs a more robust upfront, as advertisers move briskly to lock in prices they believe will rise even more as the year progresses.

“Some money will go back to the upfront,” predicted one media-buying executive. Indeed, TV may secure more advance ad commitments for coming shows for the first time since 2011, when post-recession spending helped fill the medium’s coffers.

Since that time, however, TV networks have had to scramble for leverage. In 2012, NBC touted a Capuchin monkey named Crystal as the star of a sitcom called “Animal Practice,” and advertisers showed what they thought of the idea. They narrowed the rate of increase in the cost of reaching 1,000 viewers, a measure known as a CPM that is an integral part of these annual discussions between TV networks and Madison Avenue. In the intervening years, the story has largely been the same: TV networks have generally not been able to negotiate a wider CPM increase since the 2011 market. Those that have tried have often been penalized with flat or declining volume.  Based on guidance from buyers, Variety estimates the five networks last year secured between $8.02 billion and $8.69 billion for their 2015-2016 primetime entertainment schedules, compared with between $8.17 billion and $8.94 billion for 2014-2015. The performance marked the third consecutive upfront in which volume committed for primetime fell.

In 2016, the TV networks are likely to seek CPM increases anywhere from 5% to 9%, this buyer said. “For those seeking broad reach, sight-sound-and-motion and brand awareness traditional TV still utterly dominates all alternatives despite the growth of digital media owners and increasing consumption of video on internet-connected devices,” said Brian Wieser, a media-industry analyst with Pivotal Research Group, in a February research note.

The market could reverse years of narrowed CPM rates. Consider that CBS sought CPM increases of between 3% and 5% in 2015, according to people familiar with the situation, compared with 6% in 2014; 7.5% in 2014 and 2013; 8% to 9% in 2012; and 13% to 15% in 2011. Or that NBC in 2015 sought CPM hikes of around 5%, compared with increases of between 7.5% and 8% in 2014 and 2013; 5% to 7% in 2012; and 9% in 2011.

Fox last year was forced to offer CPM rollbacks by as much as 2%, a function of the network having some of the highest costs of reaching 1,000 viewers in the business thanks to the rise of “American Idol.” In 2014 Fox sought CPM increases of between 2.5% and 3.5%, compared with 5% to 7% in 2013; 7% to 9% in 2012; and 9.5% to 12% in 2011.

ABC last year sought CPM hikes of 5% or more, and faced headwinds. In 2014, the Walt Disney-owned network asked for increases of between 4% and 5%, compared with 7% to 8% in 2013; 6% to 8% in 2012; and 10% to 12% in 2011.

The CW in 2015 bucked the trend, thanks to a new slate of sci-fi and superhero shows, and sought CPM increases of more than 4%, compared with price hikes of between 3% and 4% in 2014; between 5% and 6 in 2013; 5.5% to 6.5% in 2012; and 10% to 12% in 2011.

In decades past, the rush to TV would have meant the nation’s big media companies were dealing from a position of strength. They are not.

The rise in rates, media buyers suggested, is taking place due to audience erosion. As more people leave TV to watch their favorite programs on mobile devices and video-streaming outlets, TV networks have fewer ratings points to sell. Viewership among audiences between 18 and 49 is down 12% quarter to date in broadcast primetime, according to research from Todd Juenger, a media-industry analyst with Bernstein Research. That same measure fell 6% in the fourth quarter of last year and 9% in the third quarter.  At non-kids’ cable networks, 18-49 viewership in primetime has fallen 4% quarter to date, according to Juenger’s research, 7% in the fourth quarter and 8% in the third.

Because of the rise in pricing, however, demand to lock in ad time is rising. In basic economic terms, higher demand plus weakening supply equals higher costs. ”The real issue is the supply problem,” said the media-buying executive. “If you do the math, that is going to cause CPM inflation.”

So TV networks aren’t off the hook this year. To lock in deals, they will have to offer packages that put advertising not only in “The Voice” and “The Big Bang Theory,” but on digital extensions of those programs. In some cases, the networks may have to work to make sure the ads they are selling are easier to notice. Already, Viacom has trotted out a pact with Snapchat that allows the owner of MTV, Comedy Central and Nickelodeon to sell ad inventory on behalf of the vanishing-messages app. Time Warner’s Turner has unveiled an effort to run fewer commercials in select TNT dramas as well as on its TruTV.

To turn this new flicker of economic life into a full fire, TV networks will have to continue their efforts to prove they can measure the new ways their big-budget programs are being watched on emerging screens. If that can be accomplished some time in the near future, perhaps those CPM rates will continue their rise.

More TV

  • Global Sales for ‘Les Miserables’ Series

    Global Sales for ‘Les Miserables’ Starring Dominic West Ahead of Series Mania

    The BBC and Masterpiece adaptation of “Les Miserables” will play on a numerous international channels after a raft of deals were sealed for the series, which features Dominic West, David Oyelowo, and Lily Collins. Andrew Davies’ adaptation of Victor Hugo’s classic has been acquired by broadcasters in Scandinavia and southern Europe, and by several buyers [...]

  • Kevin Hart

    TV News Roundup: Kevin Hart Netflix Comedy Special Drops First Trailer

    In today’s roundup, Netflix releases the official trailer for the comedy special “Kevin Hart: Irresponsible” and Josh Charles joins Showtime’s Roger Ailes series “The Loudest Voice.” DATES Season two of “Yellowstone,” starring Kevin Costner, will premiere on Paramount Network on June 19 at 10 p.m. ET/PT. The sophomore season will continue the story of rancher John Dutton [...]

  • adidas game of thrones

    5 New 'Game of Thrones' Collaborations Coming in Time for the Final Season

    Some of the biggest lifestyle brands in the world are jumping on the “Game of Thrones” bandwagon this spring, hoping to capitalize on the fandom and popularity of the HBO hit, as it enters its eighth and final season. From sneakers to spirits, these officially-licensed collaborations extend the characters and colors of the show beyond [...]

  • Nicole Richie

    Nicole Richie Joins Fox Comedy Pilot 'Richard Lovely'

    Nicole Richie has been cast in a series regular role in the Fox single-cam comedy pilot “Richard Lovely.” The project follows Richard Lovely (Thomas Lennon), the disgruntled author of the best-selling children’s book series, “Mr. Mouse.” He doesn’t hate children, but rather just everything about them. After a publicity fiasco involving an unexpectedly savvy 9-year-old [...]

  • Lachlan Murdoch

    New Fox CEO Lachlan Murdoch Announces All Employees to Receive Stock in Company

    The new standalone entity Fox Corp. held a town hall on Thursday, just over a day after the official closing of the 21st Century Fox-Disney merger. Fox Corp. chairman and CEO Lachlan Murdoch led the meeting, at which sources say he announced that all employees would receive stock in the new company. The amount of [...]

  • Deadwood

    'Deadwood' Movie Drops First Trailer, Premiere Date

    HBO is taking fans back to Deadwood. Nearly 13 years after the hit Western series ended, HBO Films has released the first look at “Deadwood: The Movie.” The film will premiere on the network on May 31. Series regulars Ian McShane, Timothy Olyphant, Molly Parker and John Hawkes will reprise their roles in the film, [...]

  • Jeaninne Pirro

    Fox News Will Keep Jeanine Pirro Off Schedule for Another Week

    “Justice With Judge Jeanine,” the Saturday-night opinion show led by Jeanine Pirro, will be off the Fox News schedule for a second week in the wake of remarks she made about a Muslim congresswoman. The network’s online schedule shows that it will run another repeat of the documentary series “Scandalous” in its place Saturday night [...]

More From Our Brands

Access exclusive content