Media buyers are cheering NBCUniversal’s decision to cut back the number of ads its networks air in primetime. But they don’t share the same enthusiasm for the price the media company wants to charge for some of the commercials that will remain.
The Comcast-owned media conglomerate, in a bid to keep a rising generation of viewers accustomed to seeing few or even no ads when they watch Netflix or Hulu, has embarked on an aggressive operation to cut back the number of commercials it shows in primetime originals across primetime and cable. In place of ad breaks crammed with the usual spots for soap and smartphones, NBCU has proposed shorter breaks with just two ads each, some of them tied more directly to the programs they support.
In exchange for giving the ads a better chance of standing out, however, NBCU wants significantly more money, according to two ad buyers and two other media executives familiar with recent discussions.
“NBCU is being very aggressive with their unit cost expectations,” said one ad-buying executive. “Seems a bit too rich for most clients who are looking to mitigate inflation and manage to the bottom line.”
NBCU is offering the new concept as part of TV’s annual “upfront” market, when U.S. TV networks try to sell the bulk of their ad inventory for the next programming cycle. Under the company’s plan, it will cut back 10% of its ad time during primetime hours and 20% of the national ads usually shown. And it is telling advertisers its new shorter “Prime Pods” contain fewer ads and, so goes the pitch, are much easier for consumers to remember.
One media-buying executive said the company is looking to “double the cost” of advertising in the new ad breaks. Using that figure for the purposes of a back-of-the-envelope calculation, the average cost of a 30-second “Prime Pod” ad in NBC’s “Sunday Night Football” could be more than $1.4 million. The average cost of a 30-second ad in the show last season came to $728,434, according to Variety’s annual survey of primetime ad prices. The cost of a 30-second ad in “This Is Us” could be more than $788,000, compared to last season’s average of $394,314.
To be certain, trying to compare the new “Prime Pods” with normal commercials might be like attempting to discern the similarities in apples and provolone. NBCU is offering its new ads on a stand-alone basis, according to the executives, with a single unit price no matter who wants to buy it. In the world of TV advertising, commercial inventory is usually sold as part of a broader package, and the rates are often contingent upon how much advertising time overall is being purchased by the marketer or its media-buying representative.
NBCUniversal declined to make executives available for comment.
Ambitious talk is not unusual in the early stages of TV’s upfront. TV networks usually kick things off with an offer advertisers feel is too high and ad buyers counter with bids the networks think are too low. By the end of the summer – often by early to mid-July – the two sides meet in the middle.
This year is already different. It’s not the norm for chatter to surface even before NBCU and other TV companies stage massive presentations of their new programming to advertisers next week. And it suggests some of the networks’ efforts to reshape the way commercials fit into the mix will raise new complexities for the industry. 21st Century Fox’s Fox Broadcasting has also proposed cutting back ads in primetime, on a single day of the week.
NBCUniversal has in recent years made several aggressive bids to raise prices for advertising in certain parts of its portfolio. It’s a go-to tactic for Linda Yaccarino, NBCUniversal’s chairman of advertising sales and client partnerships, who often uses the company’s media heft to push for change. Under her aegis, NBCU has tried to wring new value out of programming that often doesn’t get it, such as reruns of “Modern Family” on USA or Megyn Kelly’s mid-morning NBC program.
The company has enjoyed some success with the technique. NBC in the fall of 2016 cut the number of ads that run in “Saturday Night Live” by 30%, and last Spring began to air the show live across the country, rather than staggering it after 11:30 p.m. in each U.S. time zone. The moves were made as “SNL” gained new relevance with viewers in the aftermath of the 2016 election. Ad prices soared.
NBCUniversal notched an 8% increase in advance ad commitments it captured for NBC broadcast primetime, resulting in volume of about $2.73 billion, according to Variety estimates. In 2016, it generated advance commitments valued at about $2.53 billion/
Still, the maneuver carries risks. In 2010, while Yaccarino supervised entertainment ad sales for Time Warner’s Turner, the company convinced advertisers to pay the same prices for Conan O’Brien’s new late-night program on cable’s TBS as they did for David Letterman on CBS and Jay Leno on NBC. When ratings proved lackluster, however, Turner had to offer its ad clients so-called “make goods,” or extra ad inventory to make up for shortfalls in viewership guarantees.
One prominent ad buyer recently sounded a somber note about the 2018 upfront. At a gathering organized by Publicis Groupe’s Spark Foundry, John Muszynski, the chief investment officer, cautioned many of the industry’s top ad-sales executives they might have to “deliver last year’s plan at the same budget, maybe less,” and warned them that the best way to win new ad dollars was to help advertisers increase sales. “All of you who are looking for increased budgets, the best way to do that is to help solve our clients’ problems,” he said.
NBCUniversal no doubt thought it was making an attempt to do just that. Negotiations will likely continue into the summer.