Madison Avenue, NBC Wrangle Over $5 Million Super Bowl Ads (EXCLUSIVE)

Analysis: How much higher can the price of a Super Bowl commercial go?

Atlanta Falcons Super Bowl LI
Erik S. Lesser/EPA/REX/Shutterstock

Ad buyers say they want to hold the line on the latest move to drive up the price of ads in the Super Bowl.

With an audience that has soared consistently above 110 million since 2014, the Big Game has become one of the most reliable events on the media-industry calendar.  But Madison Avenue seems eager to block TV networks from scoring more than $5 million for a 30-second TV ad in the pigskin classic. NBC is slated to broadcast Super Bowl LII from  U.S. Bank Stadium in Minneapolis on February 4, 2018.

“We get concerned whenever we see prices going up,” says Marcel Marcondes, chief marketing officer for Anheuser-Busch’s U.S. operations, in an interview. With more people watching sports via streaming video, “the context has changed,” he suggested. “People’s behavior has changed, and therefore the negotiations about the price should change as well.”

Anheuser has little to worry about in 2017. The company is in the midst of what Marcondes said was a multi-year Super Bowl sponsorship that would take it through NBC’s 2018 broadcast of Super Bowl LII. But the marketer has been the leading sponsor of the event for years, dropping more than $30 million on the game in both 2015 and 2016, according to Kantar Media, a tracker of ad spending. So if the brewer behind Super Bowl staples like Bud Light is focused on the numbers, maybe others should be, too.

The cost of an average 30-second spot has rocketed more than 100% between 2007 and 2016, according to Kantar data – rising to $4.8 million from $2.39 million. Fox sought more than $5 million for ads in this year’s game, but there are some skeptics who believe it may have accepted less in certain cases.

Ad buyers suggest their clients must deal with a range of new and growing costs, such as social-media promotion and a new level of expectations that call for bigger celebrity appearances and pop-music soundtracks in their glitzy commercials. Most TV networks also seek to sell bigger packages of ad inventory around a transaction surrounding the Super Bowl. With all that in mind, the price tag around a Super Bowl commercial can start veering toward $10 million or more – enough at some companies to warrant a conversation with the CFO.

That has led to a shift in the tone of conversations around the game. In most years, advertisers readily acknowledge they will have to accommodate a price hike. Not necessarily so in 2017: “If anything, they are looking to get flat to what Fox got” for its broadcast this year of Super Bowl LI, said one media buyer of NBC.

NBCUniversal is trying to maneuver around people who want to tackle forward progress. Advertiser demand is “holding up to our plan,” said Dan Lovinger, executive vice president of ad sales for NBC Sports Group. “I imagine you would understand that, traditionally, we don’t plan for decreases.” The company is seeking “north of $5 million” for a 30-second ad berth in the game, he added.

With consumers leaving TV for mobile devices and streaming video, the ratings of most TV shows have shown signs of erosion. Not the Super Bowl. And the TV networks pitch it as one of the last bastions of engaged mass viewership.

“There is a consistency in delivery,” says Lovinger. “You can go back and look: We have averaged 110 million viewers per minute in six of the past seven years. Marketers realize there are few places where you can truly aggregate reach in an environment where people are truly leaning in.” he says. Digital streaming has not kept the event from capturing more than 110 million viewers in the last few cycles. NBC has already sold out all the “A” spots – the first commercial slot in each ad break – in the first quarter, he says, and is pacing well for the same in the second quarter.

Selling the Super Bowl has become a tougher proposition in recent years. TV network executives once high-fived each other in public and announced they had sold out all ad slots in the game months ahead of Game Day. In 2016 and 2017, however, CBS and Fox both declined to acknowledge in public whether they had achieved that feat for Super Bowl 50 or Super Bowl LI. NBC announced it sold out ads for Super Bowl XLIX in 2015 with just days to go before kickoff. “This was not the easiest exercise I’ve been through,” said Seth Winter, the previous head of sales for NBC Sports, at the time.

Some major sponsors have begun to use the event differently. PepsiCo spent $172 million on Super Bowl advertising between 2006 and 2015, according to Kantar. But this year, it didn’t put down a dime for its Frito-Lay snacks division, which had advertised cheesy Doritos chips in the Super Bowl for the prior decade. In recent years, Pepsi has focused more intently on its backing of the event’s halftime show.  Pepsi declined to make executives available for comment.

Coca-Cola this year scored a big coup by running an old ad from 2014 during the pre-game show featuring “America the Beautiful” sung in multiple languages. In an era when people were looking to see if advertisers would highlight diversity after the divisive U.S. election, the Coke ad helped set the tone for the more expensive commercials that followed.

While many have refined strategy over the years, few dismiss the Super Bowl’s power to reach consumers. “We like to use it as the kickoff for something bigger,” says Anheuser-Busch’s Marcondes. “It’s a big window for us.”

NBC has taken steps to draw advertisers into the event. Lovinger and his team have pitched advertisers on the idea of working together to make Super Bowl ads relevant for NBCU’s  telecast of the Winter Olympics, which is slated to follow just four days later. A single media company has not shown both events since CBS was able to do so in 1992. The executive says at least three advertisers have jumped on the offer while others remain in discussions.

Advertiser demand for NBC’s NFL broadcasts has been strong, Lovinger added. “We expect our upfront sales will be ahead of last year,” he said, citing an influx of new sponsors as well as interest from fast-food restaurants, consumer-electronics manufacturers, movie studios and insurance companies, among other categories.

Most observers feel that no matter how expensive the Super Bowl gets, someone will always pay the price the networks seek. “Most big marketers are finding more and more ways to successfully work around TV,” acknowledged Brian Sheehan, a professor of advertising at Syracuse University’s SI Newhouse School of Communications. Even so, he added, “the Super Bowl is still one of the last places any brand can make a big splash with over one hundred million viewers, all at the same time.” If prices should fall, he suggested, “my bet is it will be slight.”