How TV Tuned in More Ad Dollars: Digital Doubts, Drugs and Desperation

Analysis: Madison Avenue's new rush to TV is sparked by doubts about digital media as well as linear ratings

TV Ad Sales Upfronts
always with honor for Variety

Advertisers are rushing back to TV because they don’t think they have anywhere else to go.

The nation’s five English-language broadcast networks trumped lowered expectations and eked out an approximate 3% to 4% gain in the volume of advance advertising commitments they secured for their next cycle of primetime programming, according to Variety estimates, part of the annual haggling of TV’s “upfront” marketplace. The networks secured between $8.69 billion and $9.55 billion, compared with between $8.41 billion and $9.25 billion in 2016 – possibly marking the most they’ve gleaned since six broadcast networks – the WB and UPN were still around, in place of CW – secured around $9.5 billion in 2004.

Some portion of that money could represent the Madison Avenue equivalent of stealing from Peter to pay Paul.

Ad buyers and network executives suggested some the influx of new dollars came as the result of big advertisers moving money normally earmarked for so-called “scatter” advertising – or commercial inventory purchased much closer to air date – into the upfront, in some cases out of fear of not being able to get the ad time they need as TV network ratings continue to erode. The shift could be the result of sound strategy. Advertisers with solid positions are bound to get better ad positions as make-goods are handed out. Buy a little filet mignon now and avoid having to digest ground chuck later.

“I don’t know how comparatively real the growth is,” said one executive familiar with the negotiations. “It’s definitely up, but when you pull it from scatter….” TV networks are likely calculating whether some of the money they normally expect to pull in as the season progresses will be there waiting. Ad buyers suggested that broadcast TV and top-rated cable fared best this season while lower-rated cable likely saw declines. In each year’s upfront market. U.S. TV networks try to sell 75% to 80% of their ad time for the coming season.

TV is in a state of flux – viewership is migrating to on-demand consumption and streaming-video – but despite a lot of bold talk, marketers aren’t abandoning the medium. Indeed, at a time of great disruption, TV is offering advertisers what it has given viewers of boob-tube favorites like “The A-Team,” “Bewitched” and “The Love Boat” the same thing it has given them for decades: Comfort food.

It’s counterintutive to think it – national TV ad sales are seen dipping 1.4% in 2017, while U.S. digital advertising is expected to rise 14%, according to media research firm Magna – but TV could have more appeal, not less, in these shifting times. Madison Avenue continues to fret over the viability of new digital media. Google’s YouTube has aligned commercials from conservative sponsors with content that is more risqué than they stuff they prefer to support. Facebook and other social and web outlets have had trouble with measuring the effectiveness of some types of video advertising.

Marc Pritchard, Procter & Gamble’s chief brand officer, has for months warned of a need to clean up digital-advertising standard, and media buyers have hinted that the consumer-products giant was among the crowd continuing to put money once reserved for digital back into TV. “The gamification of digital audience size–bots, viewability, etc.–has created skepticism amongst marketers about whether they are getting what they pay for digitally,” said Tony Pace, president and CEO of the Marketing Accountability Standards Board and a former chief marketing officer of Subway. “Against that backdrop, a reallocation of media dollars to television, where proof of performance is clear, is easily understood.”

Meanwhile, old-school TV has plenty of new-age media to sell. Many of the big media companies saw interest in their digital wares rise. At Disney/ABC Television, advertisers were said to spend 20% more on digital inventory. Fox Networks Group saw spending on digital ads and ads for new kinds of viewing experiences rise 40%. NBCUniversal saw spending on digital video advertising was up 42%.  The takeaway is that TV-screen content is more trusted than something thrown up quickly on a streaming-video service hoping to compete.

But as marketers rush to get digital dollars into what they perceive as firmer ground, they may have less of it to stand on. Linear-TV viewership continues to decline. When TV has fewer ratings points to sell, it means commercials must run more frequently to reach a certain level of consumer eyeballs. Demand becomes greater and supply is not as abundant.

“Overall supply is down, which means pricing will be hard again. That encourages people to move money forward, and that’s definitely what we are seeing as a trend,” said Rita Ferro, president of ad sales for Disney/ABC Television.

UPFRONT VOLUME in primetime, among five English-speaking broadcast networks

2010: $8.1B to $8.7B

2011: $8.8B to $9.3B

2012: $8.8B to $9.3B

2013: $8.6B to $9.2B

2014: $8.17B to $8.94B

2015: $8.02B to $8.69B

2016: $8.41B to $9.25B

2017: $8.78 billion and $9.62

Source: Variety estimates

Advertisers sprinted to stake out ground – and demonstrated a growing interest in precision. Primetime is nice, but the audiences that once flocked there can be gained more cheaply in late-night and in the morning. Pharmaceutical manufacturers moved quickly to coalesce around late-night and TV-news programming – anyone who has seen Nigel, an animated spokes-owl for Sanofi’s Xyzal allergy mediation, flitting about CBS’ “Late Show” or MSNBC’s “Morning Joe” can tell you those areas reach their consumers –  and the drug-makers wasted little time in upfront talks to get their money down.  The same was true, according to executives, of big consumer-products marketers. Fast-food restaurants, and consumer-electronics makers were also active this year, executives said, even as retailers, automakers and movie studios pared their spending. Meanwhile, some longstanding sponsors of NFL broadcasts peeled back from those pricey events.

Volume and pricing gains were the order of the day across the board at the networks – but they were often not as robust as they were in 2016, when the TV companies enjoyed similar momentum.

At NBCUniversal, executives notched CPM gains of 8% to 9%, and similar volume gains for NBC primetime. But in 2016, the company was able to wrangle CPM gains of 12.5%, as well as a 10% volume increase for primetime.  NBC’s primetime schedule drew approximately $2.73 billion in advance ad commitments, according to Variety estimates.

CBS snared CPM gains in a similar range, while primetime volume was flat. Volume rose, however, in late-night and mornings, creating an overall lift for the network. In 2016, CBS was able to secure rate hikes between high-single-digit percentages and low-double-digit percentages. Primetime volume rose between 3% and 5% in 2016. CBS’ primetime programming drew between $2.26 billion and $2.6 billion in commitments, according to Variety estimates.

ABC also pressed for similar CPM gains, and projected an increase in primetime volume of between 8% and 9%. In doing so, the Disney-owned network appeared to match or exceed last year’s results. In 2016, ABC sought CPM gains of between 8.5% and 10%, and saw volume increase by around 2% to 4%. This year, ABC secured between $1.84 billion and $2.13 billion in advance commitments, according to Variety estimates.

Related Content Time May Be Running Out for Primetime TV

Fox Broadcasting had less leverage in the primetime marketplace, pressing for CPM hikes of between 6% and 8% and drawing flat volume for its schedule. In 2016, Fox pressed for CPM increases of between 8.5% and 10% and saw volume rise by between 3% and 5%. In 2017, Fox is believed to have secured, as it did in 2016, between $1.47 billion and $1.64 billion in advance commitments for primetime.

The CW sought CPM hikes in the high-single to low-double-digit percentage range, and notched volume gains of 3% to 5%. In 2016, the joint venture of CBS Corp. and Time Warner, pressed for CPM increases in the low-double-digit percentage range and won a whopping 12% to 14% more in ad commitments for its primetime schedule. In 2017, the CW secured between $490.9 million and $549.4 million in advance ad commitments, according to Variety estimates.

Some people make the specious assumption that whatever upfront figures get revealed automatically make it to the coffers of media conglomerates like 21st Century Fox,  Time Warner CBS Corp., Comcast Corp., Viacom and Walt Disney Co. That is simply not so.

In the upfront, advertisers agree to spend a certain amount of money in the coming season. But they can cancel a portion of their upfront commitments each quarter, and can even pull their money if a show they agreed to support is canceled and no substitute can be agreed upon.

In the end, the upfront totals are merely directional indicators, essentially telling us how much Madison Avenue values TV at a particular moment in time. In 2017, it’s clear they think well of the medium. But if new-media rivals get their act together, the networks will have to think quickly to keep a growing ad base from shrinking once again.